April 15, 2004

People's Bank Reports Record First Quarter Earnings;Raises Dividend 12 Percent;Announces 3-For-2 Stock Split

Click here to see our first quarter 2004 Financial Schedules

BRIDGEPORT, CONN. - People's Bank (NASDAQ: PBCT), an $11 billion financial services company, today announced record net income of $119.2 million, or $1.91 per share, for the first quarter of 2004, compared to $16.0 million, or $0.26 per share, for the first quarter of 2003.

People's Board of Directors voted to increase the quarterly dividend on its common stock by $0.045 per share, or 12 percent, to $0.435 per share. The dividend is payable on May 15, 2004, to stockholders of record on May 1, 2004. In addition, the Board of Directors authorized a 3-for-2 stock split, effective on May 15, 2004, for stockholders of record as of May 1, 2004. On a split-adjusted basis, the new quarterly dividend rate will be $0.29 per share. People's Mutual Holdings, which owns 36.5 million shares (54.7 million shares on a split-adjusted basis) of People's Bank common stock, will accept dividends on only 3 percent of its shares. Based on the closing stock price on April 14, 2004, the dividend yield on People's Bank common stock is 3.8 percent.

John A. Klein, president and chief executive officer, stated, ''We are pleased to reward our shareholders with a 12th consecutive annual dividend increase. In addition, the decision by the Board of Directors to authorize a stock split reflects our positive outlook for People's future.''

Klein continued, ''Results for the quarter reflect the significant net positive impact of the previously announced plan to transform People's Bank, including the sale of our credit card operation and the subsequent prepayment of over $1.0 billion in high-cost wholesale liabilities. The additional net earnings generated by these transactions totaled $169 million on a pre-tax basis, or $1.76 per share, for the quarter.''

Excluding the additional net earnings from these transactions, net security losses of $4.8 million and nonrecurring expenses totaling $10.2 million, earnings would have been $19.5 million, or $0.31 per share, for the first quarter of 2004. This translates into a 22 percent increase compared to net income for the first quarter of 2003.

''Stockholders' equity increased by $205 million, or 22 percent, since last March and book value grew by $3.13 on a per share basis to $18.56. This significantly bolsters our capital levels and provides ample room to support continued strong internal loan growth and to pursue potential acquisition opportunities,'' added Klein.

Klein continued, ''Following the transformational events of the first quarter, we are concentrating our energies on our core consumer and commercial banking businesses, including further strengthening of our valuable franchise in Connecticut. People's is the only major bank in the state that is uniquely focused on Connecticut's consumers and businesses. Our 'The Switch Is On' marketing campaign is designed to encourage competitors' customers to switch their banking relationship to People's.

''Other key drivers of the bank's performance this quarter were continued expense control and outstanding asset quality,'' said Philip R. Sherringham, executive vice president and chief financial officer. ''Excluding liability restructuring costs and nonrecurring expenses referred to earlier, non-interest expense declined $1.6 million, or 2 percent, compared to the first quarter of 2003.''

Commenting on asset quality, excluding the recently sold credit card portfolio, Sherringham added, ''Bankwide asset quality was strong, with first quarter net loan charge-offs of only $2.1 million, a 50 percent improvement from the first quarter of 2003. Annualized net loan charge-offs as a percent of average loans for the quarter were 0.11 percent, compared to 0.25 percent a year ago. Non-performing assets equaled 0.46 percent of total loans, REO and other assets at March 31, 2004.''

Sherringham continued, ''With respect to balance sheet management, the combined average of the securities and short-term investments portfolios was $819 million lower than first quarter of 2003 levels, more than offsetting the $545 million growth in average loans discussed above. The securities portfolio was reduced since early 2003 in response to historically low levels of interest rates. While current earnings have been reduced, we believe the bank is better positioned for a more favorable interest rate environment. Following the balance sheet restructuring, the bank is now essentially 100 percent funded by core deposits.''

Selected Financial Terms
Due to the sale of the credit card operation, information related to that business has been reclassified to discontinued operations. As such, the following tables present information related to People's continuing operations.

In addition to presenting financial information in accordance with generally accepted accounting principles (''GAAP''), certain non-GAAP information is also presented, such as core deposits and purchased funds. Core deposits, a measure of stable funding sources, equal total deposits, other than brokered certificates of deposit (acquired in the wholesale market) and municipal deposits (which are seasonally variable by nature). Purchased funds include borrowings, brokered certificates of deposit and municipal deposits.

This release also refers to certain ''nonrecurring expenses'' incurred during the first quarter of 2004. People's generally considers an expense to be nonrecurring if it is not similar to an expense of a type incurred within the last two years, and is not similar to an expense of a type reasonably expected to be incurred within the following two years.

Conference Call
On April 16, 2004, at 11 a.m., Eastern Time, People's will host a conference call to discuss this earnings announcement. The call may be heard through www.peoples.com by selecting Investor Relations, News and Events, Conference Calls. Additional materials relating to the call may also be accessed at People's Web site. The call will be archived on the Web site and available for approximately 90 days.

1Q Financial Highlights (1Q 2004 compared with 1Q 2003 unless otherwise indicated)

Summary

•  Net income totaled $119.2 million, or $1.91 per share.
• Net after-tax gain on sale of credit card operation was $196.3 million.
•  After-tax liability restructuring costs totaled $86.7 million.
•  Provision for loan losses decreased $8.0 million.
•  Net interest income increased $3.1 million.
• Net interest margin improved 2 basis points from 4Q03 and increased 22 basis points from 1Q03 to 3.03%.
•  Non-interest income decreased $6.5 million.
•  Total fee-based revenues increased $0.9 million.
•  Net gains on sales of residential mortgage loans decreased $3.1 million.
• Included in other non-interest income in 1Q03 was $4.3 million relating to interest received on the completion of a routine IRS audit.
• Non-interest expense, excluding liability restructuring costs of $133.4 million in 1Q04 and $1.2 million in 1Q03, and $10.2 million in nonrecurring expenses in 1Q04, decreased $1.6 million.
• Compensation and benefits increased $8.4 million (including $7.0 million in nonrecurring expenses).
• Average loans increased $392 million, or 6%.
•  Average core deposits increased $243 million, or 3%.

Commercial Banking

•  Average commercial banking loans grew $217 million, or 8%.
•  Average commercial non-interest-bearing deposits increased $67 million, or 8%.
•  The ratio of non-performing loans to total loans was 0.65% at March 31, 2004 compared to 0.66% at Dec. 31, 2003.
•  Non-performing assets increased $0.4 million, or 2%, from Dec. 31, 2003.
• Net loan recoveries totaled $0.3 million.

Consumer Financial Services

•  Average residential mortgage loans increased $146 million, or 5%.
• Adjustable-rate mortgages purchased during the first quarter of 2003 contributed $47 million to the increase.
• Average home equity loans increased $183 million or 29%.
•  Average consumer non-interest-bearing deposits grew $122 million, or 13%.
• Supermarket branch deposits totaled $1.8 billion at March 31, 2004, averaging $28 million per branch.

Capital Markets

• Securities and short-term investments totaled $2.8 billion at March 31, 2004, a $292 million increase from Dec. 31, 2003.
•  Debt securities decreased $321 million.
•  Short-term investments increased $632 million.

People's Bank is a diversified financial services company providing consumer and commercial banking services, in addition to insurance and financial advisory services. The bank is a leader in supermarket banking, with 64 of its 154 branches located in Super Stop & Shop stores. Through its subsidiaries, People's provides brokerage and financial advisory services, asset management, equipment leasing and financing, and insurance services.

Certain statements contained in this release are forward-looking in nature. These include all statements about our plans, objectives, expectations and other statements that are not historical facts, and usually use words such as "expect," "anticipate," "believe" and similar expressions. Such statements represent management's current beliefs, based upon information available at the time the statements are made, with regard to the matters addressed. All forward-looking statements are subject to risks and uncertainties that could cause People's actual results or financial condition to differ materially from those expressed in or implied by such statements. Factors of particular importance to People's include (1) changes in general economic conditions, including interest rates;(2) potential improvements or deterioration in credit quality;(3) competition among providers of financial services;(4) residential mortgage and secondary market activity;(5) changes in accounting and regulatory guidance applicable to banks;and (6) price levels and conditions in the public securities markets generally. People's does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.