July 15, 2004

PEOPLE'S BANK SECOND QUARTER EARNINGS INCREASED 61% YEAR-OVER-YEAR TO
$25 MILLION OR $0.27 PER SHARE

Click here to see our second quarter 2004 Financial Schedules.

BRIDGEPORT - People's Bank (NASDAQ: PBCT), an $11 billion financial services company, today announced net income of $25.0 million, or $0.27 per share, for the second quarter of 2004, compared to $15.5 million, or $0.17 per share, for the second quarter of 2003. Prior period per share information has been restated to reflect the 3-for-2 stock split effective May 17, 2004.

People's Board of Directors declared a $0.29 per share quarterly dividend on People's common stock, payable Aug. 15, 2004, to stockholders of record on Aug. 1, 2004. People's Mutual Holdings, which owns 54.7 million shares of People's Bank common stock, will accept dividends on only 3 percent of its shares. Based on the closing stock price on July 14, 2004, the dividend yield on People's Bank common stock is 3.6 percent.

"We are pleased to report strong results this quarter following the transformational events associated with the sale of our credit card business earlier this year," said John A. Klein, president and chief executive officer. "Renewed focus on our core commercial and consumer banking businesses and the positive impact of the balance sheet restructuring in the first quarter generated significantly improved results with net income up 61 percent compared to the second quarter of 2003."

"People's generated solid loan growth, with $555 million added to our average commercial banking, home equity and residential mortgage loan portfolios since the second quarter of 2003, a combined increase of 8 percent for these portfolios," added Klein. "Our marketing campaign - 'The Switch Is On' - continues to build on momentum generated last quarter." Average savings, money market and interest-bearing checking balances increased $361 million, or 9 percent, on a year-over-year basis and average total non-interest-bearing deposits grew by $160 million, or 8 percent.

Klein stated, "Investment in building our Connecticut franchise, including our successful partnership with Stop & Shop, continues to reap dividends. People's is the only major bank in the state that is uniquely focused on Connecticut's consumers and businesses."

"Other key drivers of the bank's performance this quarter were an increase in the net interest margin and continued expense control," said Philip R. Sherringham, executive vice president and chief financial officer. "The 20 basis point improvement in the net interest margin from last quarter reflects the anticipated benefit from the balance sheet restructuring completed in March. In fact, we expect further improvement in the net interest margin during the second half of this year given the bank's slightly asset sensitive posture." Sherringham added, "In the second quarter, non-interest expenses declined $4.7 million, or 5 percent, compared to the second quarter of 2003.

"We further strengthened the balance sheet by adding $4.7 million to the allowance for loan losses, given strong growth in our commercial banking loan portfolio," stated Sherringham. The allowance for loan losses as a percent of total loans is 0.99 percent at June 30, 2004 compared to 0.94 percent at March 31, 2004.

Commenting on asset quality, Sherringham said, "Bankwide asset quality remains strong, with second quarter net loan charge-offs of only $2.4 million, a 24 percent improvement from the second quarter of last year. Annualized net loan charge-offs as a percent of average loans for the quarter were 0.13 percent, compared to 0.18 percent a year ago." Non-performing assets equaled 0.48 percent of total loans, REO and other assets at June 30, 2004 compared to 0.50 percent a year ago.

"Included in this quarter's results is a $4.0 million reduction in income tax expense related to the completion of a federal tax audit," continued Sherringham. "With respect to balance sheet management, short-term investments, which had significantly increased at the end of the first quarter due to the recently-completed sale of our credit card business, were reduced substantially this quarter. These assets were deployed into higher-yielding securities and to fund loan growth."

Selected Financial Terms
Due to the sale of the credit card business in the first quarter of this year, information related to that business for all periods presented is now reported in discontinued 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.

Conference Call
On July 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.

2Q Financial Highlights (2Q 2004 compared with 2Q 2003 unless otherwise indicated)

Summary
 

• Net income totaled $25.0 million, or $0.27 per share.
• Provision for loan losses increased $6.3 million.
  • Allowance for loan losses increased $4.7 million from March 31, 2004.
• Net interest income increased $9.0 million.
  •  Net interest margin improved 20 basis points from 1Q04 and increased 33 basis points from 2Q03 to 3.23%. 
• Non-interest income decreased $4.8 million.
  • Net gains on sales of residential mortgage loans decreased $3.2 million.
  • Net security losses of $0.1 million in 2Q04 compared to net security gains of $2.7 million in 2Q03.
•  Non-interest expense declined $4.7 million.
  •  Compensation and benefits decreased $1.7 million, reflecting lower salary and commission expense relating to lower mortgage origination volume.
• Income tax expense this quarter was reduced by $4.0 million as a result of the completion of a federal tax audit.
   

Commercial Banking

•  Average commercial banking loans grew $284 million, or 10%.
• Average commercial non-interest-bearing deposits increased $51 million, or 6%.
•  The ratio of non-performing commercial banking loans to total commercial banking loans was 0.75% at June 30, 2004 compared to 0.65% at March 31, 2004.
  •  Non-performing assets increased $3.4 million, or 16%, from March 31, 2004.
•  Net loan charge-offs totaled $0.1 million or 0.02% of average commercial banking loans.
   

Consumer Financial Services

•  Average home equity loans increased $223 million, or 35%.
• Average residential mortgage loans increased $49 million, or 2%.
•  Average consumer non-interest-bearing deposits grew $136 million, or 14%.
  
   

Treasury

• Securities and short-term investments totaled $2.6 billion at June 30, 2004, a $265 million decrease from June 30, 2003.
  • Debt securities increased $237 million.
  • Short-term investments decreased $321 million.
  • Other equity securities decreased $194 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 65 of its 155 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.