October 21, 2004

People's Bank Reports Third Quarter Earnings Increased 85% to $28 Million or $0.29 Per Share

BRIDGEPORT, CONN. - People's Bank (NASDAQ: PBCT), an $11 billion financial services company, today announced net income of $27.5 million, or $0.29 per share, for the third quarter of 2004, compared to $14.9 million, or $0.16 per share, for the third quarter of 2003. Prior period per share information has been restated to reflect the three-for-two stock split completed in May 2004.

People's Board of Directors declared a $0.29 per share quarterly dividend on People's common stock, payable Nov. 15, 2004, to stockholders of record on Nov. 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 October 20, 2004, the dividend yield on People's Bank common stock is 3.2 percent.

''Results for the quarter continue to reflect the positive impact from the balance sheet restructuring completed earlier this year,'' said John A. Klein, president and chief executive officer. ''Continued healthy growth in our core commercial and consumer banking businesses and a significant improvement in the net interest margin generated substantially improved results, with net income up 85 percent compared to the third quarter of 2003 and a return on average assets exceeding 1 percent.

''Our average commercial banking, home equity and residential mortgage loan portfolios increased a combined $583 million, or 9 percent, from year-ago levels,'' added Klein. Average savings, money market and interest-bearing checking balances increased $296 million, or 7 percent, compared to the third quarter of 2003. Klein continued, ''We are also pleased by the growth in average non-interest-bearing deposits, which increased by $181 million, or 9 percent on a year-over-year basis.''

Klein stated, ''These results further demonstrate the significant value of the bank's franchise in Connecticut, one of the most attractive banking markets in the nation. People's remains the only major bank in Connecticut that is uniquely focused on the state's consumers and businesses.''

''Other key drivers of the bank's performance this quarter were an anticipated increase in the net interest margin and outstanding asset quality,'' said Philip R. Sherringham, executive vice president and chief financial officer. ''The 24 basis point improvement in the net interest margin from last quarter reflects the bank's slightly asset sensitive position and the benefit of redeploying short-term investments to fund loan growth and to purchase higher-yielding securities.''

Commenting on asset quality, Sherringham added, ''Bankwide asset quality remains strong, with third quarter net loan charge-offs of only $2.3 million, a 42 percent improvement from the third quarter of last year. Annualized net loan charge-offs as a percent of average loans for the quarter were 0.12 percent, compared to 0.23 percent a year ago.'' Non-performing assets equaled 0.45 percent of total loans, REO and other assets at September 30, 2004 compared to 0.50 percent a year ago.

''Given the net growth in our loan portfolio, we added $2.0 million to the allowance for loan losses this quarter,'' stated Sherringham. The allowance for loan losses as a percent of total loans was 0.99 percent at both September 30, 2004 and June 30, 2004.

Sherringham continued, ''Expense control continues to be a significant area of focus, as evidenced by a 270 basis point improvement in our efficiency ratio from last quarter. In fact, non-interest expense increased a modest $0.3 million compared to the third quarter of 2003 and was essentially flat compared with last quarter, despite additional costs for Sarbanes-Oxley compliance this quarter.''

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 operating revenue and the efficiency ratio. Operating revenue consists of the sum of net interest income and total non-interest income reduced by gains and losses other than from the sale of residential mortgage loans and excluding other items that may recur from time to time but that are deemed to occur irregularly or infrequently. Management considers this measure to be more representative of People's ongoing ability to generate revenues, as the excluded items are generally related to external market conditions and non-routine transactions. The efficiency ratio, which is derived in part from operating revenue and represents an approximate measure of how much it costs People's to generate a dollar of revenue, is the ratio of total adjusted non-interest expense to operating revenue. Total adjusted non-interest expense equals People's total non-interest expense, excluding amortization of acquisition-related intangibles, losses on real estate assets and other items that may recur from time to time but that are deemed to occur irregularly or infrequently.

This release contains information about People's core deposits and purchased funds (both non-GAAP measures). Core deposits, a measure of stable funding sources, equal total deposits, other than brokered certificates of deposit (acquired in the wholesale market), municipal deposits (which are seasonally variable by nature) and certain other non-interest-bearing deposits. Purchased funds include borrowings, brokered certificates of deposit and municipal deposits

Conference Call
On October 22, 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.

3Q Financial Highlights (3Q 2004 compared with 3Q 2003 unless otherwise indicated)

• Net income totaled $27.5 million, or $0.29 per share.
  
  • Income from continuing operations increased $8.7 million after-tax.
  • Additional gain on credit card sale of $3.0 million from the resolution of certain contingencies included in income from discontinued operations.

• Provision for loan losses increased $0.3 million.
  • Allowance for loan losses increased $2.0 million from June 30, 2004.
  • Net loan charge-offs decreased $1.7 million.
  
  
• Net interest income increased $17.5 million.
• Net interest margin improved 24 basis points from 2Q04 and increased 63 basis points from 3Q03 to 3.47%.

• Non-interest income decreased $3.2 million.
  • Net gains on sales of residential mortgage loans decreased $4.2 million.
  • Net security gains of $0.2 million compared to $0.8 million.
  • Other non-interest income includes $1.8 million of credit card-related servicing income.

• Non-interest expense increased $0.3 million.
• Compensation and benefits increased $0.9 million.
• Advertising and promotion declined $0.6 million.
• Occupancy and equipment decreased $0.6 million.
• Professional and outside service fees include $0.6 million of costs relating to Sarbanes-Oxley compliance.

• Effective income tax rate for 3Q04 equaled 35.3%, up from 22.6% for 2Q04.
• Income tax expense in 2Q04 was reduced by $4.0 million as a result of the completion of a federal tax audit.

Commercial Banking

• Average commercial banking loans grew $267 million, or 9%.
  
• Average commercial non-interest-bearing deposits surpassed $1.0 billion this quarter and increased $75 million, or 8%.
  
• The ratio of non-performing commercial banking loans to total commercial banking loans was 0.76% at September 30, 2004 compared to 0.75% at June 30, 2004.
  
• Non-performing assets increased $1.4 million, or 6%, from June 30, 2004.
  
• Net loan charge-offs totaled $0.7 million or 0.09% of average commercial banking loans.

Consumer Financial Services

• Average home equity loans increased $260 million, or 38%.
  
• Average consumer non-interest-bearing deposits grew $106 million, or 11%.
  
• Average residential mortgage loans increased $56 million, or 2%.
  

Treasury

• Securities and short-term investments totaled $2.3 billion at September 30, 2004, a $403 million decrease from September 30, 2003.
  
• Debt securities decreased $256 million.
  
• Short-term investments decreased $34 million.
  
• Other equity securities decreased $115 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 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.

Access People's Bank on the World Wide Web at www.peoples.com.

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