JANUARY 19, 2006

People's Bank Fourth Quarter Earnings Increased 26 Percent To $35 Million Or $0.25 Per Share

PBCT Total Return for 2005 Tops 23 Percent

Click here to see our fourth quarter Financial Schedules.

BRIDGEPORT, CONN. - People's Bank (NASDAQ: PBCT), an $11 billion financial services company, today announced net income increased 26 percent to $35.2 million, or $0.25 per share, for the fourth quarter of 2005, compared to $28.0 million, or $0.20 per share, for the fourth quarter of 2004. Income from continuing operations increased 30 percent to $34.3 million, or $0.24 per share, from $26.3 million, or $0.19 per share, for the year-ago quarter. Prior period per share information has been restated to reflect the three-for-two stock split completed in May 2005.

For the year ended December 31, 2005, net income totaled $137.1 million, or $0.97 per share, compared to $199.7 million, or $1.42 per share, for the prior year. Included in the 2005 results are a gain on sale of three branches, a gain from the resolution of the remaining contingencies related to the sale of the credit card portfolio, a reduction in income tax expense, a goodwill impairment charge and expenses incurred in connection with the repurchase of subordinated notes and the accelerated vesting of stock options. Results for 2004 included the net gain on sale of People's credit card business, balance sheet restructuring costs, other nonrecurring charges and a reduction in income tax expense. Excluding such items from both 2005 and 2004, net income would have been $127.1 million, or $0.90 per share, in 2005 and $90.0 million, or $0.64 per share, in 2004, a 41 percent increase.

For the fourth quarter of 2005, return on average assets was 1.30 percent and return on average stockholders' equity was 11.1 percent, compared to 1.06 percent and 9.4 percent, respectively, for the year-ago quarter.

People's Board of Directors declared a $0.22 per share quarterly dividend on People's common stock, payable February 15, 2006, to shareholders of record on February 1, 2006. People's Mutual Holdings, which owns 82.0 million shares of People's Bank common stock, will accept dividends on only 2.5 percent of its shares. Based on the closing stock price on January 18, 2006, the dividend yield on People's Bank common stock is 2.7 percent.

"2005 was a year of dramatic improvement in core earnings for People's Bank and another rewarding one for our shareholders, as People's common stock generated a total return for the year of 23 percent," stated John A. Klein, President and Chief Executive Officer. "We continued growing our core lending businesses and investing in our banking franchise, thus further strengthening our focus on the fundamentals.

"During 2005 we continued to generate healthy loan growth across our commercial and consumer businesses while maintaining outstanding asset quality," added Klein. "Our average commercial banking, home equity and residential mortgage loan portfolios increased a combined $900 million, or 12 percent, compared to last year. Optimizing the performance of our branch franchise, whose concentration in Fairfield County makes it the most attractive in Connecticut, we opened six new branches across the state and sold three in eastern Connecticut."

Klein concluded, "Our 2005 performance further demonstrates the significant value of the bank's franchise in Connecticut, one of the most attractive banking markets in the nation. People's is the only major bank in the state that is uniquely focused on Connecticut's consumers and businesses."

Results for the fourth quarter of 2005 included several essentially offsetting significant items, including an $8.1 million gain on sale of three branches (included in non-interest income) and a $2.0 million reduction in income tax expense relating to the completion of a federal tax audit. Noteworthy expense items this quarter included: a $2.7 million charge related to the repurchase of subordinated notes;a $0.7 million charge for the accelerated vesting of stock options (both included in non-interest expense);a $2.3 million charge-off related to one commercial banking loan;and a $2.0 million increase in the allowance for loan losses (both reflected in the provision for loan losses).

"Key drivers of the bank's performance this quarter were another increase in the net interest margin and continued growth in fee-based revenues," said Philip R. Sherringham, Executive Vice President and Chief Financial Officer. "The year-over-year 18 basis point improvement in the net interest margin reflects a combination of the bank's asset-sensitive position and the ongoing substitution of securities with higher-yielding loans. In fact, average loans increased $720 million, or 9 percent, year-over-year, while average investments declined $646 million, or 30 percent. The 10 percent increase in fee-based revenues reflects the benefit from our revenue initiatives implemented during 2005."

Commenting on asset quality, Sherringham added, "Fourth quarter net loan charge-offs totaled $3.3 million, or 0.16 percent of average loans on an annualized basis, compared to $4.5 million, or 0.23 percent, respectively, in the fourth quarter of last year." Included in the fourth quarter of 2005 is a $2.3 million charge-off relating to one commercial banking loan, while the year-ago quarter also included a $3.2 million charge-off relating to another commercial banking loan.

At December 31, 2005, non-performing assets totaled $22.0 million, a $6.6 million, or 23 percent, decrease from the prior year and equaled 0.26 percent of total loans, REO and repossessed assets, compared to 0.36 percent at December 31, 2004. The allowance for loan losses as a percentage of non-performing loans was 353 percent at December 31, 2005, compared to 265 percent at December 31, 2004. The allowance for loan losses as a percentage of total loans was 0.87 percent at December 31, 2005, compared to 0.91 percent a year ago.

Sherringham continued, "Our efficiency ratio was 62.6 percent in the fourth quarter of 2005, compared to 66.5 percent in the fourth quarter of 2004. The 390 basis point improvement from the year-ago quarter reflects continued expense control and a significant increase in revenue, including a 6 percent increase in net interest income and a 13 percent increase in adjusted non-interest income."

Selected Financial Terms
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 is based on income from continuing operations 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 profitability, 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 the cost required by People's to generate a dollar of revenue, is the ratio of operating expense to operating revenue. Operating expense equals People's total non-interest expense, excluding goodwill impairment, amortization of acquisition-related intangibles, losses on real estate assets, and nonrecurring expenses. People's 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.

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 non-interest-bearing deposits utilized for the operation of People's businesses. Purchased funds include borrowings, brokered certificates of deposit and municipal deposits.

Conference Call
On January 20, 2006, 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" in the "About People's" section on the home page, and then selecting "Conference Calls" in the "News and Events" section. 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.

4Q Financial Highlights
(4Q 2005 compared with 4Q 2004 unless otherwise indicated)

Summary

• Net income totaled $35.2 million, or $0.25 per share.
• Income from continuing operations increased $8.0 million.
• Net interest income increased $5.2 million.
• Net interest margin increased 18 basis points from 4Q04 and improved 5 basis points from 3Q05 to 3.75%.
• Provision for loan losses increased $3.3 million.
• Net loan charge-offs decreased $1.2 million (4Q05 included a $2.3 million charge-off related to one commercial banking loan and 4Q04 included a $3.2 million charge-off related to another commercial banking loan).
• The allowance for loan losses was increased $2.0 million in 4Q05 and decreased $2.5 million in 4Q04.
• Non-interest income, excluding the $8.1 million gain on sale of three branches, increased $5.1 million, or 13%.
• Total fee-based revenues increased $3.5 million, or 10%.
• Included in 4Q05 is $1.6 million related to the bank's investment in bank-owned life insurance.
• Non-interest expense, excluding the $3.4 million of charges discussed previously, increased $2.8 million, or 3%.
• Compensation and benefits increased $3.8 million (included in 4Q05 is the $0.7 million charge relating to the accelerated vesting of stock options as well as higher accruals for incentives and commission-related expense).
• Income tax expense this quarter was reduced by $2.0 million as a result of the completion of a federal tax audit.

Commercial Banking

• Average commercial banking loans grew $314 million, or 9%.
• Average commercial non-interest-bearing deposits increased $26 million, or 3%.
• The ratio of non-performing commercial banking loans to total commercial banking loans was 0.33% at December 31, 2005, compared to 0.54% at December 31, 2004.
• Non-performing loans decreased $5.7 million, or 30%, from December 31, 2004.
• Net loan charge-offs totaled $2.5 million, or 0.28% of average commercial banking loans.

Consumer Financial Services

• Average residential mortgage loans increased $265 million, or 8%.
• Average home equity loan portfolios increased $179 million, or 17%.
• Average consumer non-interest-bearing deposits grew $36 million, or 3%.

Treasury

• Average securities and short-term investments declined $646 million, or 30%.
• Securities made up 14% of average earning assets compared to 21% in 4Q04.
• The debt securities portfolio totaled $1.3 billion at December 31, 2005, a $724 million, or 36% decrease from a year ago.

People's Bank is a diversified financial services company providing consumer and commercial banking services, in addition to insurance, trust and financial advisory services. The bank is a leader in supermarket banking, with 70 of its 153 branches located in Super Stop & Shop stores. Through its subsidiaries, People's provides brokerage and financial advisory services, asset management, equipment financing and insurance services.

Certain statements contained in this release are forward-looking in nature. These include all statements about People's 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, but are not limited to: (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.