April 20, 2006

People's Bank First Quarter Earnings Increased 11 Percent; Dividend Raised 14 Percent

Click here to see our first quarter Financial Schedules.

BRIDGEPORT, CONN. - People's Bank (NASDAQ: PBCT), an $11 billion financial services company, today announced net income of $34.8 million, or $0.24 per share, for the first quarter of 2006, compared to $31.4 million, or $0.22 per share, for the first quarter of 2005. Income from continuing operations increased 14 percent to $33.9 million, or $0.24 per share, from $29.8 million, or $0.21 per share, for the year-ago quarter.

For the first quarter of 2006, return on average assets was 1.28 percent and return on average stockholders' equity was 10.8 percent, compared to 1.17 percent and 10.4 percent, respectively, for the year-ago quarter.

People's Board of Directors voted to increase the quarterly dividend on its common stock by $0.03 per share, or 14 percent, to $0.25 per share. The dividend is payable May 15, 2006, to shareholders of record on May 1, 2006. People's Mutual Holdings, which owns 82.0 million shares of People's Bank common stock, will accept dividends on only 2.2 percent of its shares. Based on the closing stock price on April 19, 2006, the dividend yield on People's Bank common stock is 2.9 percent.

"We are pleased to reward our shareholders with a 14th consecutive annual dividend increase, reflecting management's confidence in People's future," stated President and Chief Executive Officer, John A. Klein.

"Our first quarter results continue to build on the steadily improving financial performance achieved in 2005," said Klein. "The 14 percent improvement in earnings from continuing operations further illustrates the continued strength of our consumer and commercial franchises."

Klein added, "We continue to generate meaningful loan growth across our core lending businesses. Our average commercial banking, home equity and residential mortgage loan portfolios increased a combined $600 million, or 8 percent, since the first quarter of 2005."

Klein concluded, "We remain committed to strengthening the bank's franchise in Connecticut, through traditional and in-store branch expansion and renovations, and growing our core portfolios, while at the same time continuing to explore suitable acquisition opportunities in neighboring markets, including New York, New Jersey, Massachusetts and Rhode Island."

"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 15 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 $571 million, or 7 percent, year-over-year, while average securities declined $709 million, or 35 percent. The 6 percent increase in fee-based revenues reflects the ongoing benefits from the revenue initiatives implemented during 2005."

Sherringham added, "Bankwide asset quality remains very strong. First quarter net loan charge-offs, after excluding a $2.3 million commercial banking loan recovery, totaled $1.0 million, or 0.05 percent of average loans on an annualized basis, compared to $0.8 million, or 0.04 percent, respectively, in the first quarter of last year."

At March 31, 2006, non-performing assets totaled $24.3 million, a $2.7 million, or 10 percent, decrease from the prior year, and equaled 0.28 percent of total loans, REO and repossessed assets, compared to 0.33 percent at March 31, 2005. The allowance for loan losses as a percentage of non-performing loans was 322 percent at March 31, 2006, compared to 280 percent at March 31, 2005. The allowance for loan losses as a percentage of total loans was 0.84 percent at March 31, 2006, compared to 0.90 percent a year ago.

Results for the first quarter of 2006 included severance-related expenses totaling $1.2 million, a $0.9 million reserve established to resolve certain business contingencies (both included in non-interest expense);a $2.3 million commercial banking loan recovery and a $1.0 million decrease in the allowance for loan losses (both reflected in the provision for loan losses).

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 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.

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 April 21, 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.

1Q Financial Highlights
(1Q 2006 compared with 1Q 2005 unless otherwise indicated)

Summary

• Net income totaled $34.8 million, or $0.24 per share.
• Income from continuing operations increased $4.1 million, or 14%.
• Net interest income increased $2.8 million, or 3%.
• Net interest margin increased 15 basis points from 1Q05 and improved 2 basis points from 4Q05 to 3.77%.
• Provision for loan losses decreased $3.6 million.
• Net loan recoveries in 1Q06 totaled $1.3 million compared to net loan charge-offs in 1Q05 of $0.8 million, a difference of $2.1 million.
• The allowance for loan losses was reduced $1.0 million in 1Q06 and was increased $0.5 million in 1Q05.
• Non-interest income increased $4.4 million, or 12%.
• Total fee-based revenues increased $2.2 million, or 6%.
• Included in 1Q06 is $1.9 million ($2.9 million on a taxable-equivalent basis) related to the bank's investment in bank-owned life insurance.
• Non-interest expense, excluding the $2.1 million of charges discussed previously, increased $3.5 million, or 4%.
• Adjusted compensation and benefits increased $3.1 million.

Commercial Banking

• Average commercial banking loans grew $232 million, or 7%.
• Average commercial non-interest-bearing deposits totaled $940 million.
• The ratio of non-performing commercial banking loans to total commercial banking loans was 0.44% at March 31, 2006, compared to 0.53% at March 31, 2005.
• Non-performing loans decreased $2.3 million, or 12%, from March 31, 2005.
• Net loan charge-offs (excluding the $2.3 million recovery) totaled $0.4 million, or 0.04% of average commercial banking loans.

Consumer Financial Services

• Average residential mortgage loans increased $228 million, or 7%.
• Average home equity loan portfolios increased $142 million, or 13%.
• Average consumer non-interest-bearing deposits totaled $1.2 billion.

Treasury

• Average securities and short-term investments declined $674 million, or 32%.
• Securities made up 13% of average earning assets compared to 20% in 1Q05.
• The debt securities portfolio totaled $1.2 billion at March 31, 2006, a $729 million, or 38% 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.