OCTOBER 19, 2006

People's Bank Reports Third Quarter Earnings Of $17 Million Or $0.12 Per Share;Results Reflect Further Balance Sheet Restructuring

BRIDGEPORT, CONN. - People's Bank (NASDAQ: PBCT), an $11 billion financial services company, today announced net income of $17.0 million, or $0.12 per share, for the third quarter of 2006, compared to $33.5 million, or $0.24 per share, for the third quarter of 2005. The current quarter's results include a previously-disclosed after-tax loss of $15.7 million, or $0.11 per share, from the sale of securities as part of further balance sheet restructuring activities.

Income from continuing operations for the third quarter of 2006 was $16.9 million, or $0.11 per share, compared to $32.4 million, or $0.23 per share, for the year-ago quarter. Income from continuing operations excluding the loss on sale of securities would have been $32.6 million, a 1 percent increase from the year-ago period.

For the third quarter of 2006, return on average assets was 0.63 percent and return on average stockholders' equity was 5.1 percent, compared to 1.24 percent and 10.7 percent, respectively, for the year-ago quarter. Return on average assets would have been 1.21 percent for the third quarter of 2006 excluding the loss on sale of securities.

People's Board of Directors declared a $0.25 per share quarterly dividend on People's common stock, payable November 15, 2006, to shareholders of record on November 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 October 18, 2006, the dividend yield on People's Bank common stock is 2.4 percent.

President and Chief Executive Officer John A. Klein stated, "The bank's performance this quarter reflects another increase in the net interest margin, our 12th consecutive increase. Our recent balance sheet restructuring activities contributed, in part, to the current quarter's margin increase. The year-over-year 19 basis point improvement in the net interest margin also reflects the bank's asset-sensitive position and the substitution of securities with higher-yielding loans."

Klein continued, "Our average commercial banking, home equity and residential mortgage loan portfolios increased a combined $785 million, or 10 percent, since the third quarter of 2005, while average securities declined $911 million, or 58 percent. Our commercial banking and home equity loan portfolios each grew 8 percent, while our residential mortgage loans grew 11 percent."

"As previously disclosed, we sold our entire debt securities portfolio during the third quarter," said Philip R. Sherringham, Executive Vice President and Chief Financial Officer. "The transaction involved $835 million in securities earning a weighted average yield of approximately 3.55 percent, which were sold at a $23.7 million pre-tax loss. The proceeds from this transaction were used to pay down short-term borrowings with an average cost of 5.25 percent and invest in short-term securities at current market yields of 5.20 percent. Another benefit of this transaction is an improvement in our efficiency ratio in the third quarter to 61.5 percent from 62.2 percent in the third quarter of last year."

Commenting on asset quality, Sherringham added, "Third quarter net loan charge-offs totaled $4.1 million, or 0.18 percent of average loans on an annualized basis, compared to $1.1 million or 0.05 percent in the third quarter of last year." Included in the third quarter of 2006 is a $4.0 million charge-off relating to one commercial banking loan that was placed on non-accrual in the second quarter of 2006 as previously disclosed. This charge-off reduced earnings by $2.7 million, or $0.02 per share, and return on average assets by 10 basis points for the quarter. Other net loan charge-offs for the third quarter of 2006 totaled $0.1 million, or 0.01 percent of average loans on an annualized basis.

At September 30, 2006, non-performing assets totaled $22.9 million, a $5.2 million, or 19 percent, decrease from June 30, 2006. This reduction in non-performing assets reflects a $5.5 million partial payment received on one commercial banking non-performing loan and the $4.0 million charge-off discussed above. Non-performing assets equaled 0.25 percent of total loans, REO and repossessed assets, compared to 0.31 percent at June 30, 2006. The allowance for loan losses as a percentage of non-performing loans was 355 percent at September 30, 2006, compared to 267 percent at June 30, 2006. The allowance for loan losses as a percentage of total loans was 0.81 percent at September 30, 2006, compared to 0.82 percent at June 30, 2006.

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 and municipal deposits.

3Q Financial Highlights(3Q 2006 compared with 3Q 2005 unless otherwise indicated)

Summary

• Net income totaled $17.0 million, or $0.12 per share.
• Includes a $23.7 million pre-tax loss ($15.7 million after-tax) from the sale of securities.
• Net interest income increased $3.7 million, or 4%.
• Net interest margin increased 19 basis points from 3Q05 and improved 7 basis points
  from 2Q06 to 3.89%.
• 3Q06 margin positively affected by 2 basis points due to the Federal Home Loan Bank of Boston declaring and paying two dividends on its stock this quarter.
• Provision for loan losses increased $3.0 million.
• Net loan charge-offs increased $3.0 million (3Q06 includes a $4.0 million charge-off related to one commercial banking loan).
• Non-interest income, excluding net security losses, decreased $0.8 million, or 2%.
• Other non-interest income in 3Q06 includes a $0.7 million net gain from the sale of a corporate insurance account by R.C. Knox.
• Non-interest expense increased $0.9 million, or 1%.

Commercial Banking

• Average commercial banking loans grew $309 million, or 8%.
• Average commercial non-interest-bearing deposits totaled $937 million.
• The ratio of non-performing commercial banking loans to total commercial banking loans was 0.29% at September 30, 2006, compared to 0.55% at June 30, 2006.
• Non-performing loans decreased $10.1 million, or 46%, from June 30, 2006.
• Net loan charge-offs totaled $3.9 million, or 0.40% annualized, of average commercial banking loans.

Consumer Financial Services

• Average residential mortgage loans increased $382 million, or 11%.
• People's purchased $170 million of residential mortgage loans towards the end of 1Q06.
• Average home equity loan portfolios increased $95 million, or 8%.
• Average consumer non-interest-bearing deposits totaled $1.1 billion.

Treasury

• Average securities declined $911 million, or 58%.
• Sold $835 million of securities in 3Q06, resulting in a $23.7 million pre-tax loss ($23.4 million in net security losses and $0.3 million in other non-interest expense).
• Transaction included $810 million of debt securities and $25 million of securities purchased under agreements to resell.
• Securities made up 7% of average earning assets compared to 16% in 3Q05.
• The debt securities portfolio totaled $147 million at September 30, 2006, a $1.4 billion, or 90%, 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.