January 18, 2007

People's Bank Fourth Quarter Earnings Up 12 Percent to $39 Million or $0.28 Per Share

PBCT Total Return for 2006 Tops 47 Percent

Click here to see the fourth quarter Financial Schedule.

BRIDGEPORT, CONN. –People's Bank (NASDAQ: PBCT), an $11 billion financial services company, today announced net income of $39.3 million, or $0.28 per share, for the fourth quarter of 2006, a 12 percent increase compared to $35.2 million, or $0.25 per share, for the fourth quarter of 2005. Income from continuing operations increased 13 percent to $38.7 million, or $0.27 per share, from $34.3 million, or $0.24 per share, for the year-ago quarter.

For the year ended December 31, 2006, net income totaled $124.0 million, or $0.87 per share, compared to $137.1 million, or $0.97 per share, for 2005. Included in this year's results are net security losses ($27.4 million) related to significant balance sheet restructuring activities in the third and second quarters, and an income tax benefit related to certain prior-year tax matters ($2.4 million). The net impact of these items reduced 2006 net income by $15.8 million, or $0.11 per share. Results for 2005 included a gain on the sale of three branches ($8.1 million), a gain from the resolution of a significant contingency related to the sale of the credit card portfolio in 2004 ($9.7 million), an income tax benefit ($2.0 million), a goodwill impairment charge ($2.0 million) and expenses incurred in connection with the repurchase of subordinated notes ($2.7 million) and the accelerated vesting of stock options ($0.7 million). The net impact of these items increased 2005 net income by $9.3 million, or $0.07 per share.

For the fourth quarter of 2006, return on average assets was 1.49 percent and return on average stockholders' equity was 11.6 percent, compared to 1.30 percent and 11.1 percent, respectively, for the year-ago quarter. Return on average assets would have been 1.40 percent for the fourth quarter of 2006, excluding the previously mentioned $2.4 million income tax benefit.

People's Board of Directors declared a $0.25 per share quarterly dividend on People's common stock, payable February 15, 2007, to shareholders of record on February 1, 2007. 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 January 17, 2007, the dividend yield on People's Bank common stock is 2.3 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 13th consecutive increase. Our third quarter balance sheet restructuring activities contributed, in part, to the current quarter's margin improvement. The year-over-year 26 basis point increase in the net interest margin to 4.01 percent 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 $824 million, or 10 percent, since the fourth quarter of 2005. Our commercial banking loan portfolio grew 9 percent and the home equity loan portfolio grew 6 percent, while our residential mortgage loans grew 12 percent."

"As previously disclosed, we sold our entire debt securities portfolio during the third quarter of 2006,"said Philip R. Sherringham, Executive Vice President and Chief Financial Officer. "This transaction contributed to the continued improvement in the bank's net interest margin, as well as an improvement in our efficiency ratio to below 60 percent this quarter."Average securities declined $1.3 billion, or 88 percent, on a year-over-year basis.

Commenting on asset quality, Sherringham added, "Fourth quarter net loan charge-offs totaled $1.4 million, or 0.06 percent of average loans on an annualized basis, compared to $3.3 million, or 0.16 percent annualized in the fourth quarter of last year."At December 31, 2006, non-performing assets totaled $22.7 million, a $0.2 million, or 1 percent, decrease from September 30, 2006. Non-performing assets equaled 0.24 percent of total loans, REO and repossessed assets, compared to 0.25 percent at September 30, 2006. The allowance for loan losses as a percentage of non-performing loans was 328 percent at December 31, 2006, compared to 355 percent at September 30, 2006. The allowance for loan losses as a percentage of total loans was 0.79 percent at December 31, 2006, compared to 0.81 percent at September 30, 2006.

Selected Financial Terms
In addition to evaluating People's results of operations in accordance with generally accepted accounting principles ("GAAP"), management routinely supplements this evaluation with an analysis of certain non-GAAP financial measures, such as core deposits, purchased funds and the efficiency ratio. Management believes these non-GAAP financial measures provide information useful to investors in understanding People's underlying operating performance and trends, and facilitates comparisons with the performance of other banks and thrifts.

Core deposits is a measure of stable funding sources and is defined as 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.

The efficiency ratio, which represents an approximate measure of the cost required by People's to generate a dollar of revenue, is the ratio of total non-interest expense (excluding goodwill impairment, amortization of acquisition-related intangibles, losses on real estate assets and nonrecurring expenses) to net interest income plus total non-interest income (adjusted for gains and losses on sales of assets other than residential mortgage loans and excluding other items that may recur from time to time but that are deemed to occur irregularly or infrequently). 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. Management considers the efficiency ratio to be more representative of People's ongoing operating efficiency, as the excluded items are generally related to external market conditions and non-routine transactions.

Conference Call
On January 19, 2007, 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 2006 compared with 4Q 2005 unless otherwise indicated)

Summary

• Net income totaled $39.3 million, or $0.28 per share.
• Net interest income increased $2.8 million, or 3%.
  • Net interest margin increased 26 basis points from 4Q05 and improved 12 basis points
    from 3Q06 to 4.01%.
• Provision for loan losses decreased $3.9 million.
  • Net loan charge-offs decreased $1.9 million (4Q05 included a $2.3 million charge-off related to one commercial banking loan).
• Non-interest income, excluding the $8.1 million gain on sale of three branches in 4Q05, increased $1.3 million, or 3%.
  • Bank-owned life insurance income increased $1.2 million.
• Non-interest expense, excluding charges of $2.7 million related to the repurchase of subordinated notes and $0.7 million for the accelerated vesting of stock options in 4Q05, decreased $1.5 million, or 2%.
• Income tax expense was reduced by $2.4 million in 4Q06 related to certain prior-year tax matters and by $2.0 million in 4Q05 resulting from the completion of a federal tax audit.
• Total stockholders' equity at December 31, 2006 was reduced by $40 million resulting from the adoption of SFAS No. 158.

Commercial Banking

• Average commercial banking loans grew $334 million, or 9%.
• Average commercial non-interest-bearing deposits totaled $929 million.
• Non-performing commercial banking assets increased $0.5 million, or 3%, from September 30, 2006.
  • Non-performing commercial loans increased $8.9 million from September 30, 2006, reflecting one loan totaling $10.6 million that was classified as non-performing.
  • Non-performing commercial real estate finance loans decreased $6.4 million from
    September 30, 2006, reflecting the repayment of one loan totaling $5.5 million.
• The ratio of non-performing commercial banking loans to total commercial banking loans was 0.34% at December 31, 2006, compared to 0.29% at September 30, 2006 and 0.33% at December 31, 2005.
• Net loan charge-offs totaled $0.8 million, or 0.08% annualized, of average commercial banking loans, compared to $2.5 million, or 0.28% annualized, in 4Q05.

Consumer Financial Services

• Average residential mortgage loans increased $414 million, or 12%.
  • People's purchased $170 million of residential mortgage loans towards the end of 1Q06.
• Average home equity loan portfolios increased $76 million, or 6%.
• Average consumer non-interest-bearing deposits totaled $1.1 billion.

Treasury

• Average securities declined $1.3 billion, or 88%.
  • Sold $835 million of debt securities in 3Q06 and $266 million in 2Q06.
• Average securities made up 2% of average earning assets compared to 14% in 4Q05.
• The 7.20% subordinated notes ($43.5 million) matured on December 1, 2006.

People's Bank is a diversified financial services company providing consumer and commercial banking services, in addition to insurance, trust and financial advisory services.