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					                     I S I T P OSS I B L E . . .
2003 Annual Report




                      people’s bank   2003 year in review
                         P EO P L E ’S BA N K




EARNINGS PER SHARE
Years ended December 31 (dollars)


2003                                            1.03

2002                                            0 .9 0

2001                                            1.23

2000                                            1 .7 7

1999                                            1.81




DIVIDENDS PER SHARE
Years ended December 31 (dollars)


2003                                            1.53

2002                                            1.42

2001                                            1.34

2000                                            1.20

1999                                            1.03




CORE DEPOSITS
As of December 31 (dollars in millions)


2003                                            8,519

2002                                            8,230

2001                                            7, 8 1 4

2000                                            7,1 8 6

1999                                            6 ,75 3




C LOS I N G STO C K P R I C E
As of December 31 (dollars)


2003                                            32 . 55

2002                                            25.20

2001                                            21 . 26

2000                                            25.88

1999                                            2 1 .1 2
I S I T P OSS I B L E . . .
D e a r S h a re h o l d e r People’s began 2004 with exciting news, announcing that it had agreed to sell its credit card
business to The Royal Bank of Scotland Group (RBS). Our strategic decision to exit the credit card business affords
significant financial opportunities for the bank and will unlock considerable shareholder value. At the same time, it
enables us to continue delivering on our high levels of commitment to our customers, employees and communities.
   The agreement with RBS includes the sale of $2.0 billion of credit card receivables as of the March 5th closing date,
as well as the transfer of the related Bridgeport credit card operations and staff to RBS. The gross premium from the
transaction totaled $315 million. We are very pleased that RBS will maintain the credit card employment base in
Bridgeport and that the transaction will bring a significant new corporate citizen to Connecticut.
   We chose to exit the credit card business because we believed the time was right to transfer the operation to an insti-
tution that can optimize its performance and grow it to a multiple of its current size. For People’s to expand the business
significantly would have disturbed the balance that we seek to maintain in our portfolio of businesses. RBS, with one of
the largest credit card platforms in Europe, is an institution with the experience and resources to grow the business and
optimize its performance.
   The sale of the business provides us with an opportunity to restructure and significantly strengthen our balance sheet,
which should lead to improved financial performance. We intend to use a portion of the proceeds to retire approximately
$1 billion of high-rate borrowings that have had a significant negative impact on our net interest margin in past years.




                  JOHN KLEIN, CHIEF EXECUTIVE OFFICER



                 “We concluded 2003 with substantial earnings improvements and have
                  begun 2004 with a strategic redirection of focus that fully leverages
                  our powerful banking competencies, brand recognition and competitive
                  advantage in the commercial and retail banking franchise.”




   Our decision to exit the credit card business strengthens People’s Bank today and for the future. It better enables us
to focus on and invest in our core retail and commercial banking businesses where we have proven competencies and
demonstrated competitive advantages.
   Now, looking back, in 2003 we built on the solid foundation established during the previous year, increasing annual
earnings by 14 percent. Our net income for the year totaled $64 million, or $1.03 per share, compared to $55 million, or $0.90
per share, for 2002. We continued to deliver shareholder value with a 35 percent total rate of return, including price
appreciation and dividend reinvestment. People’s stock price closed at $32.55 on December 31, up $7.35, or 29 percent
for the year. We paid our shareholders $1.53 in dividends, an 8 percent increase over 2002. Our total return for 2003 out-
performed most major stock market and sector benchmarks, even though all experienced strong gains during the year.

D e p os i t G a t h e r i n g Effe c t i ve n ess Our diverse distribution network is the key to our position as one of the
most effective deposit-growing franchises in Connecticut. People’s 154 branches statewide, including our 64 Super Stop &
Shop branches with full-service, seven-day banking, provide unmatched convenience for our customers. This partnership
with Stop & Shop offers us the sustainable, differentiable competitive advantage that is the envy of others. No other
financial institution in the state can provide customers with a comparable “convenience advantage” along with top-notch
financial expertise.




                                                      2
I S I T P OSS I B L E . . .
   People’s relationship with the University of Connecticut Athletics Division and the UConn Co-Op is taking stronger
hold as we serve the financial needs of the 24,000 members of the Storrs campus and increase our outreach to alumni,
family and fans across the state. In addition, our award-winning Web site attracted more recognition this year when
Jupiter Research, a top consumer technology research group, ranked it number one nationwide in migrating traditional
customers to online relationships and eighth overall among U.S. bank Web sites.
   The power of People’s distribution channels translated into strong deposit growth for the year. We increased commer-
cial and retail non-interest bearing deposits, our most attractive funding source, by 11 percent. At the same time, we
added nearly $500 million on a year-over-year basis to core deposits. Commercial deposits registered good growth as our
enhanced cash management services provided business customers with an even greater range of products and ease of
use through Web-based enhancements.

Le n d i n g St re n g t h While we delivered healthy deposit growth, interest rates at 45-year lows fueled expansion
of our retail and commercial lending businesses. Our residential mortgage group generated record-breaking volume with
over $3 billion in residential mortgage closings during 2003. We also benefited from the increase in income generated
from the sale of substantially all newly-originated fixed-rate mortgage loans. At a time when many other banks aban-
doned their branch network as a source of mortgage originations, our branches contributed 47 percent of overall retail
residential mortgage originations for the year. Even more impressive, a full 20 percent of People’s residential mortgage
originations from the branches were generated in our Super Stop & Shop locations.
   Home equity lending grew briskly in 2003 with loan originations up 38 percent, generating a portfolio increase of
25 percent year over year. This growth trend stems primarily from improved integration in our approach to mortgage and
home equity product delivery through both retail and wholesale origination channels.
   Commercial loans grew at a double-digit rate last year accompanied by continued exceptional asset quality. The com-
mercial banking loan portfolio grew to $3 billion while net charge-offs were at industry lows of 0.05 percent of average
loans. Some highlights of our commercial lending group’s activities in 2003 included providing financing to Charlotte
Hungerford Hospital in Torrington for a new treatment center; to Stamford’s Palace Theater for its $9 million restoration;
and to Artspace, a former department store in downtown Bridgeport scheduled to become a living and work space for
artists by 2005.
   This year our fundamental goals include expanding our national portfolios while maintaining appropriate geographic
and sector risk diversification. We anticipate that a strengthening economy will have a beneficial effect on this business
in 2004 as our commercial customers’ appetite for additional borrowing grows with demand from their own customers.

A sset Q u a l i ty a n d I n te rest Ra tes Asset quality remained high across the board through a constant focus
on credit risk monitoring. While asset quality in the commercial business remained stable at exceptionally low levels, asset
quality improvement was a significant part of the upward trend in the credit card business. The credit card portfolio grew
slightly year over year and returned to profitability in the second half of 2003, though it recorded a net operating loss
for the year as a whole. Net charge-offs dropped by 259 basis points and delinquencies declined by 30 percent.




                                               T H E B A N K T H A T R E V O LV E S A R O U N D Y O U



                                               In 2003 People’s launched an advertising campaign bringing a fresh
                                               new approach to our established tag line, It’s Possible @ People’s.
                                               The design represents our customer-centric approach to all we
                                               do. Revolving around the central hub are spokes representing the
                                               broad array of financial solutions that People’s provides to meet
                                               customers’ changing needs.


                                                     4
I S I T P OSS I B L E . . .
SEVEN-DAY BANKING Financial expertise and convenience greet our customers at the Greens Farms Super Stop & Shop
in Westport. People’s combines convenient banking with financial expertise as licensed professionals offer investment and
insurance guidance at 154 locations across Connecticut. Our 64 Super Stop & Shop locations statewide provide nearly
2 million customers and potential customers with access to People’s seven-day banking and financial services every week.

                                                            6
I S I T P OSS I B L E . . .
CARLA’S PASTA, SOUTH WINDSOR Carla Squatrito is the founder and president of Carla’s Pasta Inc., which manufactures
nationally distributed specialty frozen pasta. Carla’s is recognized as one of the largest female-owned businesses in Connecticut.
People’s is proud to be a part of her strong and growing business and values our ten-year relationship with Carla.




                                         Looking forward to the remainder of 2004, we believe that asset quality trends should remain stable
RELATIONSHIP BANKING                  as the economy shows ongoing signs of improvement. The combination of historic lows in interest rates,
People’s commercial banking is
a business of relationships. From     stimulative fiscal policy and outstanding productivity established in previous years have laid the foundation
lending to insurance, from checking
and cash management services
                                      for a sustainable recovery that is, of course, subject to downside risks from geopolitical concerns. We
to financing large multi-use           believe, however, that improving global conditions, along with higher household net worth and stronger
developments, our commercial
bankers are ready to meet the         market fundamentals, should buoy the recovery.
needs of their customers.                Faced with record low interest rate levels in 2003, we made a strategic decision to reduce the size of
Anthony J. Ciaramella                 our investment portfolio by not reinvesting all proceeds from maturing securities. Though our decision
Vice President and Regional
Manager, Commercial Banking           resulted in lower earnings in 2003, we took significant interest rate risk off the balance sheet and better
Carla Squatrito                       positioned the bank for a rising interest rate environment.
President, Carla’s Pasta Inc.

                                      F i n a n c i a l E x p e r t i se i n Eve r y B ra n c h To ensure that we provide customers with a seam-
                                      less financial experience, we have focused on a more integrated approach to wealth management and
                                      insurance services. In addition to reorganizing our delivery structure, we have branded our brokerage, life
                                      insurance, trust, estate planning and money management services under one umbrella – “People’s
                                      Financial Advisors.” We began providing customers with Financial SnapshotsTM, which offer an instant
                                      overview of their financial planning parameters based on answers to a few brief questions. These
                                      steps allow us to better meet our customers’ needs through a full range of brokerage, financial advisory
                                      and life insurance services.
                                         Providing our customers with expert financial guidance is critical to our goals as well as theirs. Our
                                      professionals are highly credentialed and experienced. People’s financial advisors, on average, have more
                                      than 13 years of related experience and we currently have 240 licensed investment associates located
                                      throughout our branch network. These licensed professionals offer investment and insurance guidance in
                                      each of our 154 branch locations.
                                                                           8
I S I T P OSS I B L E . . .
                 We launched a new advertising campaign during 2003 to highlight our full range of products and services. This new
              approach enhances our brand awareness and highlights how we help fulfill our customers’ financial goals and life
              dreams holistically through a wide variety of financial solutions.

              Te c h n o l o g y I n n ova t i o n s Investments in People’s franchise and branches in 2003 focused on building customer
              relationships through ever-increasing convenience paired with expert financial advice. We continued to introduce tech-
              nology for our customers and employees which enhances our customer focus and efficiency.
                 One example of these new technologies was the successful pilot of Express Plus, designed to increase our ability to
              better serve our customers. Express Plus offers immediate, point-of-service identification and information for customers
              who swipe their People’s Plus® card and enter their confidential PIN. While expediting banking transactions, this service
              also provides branch employees with more time and better information to serve our customers while advising them on
              products and services that fulfill their financial needs. We rolled out this new technology throughout our branch network
              during the first quarter of 2004.




BANKING – WHEN AND WHERE YOU NEED IT Whether at home or traveling, People’s customers can easily access our
award-winning Web site at www.peoples.com. Paying bills, transferring funds and trading online through People’s Securities,
Inc. is convenient 24/7 for our consumer and small business customers.


                                                                  10
I S I T P OSS I B L E . . .
G row t h i n 20 0 4 In summary, we concluded 2003 with substantial earnings improvements and have begun 2004
with a strategic redirection of focus that fully leverages our powerful banking competencies, brand recognition and
competitive advantage in the commercial and retail banking franchise. We have in place an outstanding foundation on
which to build long-term growth for People’s shareholders, customers, employees and communities.
   We will pursue increased opportunities for growth in People’s core businesses. We will focus on growing core
deposits while expanding our commercial and consumer lending businesses. As our marketplace becomes ever more
competitive, our branch and wholesale networks will continue to grow in importance as crucial channels for delivering
mortgages and home equity products to our customers. We plan to expand our branch system statewide with five new
Super Stop & Shop branches and the relocation and renovation of six other branches. We also will be in a position to
carefully consider acquisitions that reinforce our core competencies in middle-market commercial and retail banking. We
will continue to leverage technology to enhance our customers’ experience and drive efficiencies.
   People’s will maintain its 162-year leadership commitment to Connecticut’s communities which is part of the very fiber
of this institution. And we will continue to work with our employees to build our Workplace of Choice Partnership,
by which we seek to deepen our employees’ engagement in their work so that they can better enhance our customers’
relationship with and loyalty to People’s Bank.
   On behalf of our management team and all of our employees at People’s Bank, I want you to know that we are ener-
gized by the opportunities that we face. We look forward to continuing to exceed our customers’ expectations and grow
our core franchise. These are critical elements in delivering increased value to you, our shareholder, which is the best
way we know to thank you for your continued loyalty to People’s Bank.

Sincerely,




John A. Klein
Chairman, CEO and President
March 5, 2004
IT’S POSSIBLE@PEOPLE’S.




                 MORTGAGES           COMMERCIAL BANKING
                 Pamela Hippolyte    Gaetan Frosina
                 Millie Rochet       Liz Angell
                 Clifford Kruger     Louis Paffumi
                                     James Macdonald
                 PERSONAL BANKING
                                     FINANCIAL INVESTMENTS
                 Sandra Parks        Brian Maitland
                 Evelyn Mansfield     Brian Elmer
                 Christopher Smith   Gray Horn
                 Kim Karl
                 Stephen Shealy
FINANCIAL HIGHLIGHTS



As of and for the years ended December 31
(dollars in millions, except per share data)                                        2003            2002            2001            2000         1999
Operating Data:
Net interest income – FTE                                                       $ 323.1         $ 355.9         $ 358.7         $ 389.6         $ 343.3
Provision for loan losses                                                          48.6            77.7           101.1            59.9            54.5
Fee-based revenues                                                                226.2           232.6           223.5           258.1           269.9
Net security gains (losses)                                                        (0.6)            (3.3)          (18.5)          16.5            18.7
All other non-interest income (1)                                                  25.4            19.4           116.8            20.5            14.0
Non-interest expense                                                              435.9           441.8           458.4           454.8           415.6
Net income                                                                         63.8            55.4             75.8          108.4           112.0

Selected Statistical Data:
Net interest margin – managed portfolio (2)                                            3.41%         4.04%           4.33%            4.47%          4.26%
Net interest margin – owned portfolio                                                  2.95          3.40            3.53             3.95           3.69
Return on average assets                                                               0.54          0.47            0.68             1.01           1.10
Return on average stockholders’ equity                                                  6.6           5.9             8.2             13.5           14.0
Efficiency ratio – managed portfolio (2)                                                66.0          60.1            55.4             54.7           54.7

Financial Condition Data:
Total assets – managed portfolio (2)                                            $12,672         $13,382         $13,714         $ 13,744        $13,229
Total assets – owned portfolio                                                   11,672          12,261          11,891           11,571         10,737
Loans – managed portfolio (2)                                                     9,402           8,696           8,879            9,636          9,579
Loans – owned portfolio                                                           8,234           7,450           7,046            7,449          7,075
Allowance for loan losses                                                           113             114             115              105            105
Securities, net                                                                   2,556           3,336           2,900            2,473          2,310
Deposits                                                                          8,714           8,426           7,983            7,761          7,191
Core deposits                                                                     8,519           8,230           7,814            7,186          6,753
Borrowings                                                                        1,516           2,437           2,542            2,466          2,442
Purchased funds                                                                   1,711           2,634           2,711            3,041          2,880
Subordinated notes                                                                  253             252             252              266            149
Stockholders’ equity                                                              1,002             940             935              882            782
Non-performing assets                                                                41              48              46               65             47

Ratios:
Non-performing assets to total loans and REO                                           0.50%         0.64%           0.65%            0.87%          0.67%
Net loan charge-offs to average loans                                                  0.64          1.11            1.32             0.86           0.83
Allowance for loan losses to total loans                                               1.37          1.53            1.63             1.41           1.48
Average stockholders’ equity to average assets                                          8.5           8.0             8.2              7.5            7.9
Stockholders’ equity to total assets                                                    8.6           7.7             7.9              7.6            7.3
Total risk-based capital                                                               13.1          12.5            12.3             11.6           10.9

Per Common Share Data:
Basic and diluted earnings per share                                            $  1.03         $  0.90         $  1.23         $  1.77         $  1.81
Dividends paid per share(3)                                                        1.53            1.42            1.34            1.20            1.03
Total dividend payout ratio (3)                                                    63.7%           67.4%           49.4%           28.4%           24.4%
Book value                                                                      $ 16.16         $ 15.22         $ 15.20         $ 14.39         $ 12.80
Tangible book value                                                               14.33           13.39           13.32           12.36           10.62
Stock price:
  High                                                                                34.00         28.05           28.38            27.00          32.25
  Low                                                                                 24.25         20.66           20.66            16.38          19.25
  Close                                                                               32.55         25.20           21.26            25.88          21.12

(1) Includes a net gain of $2.6 million in 2002 and $78 million in 2001 on the sale of the United Kingdom business in 2001. The 2001 period also includes
    $20 million in gains on other sales of assets.
(2) Represents the owned portfolio plus off-balance-sheet securitized and sold credit card receivables.
(3) Reflects the waiver of dividends on the substantial majority of the common shares owned by People’s Mutual Holdings.

See the Glossary on page 94 for definitions of certain terms in this table.




                                                                                 14

14   2003 Annual Report
M A N AG E M E N T ’S D I S C U S S I O N A N D A N A LYS I S

GENERAL

People’s Bank (“People’s”) is a state-chartered stock       branches, 26 investment and brokerage offices (with
savings bank with $12.7 billion in managed assets           25 located in People’s traditional branches or financial
as of December 31, 2003. People’s was organized             centers), 7 wealth management and trust offices and
in 1842 as a mutual savings bank and converted              6 commercial lending offices. People’s distribution
to stock form in 1988. People’s is headquartered            network also includes a fully integrated Internet
in Bridgeport, Connecticut.                                 banking and investment trading Web site, a 24-hour
    Deposits are insured up to applicable limits by the     telephone banking service and participation in a
Bank Insurance Fund of the Federal Deposit Insurance        worldwide ATM network.
Corporation (“FDIC”). People’s primary regulators are           People’s results of operations are largely dependent
the FDIC and the State of Connecticut Department            upon revenues generated through net interest income,
of Banking.                                                 fee-based revenues and other forms of non-interest
    People’s offers a full range of financial services       income such as net security gains and gains on asset
to individual, corporate and municipal customers.           sales. Sources for these revenues are diversified
Traditional banking activities are conducted primarily      across People’s four business segments: Commercial
within the state of Connecticut and include originating     Banking; Consumer Financial Services; Credit Card
mortgage loans secured by residential and commercial        Services; and Capital Markets. Results of operations
properties, extending secured and unsecured consumer        are also significantly affected by the provision for
and commercial loans, and accepting consumer,               loan losses.
commercial and municipal deposits. People’s also                In preparing the Consolidated Financial
originates credit cards nationally. In addition to tradi-   Statements, People’s is required to make significant
tional banking activities, People’s provides specialized    estimates and assumptions that affect the reported
services tailored to specific markets including: personal,   amounts of assets, liabilities, revenues and expenses.
institutional and employee benefit trust; cash manage-       Actual results could differ from current estimates,
ment; and municipal banking and finance. Through its         as a result of changing conditions and future events.
subsidiaries, People’s offers: brokerage and financial       Several estimates are particularly critical and are
advisory services through People’s Securities, Inc.         susceptible to significant near-term change, including
(“PSI”); equipment leasing and financing through             the allowance for loan losses, the valuation of retained
People’s Capital and Leasing Corp. (“PCLC”); asset          interests in credit card securitizations, the valuation
management through Olson Mobeck Investment                  of derivative financial instruments, and asset impair-
Advisors, Inc. (“OMIA”); and insurance services             ment judgments including other-than-temporary
through R.C. Knox and Company, Inc. (“RC Knox”).            declines in the value of securities and the recoverability
    This full range of financial services is delivered       of goodwill and other intangible assets. People’s
through a network of 8 financial centers, 74 traditional     significant accounting policies are summarized in
branches, 64 supermarket branches, 8 limited-services       Note 1 to the Consolidated Financial Statements.

CREDIT CARD SALE AND BALANCE SHEET RESTRUCTURING

On February 3, 2004, People’s announced an                  ments, totaled $2.4 billion, including a gross premi-
agreement to sell its credit card business (the “Sale”)     um of $315 million. People’s and RBS have entered
to The Royal Bank of Scotland Group (“RBS”)                 into a long-term agency agreement whereby People’s
and its intention to restructure its balance sheet          will originate credit cards on behalf of RBS through
(the “Restructuring”).                                      People’s customer base. People’s and RBS have also
    On March 5, 2004, People’s completed the Sale,          entered into an interim servicing agreement under
which included $2.0 billion of credit card receivables      which People’s will continue to service the credit
and the transfer of its related credit card operations      card portfolio and provide other support services
and 420 employees to RBS. Gross proceeds from the           for RBS for a period of up to 15 months.
Sale, after completing normal post-closing adjust-

                                                                                                      People’s Bank   15
     A portion of the proceeds from the Sale were         totaling approximately $160 million. The discussion
used to prepay $0.9 billion of long-term borrowings,      and analysis that follow have been adjusted where
unwind derivative positions related to these liabili-     applicable to reflect the impact of the Sale and the
ties, and repurchase $132 million of subordinated         Restructuring on People’s financial condition and
notes. People’s utilized $1.2 billion in proceeds for     results of operations.
the Restructuring, including prepayment costs

FINANCIAL OVERVIEW

People’s net income increased $8.4 million in 2003 to     reflecting the improving trends in credit card asset
$63.8 million, or $1.03 per share, from $55.4 million,    quality; a record year of residential mortgage origi-
or $0.90 per share in 2002. The historically low          nation volume; a $6.0 million income tax benefit
level of market interest rates in 2003 had a signifi-      and $4.3 million (pre-tax) of related interest result-
cant impact on People’s overall financial results, as      ing from the completion of a routine IRS audit; and
evidenced by a $33 million, or 9%, reduction in net       continued emphasis on expense control. Results for
interest income and a $6.4 million, or 76% improve-       2003 also reflect steady growth in loans and core
ment in net gains on sales of residential mortgage        deposits, substantial reductions in credit card net
loans. The other key factors affecting the financial       charge-offs and delinquencies, and a significant
results in 2003 were: continued strong growth from        reduction in the securities portfolio in response to
People’s core Connecticut franchise; a $29 million,       the low level of interest rates.
or 37%, reduction in the provision for loan losses,

ECONOMIC ENVIRONMENT

People’s results are subject to periodic fluctuations      interest rates reflects a strong resolve on the part
based on local, state and national economic conditions.   of the Federal Reserve to create jobs and improve
Economic activity in the United States showed signs       general economic conditions.
of improving in 2003, as indicated by a decrease in            People’s primary market area, Connecticut,
the national unemployment rate to 5.7% as of              continues to enjoy the highest per capita personal
December 31, 2003, from 6.0% a year ago. Although         and disposable income in the country. The state’s
the equities markets had year-over-year gains for the     unemployment rate, which rose to 5.5% as of
first time in four years, the national economy contin-     December 31, 2003, compared to 4.7% a year ago,
ues to be weighed down by weak capital spending,          is still below the national rate of 5.7%. The Connec-
relatively high levels of unemployment, a widening        ticut economy, like the national economy, also
federal budget deficit, and geopolitical uncertainties.    experienced sluggish job growth in 2003. The state’s
In response to the continued weakness in the U.S.         economy, however, is still outperforming the rest of
economy, in June 2003 the Federal Reserve Board           the country in terms of per capita personal income
lowered the targeted federal funds rate another 25        and the rate of unemployment. The outlook for
basis points to 1.00%, a 45-year low. Since January       the Connecticut economy in 2004 is one that is
2001, the Federal Reserve has lowered the federal         cautiously optimistic, with the expectation that the
funds rate a total of 550 basis points (from 6.50% to     state will experience positive job growth as the
1.00%). This decrease to such a low nominal level of      economy gains momentum.

SELECTED FINANCIAL TERMS

In addition to presenting financial information in         information relating to People’s off-balance-sheet
accordance with generally accepted accounting prin-       credit card securitization activities. This presentation
ciples (“GAAP”), certain non-GAAP information is          is consistent with the manner in which management
also presented. Items presented on a “managed” basis      conducts operations and measures People’s business
are one such example. Managed basis results include       performance; it also presents more complete




16   2003 Annual Report
information about the assets, revenues and expenses           non-interest income reduced by gains and losses other
attributable to the Credit Card Services segment.             than from the sale of residential mortgage loans and
Financial information presented on a managed basis            excluding other items that may recur from time to
includes off-balance-sheet securitized and sold credit        time but that are deemed to occur irregularly or
card receivables, and the related securities sold to third-   infrequently. Management considers this measure
party investors. See “Credit Card Securitizations” on         to be more representative of People’s ongoing ability
pages 39 and 40 for a comparison of certain financial          to generate revenues, as the excluded items are
information presented in accordance with GAAP and             generally related to external market conditions and
on a managed basis.                                           non-routine transactions. The efficiency ratio, which
    Other non-GAAP measures discussed are core                represents an approximate measure of how much it
deposits and purchased funds. Core deposits are a             costs People’s to generate a dollar of revenue, is the
measure of stable funding sources that equal total            ratio of total adjusted non-interest expense to oper-
deposits, other than brokered certificates of deposit          ating revenue. Total adjusted non-interest expense
(acquired in the wholesale market) and municipal              equals People’s total non-interest expense, excluding
deposits (which are seasonally variable by nature).           amortization of acquisition-related intangibles, losses
Purchased funds include borrowings, municipal                 on real estate assets and other items that may recur
deposits and brokered certificates of deposit.                 from time to time but that are deemed to occur
    Information regarding People’s operating revenue          irregularly or infrequently. In calculating the efficiency
(a non-GAAP measure) and its efficiency ratio, which           ratio on a managed basis, credit losses reflected in
is derived in part from operating revenue, are included       credit card securitization income are excluded from
in the discussion that follows. Operating revenue             operating revenue.
consists of the sum of net interest income and total

B U S I N E S S S E G M E N T R E S U LT S

People’s operations are divided into four business            not affect the consolidated financial position or results
segments: Commercial Banking; Consumer Financial              of operation for People’s as a whole.
Services; Credit Card Services, which is presented on             The category “Impact of Securitization” represents
a “managed basis” and includes the owned portfolio            amounts related to off-balance-sheet securitized and
and off-balance-sheet securitized and sold credit             sold credit card receivables, since the Consolidated
card receivables; and Capital Markets.                        Financial Statements are presented on an owned
    People’s uses an internal profitability reporting          basis, whereas Credit Card Services’ segment results
system to generate information by segment, which              are presented on a managed basis. The category
is based on a series of management estimates and              “Other” includes the residual financial impact from
allocations regarding funds transfer pricing (“FTP”),         the allocation of revenues and expenses, reversal
the provision for loan losses, non-interest expense           of the fully taxable equivalent (“FTE”) adjustment
and income taxes. These estimates and allocations,            since net interest income for the reportable segments
which are subjective in nature, are continually being         is presented on a FTE basis, and certain revenues and
reviewed and refined.                                          expenses not attributable to a particular segment.
    During 2002, People’s performed comprehensive                 The provision for loan losses for Credit Card
reviews of its methodologies for FTP and indirect             Services and PCLC is based on the respective actual
cost allocations. Segment information for 2003                loan loss provision for the year. For the other operat-
reflects changes resulting from these reviews. Since           ing segments, the provision for loan losses is based on
prior period business segment results have not been           a five-year rolling average loss rate for the respective
revised to conform to the current presentation,               operating segment (“Insurance Method”). For a more
certain information presented for 2003 is not                 detailed description of the estimates and allocations
comparable to prior-year information. While these             used to measure business segment performance, see
changes in methodologies affected the reported                Note 21 to the Consolidated Financial Statements.
results of the individual business segments, they did



                                                                                                       People’s Bank   17
BUSINESS SEGMENT PERFORMANCE SUMMARY


                                                                                            Net Income

Years ended December 31 (dollars in millions)                                      2003          2002         2001
Commercial Banking                                                              $ 47.7        $ 53.5          $ 43.3
Consumer Financial Services                                                       35.9           45.6           43.6
Credit Card Services                                                              (4.5)         (33.9)          10.1
Capital Markets                                                                   (6.1)           (1.9)        (13.4)
  Total reportable segments                                                       73.0           63.3           83.6
Impact of Securitization                                                           1.4            (3.2)         (4.6)
Other                                                                            (10.6)           (4.7)          (3.2)
  Total                                                                         $ 63.8        $ 55.4          $ 75.8


Commercial Banking consists principally of commercial lending, commercial real estate finance lending and
commercial deposits. This segment also includes cash management, correspondent banking, municipal banking,
and the equipment leasing and financing operations of PCLC.

Years ended December 31 (dollars in millions)                                      2003          2002          2001
Net interest income                                                            $    116.4    $    122.6   $     113.3
Provision for loan losses                                                            11.8           8.3           7.2
Non-interest income:
   Fee-based revenues                                                                21.3          19.9          15.3
   Other non-interest income                                                          0.8           2.4           1.3
     Total non-interest income                                                       22.1          22.3          16.6
Non-interest expense                                                                 55.5          54.5          53.2
     Income before income taxes                                                      71.2          82.1          69.5
Income tax expense                                                                   23.5          28.6          26.2
     Net income                                                                $     47.7    $     53.5   $      43.3

Average earning assets                                                         $ 2,908.0     $ 2,706.0    $ 2,603.9
Average liabilities                                                              1,206.9       1,009.4        987.2
Year end assets                                                                  3,040.1       2,837.2      2,714.2


     Commercial Banking net income declined                     Average commercial loans increased $122 million,
$5.8 million, or 11%, in 2003 compared to 2002,             or 11%, and average commercial real estate finance
reflecting lower net interest income and an increase         loans increased $82 million, or 5%, compared to
in the provision for loan losses. The decrease in net       2002, while average commercial non-interest-bearing
interest income of $6.2 million is primarily due to a       deposits grew $105 million, or 13%. The increase in
73 basis point decline in the yield on the Commercial       non-interest-bearing deposits reflects People’s continued
Banking loan portfolio in 2003, as well as the change       focus on building and expanding its relationships with
in FTP methodology. The increase in the provision for       commercial customers. The $1.4 million, or 7%,
loan losses reflects an addition to the PCLC-related         improvement in fee-based revenues, primarily due
allowance for loan losses of $3.7 million, in response      to higher lending-related fees, is reflective of the low
to asset quality trends in that portfolio during the first   interest rate environment. Included in other non-
half of 2003, partially offset by a lower provision         interest income in 2003 and 2002 were $0.4 million
for loan losses for the remaining Commercial Bank-          and $2.2 million, respectively, of gains on the sale of
ing loan portfolios utilizing the Insurance Method.         leases originated by PCLC. The decline in 2003
Included in the consolidated results for the commer-        reflects management’s decision to retain more leases.
cial loan and commercial real estate finance portfolios          Net income improved $10.2 million in 2002 com-
were net charge-offs of $1.5 million for the year ended     pared to 2001, as increases in net interest income and
December 31, 2003, a $2.9 million improvement               fee-based revenues were partially offset by increases
compared to the year-ago period.                            in the provision for loan losses and non-interest




18   2003 Annual Report
expenses. The $9.3 million, or 8%, improvement            in non-interest-bearing commercial deposits. Fee-based
in net interest income was driven by an $89 million,      revenues increased $4.6 million, or 30%, reflecting
or 6%, increase in average commercial real estate         higher lending-related fees, including prepayment fees
finance loans and a $123 million, or 18%, increase         in a low interest rate environment.

Consumer Financial Services includes, as its principal business lines, residential mortgage lending and consumer
deposits origination. This segment also includes brokerage and financial advisory services provided by PSI,
wealth management and trust services (including the operations of OMIA) and insurance services provided
through RC Knox.

Years ended December 31 (dollars in millions)                                    2003         2002             2001
Net interest income                                                          $    167.9   $   194.5        $   192.0
Provision for loan losses                                                           1.8         2.4              2.4
Non-interest income:
   Fee-based revenues                                                             118.3       113.4            104.7
   Net gains on sales of residential mortgage loans                                14.9         8.4              8.5
   Gains on other sales of assets                                                    .–          .–              3.1
   Other non-interest income                                                        3.6         4.0              5.5
     Total non-interest income                                                    136.8       125.8            121.8
Non-interest expense                                                              247.7       246.1            239.4
     Income before income taxes                                                    55.2        71.8             72.0
Income tax expense                                                                 19.3        26.2             28.4
     Net income                                                              $     35.9   $    45.6        $    43.6

Average earning assets                                                       $ 3,105.3    $ 2,830.4        $ 2,695.3
Average liabilities                                                            7,437.3      7,055.7          6,590.0
Year end assets                                                                3,243.2      2,913.6          2,794.2


    Net income for this segment decreased $9.7 mil-       reflecting increases in service charges on deposit
lion, or 21%, compared to 2002. The $26.6 million         accounts and insurance revenue, partially offset by
decline in net interest income in 2003 reflects the        lower interchange fees that resulted from the settlement
change in FTP methodology that resulted in narrower       in 2003 of a lawsuit brought against MasterCard
spreads on consumer deposits and a 121 basis point        International and Visa U.S.A. See “Non-Interest
decrease in the yield on the residential mortgage loan    Income” on page 27. The increase in non-interest
portfolio, partially offset by growth in consumer         expense in 2003 reflects higher commission expenses
deposits and residential mortgage loans. In 2003,         related to the increase in mortgage origination volume
average consumer deposits increased $368 million,         and insurance revenue, and branch-related expenses.
or 5%, and average residential mortgage loans                 Consumer Financial Services’ net income increased
increased $275 million, or 10%, including $177            $2.0 million in 2002 compared to 2001. Net interest
million relating to the purchase of adjustable-rate       income increased $2.5 million due to growth in total
loans during the first quarter of 2003. Supermarket        consumer deposits and residential mortgage loans,
branch deposits increased $79 million, or 5%, and         partially offset by a 95 basis point decrease in the
averaged $28 million per branch. At December 31,          yield on the residential mortgage loan portfolio and
2003, supermarket branch deposits totaled $1.8 billion.   narrower spreads on deposits in a low interest rate
    The $6.5 million improvement in net gains on          environment. The $8.7 million increase in fee-based
sales of residential mortgage loans reflects an 18%        revenues reflects increases in service charges on deposit
year-over-year increase in residential mortgage origi-    accounts and insurance revenue. The increase in non-
nations and the resulting higher level of loan sales,     interest expense is primarily related to an increase in
as well as higher premiums on sales in the secondary      the allocation of branch-related expenses. Included
market. Fee-based revenues increased $4.9 million,        in 2001 is a $3.1 million gain on the sale of a branch.




                                                                                                      People’s Bank    19
Credit Card Services encompasses the managed credit card and consumer lending businesses. Managed credit
card includes the owned portfolio and off-balance-sheet securitized and sold credit card receivables.

Years ended December 31 (dollars in millions)                                    2003          2002          2001
Net interest income                                                          $    167.8    $   188.5     $   240.7
Provision for loan losses                                                         126.1        191.3         259.8
Non-interest income:
   Fee-based revenues                                                              75.4          83.9        107.3
   Net gain on sale of U.K. business                                                 .–           2.6         78.0
   Other non-interest income                                                        1.4           1.9          1.9
     Total non-interest income                                                     76.8          88.4        187.2
Non-interest expense                                                              125.2        137.8         151.8
     Income (loss) before income taxes                                             (6.7)        (52.2)        16.3
Income tax expense (benefit)                                                        (2.2)        (18.3)         6.2
     Net income (loss)                                                       $     (4.5)   $    (33.9)   $    10.1

Average earning assets                                                       $ 3,091.8     $ 3,004.7     $ 3,662.9
Average liabilities                                                            1,160.9       1,488.6       2,007.2
Year end assets                                                                3,252.9       2,969.3       3,417.4


    Compared to 2002, the net loss for Credit Card        million reduction in non-interest expense is reflective
Services reflects a significantly lower provision for       of reduced levels of advertising expenditures and a
loan losses and a reduction in non-interest expense,      decline in compensation and benefits.
partially offset by declines in net interest income           The net loss in Credit Card Services in 2002
and non-interest income. The lower provision for loan     compared to 2001 reflects a reduction in average
losses reflects a $58.7 million, or 208 basis point,       earning assets in 2002, a lower provision for loan
improvement in the loan portfolios’ loss rates in         losses and recording the substantial majority of the
2003 and a $5.0 million reduction in this segment’s       gain relating to the sale of the U.K. portfolio in 2001.
allowance for loan losses. See “Credit Card Services”     Net interest income and fee-based revenues declined
on page 37 for a discussion of the loan portfolios        $52.2 million and $23.4 million, respectively, as
and net charge-offs, and “Asset Quality” on page 40       average earning assets decreased $658 million, or
for a discussion of the provision for loan losses. Net    18%, including a $716 million decline in average
interest income declined $20.7 million, primarily         managed credit card receivables and a 134 basis point
due to a 300 basis point decrease in the yield on the     decline in the yield on this portfolio. The decline in
managed credit card portfolio, partially offset by a      the yield on this portfolio reflects the lag effect of
change in FTP methodology. The decline in yield on        lower market interest rates, competitive pressure and
the managed credit card portfolio reflects lower mar-      a decline in higher yielding and riskier receivables.
ket interest rates and growth in balances at promo-       The lower provision for loan losses reflects a $61.0
tional rates for new and existing accounts. The           million improvement in net loan charge-offs in 2002
decline in non-interest income reflects lower late fees    and the reduction in portfolio balances, and a $1.5
due to reductions in managed delinquencies, and           million increase in the segment’s allowance for loan
$2.6 million of residual gains recorded in 2002 related   losses in 2002 compared to a $9.0 million increase
to the sale of the U.K. business in 2001. The $12.6       in 2001.




20   2003 Annual Report
Capital Markets encompasses the securities portfolio, short-term investments, wholesale funding activities,
such as borrowings, and the impact of derivative financial instruments used for risk management purposes.

Years ended December 31 (dollars in millions)                                   2003          2002               2001
Net interest income                                                         $     (4.2)   $     3.4          $    17.9
Non-interest income:
   Net security losses                                                            (0.3)         (3.3)             (18.5)
   Other non-interest income                                                       0.1           0.3                 0.9
     Total non-interest income                                                    (0.2)         (3.0)             (17.6)
Non-interest expense                                                               4.7           3.3               20.8
     Loss before income taxes                                                     (9.1)         (2.9)             (20.5)
Income tax benefit                                                                 (3.0)         (1.0)               (7.1)
     Net loss                                                               $     (6.1)   $     (1.9)        $    (13.4)

Average earning assets                                                      $ 3,022.8     $ 3,413.8          $ 3,217.5
Average liabilities                                                           1,919.7       2,370.9            2,321.3
Year end assets                                                               2,601.4       3,607.2            3,395.4


    Capital Markets’ net loss in 2003 compared to         a much lesser extent, sales of preferred and common
2002 reflects a reduction in net interest income and       stocks. Included in net interest income is $20.3 mil-
an increase in non-interest expense, partially offset     lion, $23.8 million, and $11.6 million for the years
by lower net security losses in 2003. The decrease        ended December 31, 2003, 2002, and 2001, respec-
in net interest income, which is presented on a FTE       tively, of expense relating to derivative financial
basis, reflects narrower spreads on earning assets,        instrument positions.
and a $391 million decline in average earning assets,         The reduced net loss in Capital Markets in 2002
partially offset by a change in FTP methodology.          compared to 2001 reflects significantly lower net
Net security losses in 2003 included $1.4 million         security losses and non-interest expense, partially
in write-downs in the carrying amount of certain          offset by a reduction in net interest income. The
equity securities due to declines in value deemed to      decline in net interest income reflects the reduction
be other than temporary, reflecting the equity markets     in duration of earning assets. The lower level of
at the time. Non-interest expense includes $1.2 million   non-interest expense in 2002 is primarily due to the
in fees related to the prepayment of Federal Home         absence of $16.6 million in fees associated with the
Loan Bank (“FHLB”) advances in 2003.                      prepayment of $421 million in FHLB advances
    During 2003, the securities portfolio, primarily      recorded in 2001. Net security losses in 2002 and
debt securities, and short-term investments were          2001 included $7.5 million and $10.9 million,
reduced by $977 million, or 27%, resulting from a         respectively, for write-downs in the carrying amount
management decision not to fully reinvest proceeds        of certain equity securities and a $4.0 million loss
from maturities and prepayments of debt securities        from the sale of an Enron bond in 2001.
in a historically low interest rate environment and, to




                                                                                                        People’s Bank       21
NET INTEREST INCOME

Throughout this discussion, reference is made to                          In 2003, People’s mortgage-backed securities
People’s net interest income, interest rate spread and                portfolio and residential mortgage loan portfolio
net interest margin on a FTE basis in terms of the                    experienced substantial prepayments of higher-yield-
“owned portfolio” and the “managed portfolio.”                        ing components. The decision not to fully reinvest
The owned portfolio encompasses on-balance-sheet                      the proceeds generated from prepayments of securities
earning assets and funding liabilities. These amounts                 into assets at lower market interest rates, while having
are combined with off-balance-sheet securitized and                   an adverse effect on the net interest margin in 2003,
sold credit card receivables (and the related securities              better positions People’s for long-term earnings
sold to investors) to determine managed portfolio                     growth in a rising interest rate environment. Addi-
performance.                                                          tionally, portions of People’s commercial loan and
     Net interest income and net interest margin are                  credit card portfolios, as well as the entire home
affected by many factors, including changes in average                equity credit line portfolio are variable-rate products
balances; interest rate fluctuations; credit card secu-                that fluctuate with market interest rates.
ritization activities; sales of other loans and securities;               While interest rates on short-term borrowings
residential mortgage loan and mortgage-backed                         have repriced and reflect the movements in market
security prepayment rates; product pricing; competi-                  interest rates, a substantial amount of People’s long-
tive forces; the relative mix and maturity of earning                 term borrowings have fixed interest rates. In addition,
assets and interest-bearing liabilities; non-interest-                the rates paid on People’s interest-bearing deposit
bearing sources of funds; derivative-based hedging                    products are already at historically low levels. As
activities; and asset quality.                                        a result, People’s experienced compression of its net
                                                                      interest margin in 2003. People’s strategies regarding
                                                                      asset and liability management, including growth and
F T E N E T I N T E R EST I N CO M E – M A N AG E D P O RT FO L I O   pricing of earning assets and deposits, and funding
Years ended December 31 (dollars in millions)                         mix, enabled it to mitigate the impact of this low
                                                                      interest rate environment on net interest margin
2003                                                          413
                                                                      in 2003. People’s expects its net interest margin to
2002                                                          483     stabilize in 2004 due to a reduced level of interest
2001                                                          527     rate-related prepayments, and the absolute low level
2000                                                          545
                                                                      of nominal market interest rates.

1999                                                          493     MANAGED PORTFOLIO
                                                                      Net interest income for the managed portfolio
                                                                      decreased $70 million, or 14%, in 2003 compared to
                                                                      2002 and the net interest margin declined 63 basis
The interest rate environment encountered in 2003                     points. Total interest income decreased $146 million,
and 2002 continued to have a negative impact on                       partially offset by a $76 million reduction in total
People’s net interest income and margins. The Federal                 interest expense.
Reserve lowered the targeted federal funds rate by                        Average earning assets totaled $12.1 billion
25 basis points in 2003, in addition to 12 interest                   in 2003, a $173 million increase from 2002, and
rate reductions in 2002 and 2001, for a total of 550                  continued to reflect a shift in the mix of these assets.
basis points. These actions were taken to counteract                  Average loans increased $566 million, while average
the weak economy in the United States. The histori-                   securities and average short-term investments declined
cally low level of interest rates and the continued                   $313 million and $80 million, respectively.
economic weakness affected People’s net interest                          Average credit card receivables increased $78 mil-
margin, investment decisions and funding strategies                   lion and comprised 18% of average earning assets
in 2003.                                                              in 2003, compared to 17% in 2002. In addition,
                                                                      average residential mortgage loans increased




22   2003 Annual Report
$275 million (including $177 million relating to the                     2003 and 2002 relating to People’s maturing credit
purchase of adjustable-rate residential mortgage                         card securitizations (the “Repayment Funds”),
loans during the first quarter) and average commercial                    average funding liabilities would have increased
loans grew by $122 million in 2003. The $14 million                      approximately $113 million compared to 2002.
increase in average consumer loans continues to reflect                       Average core deposits comprised 72% of average
a shift in mix as growth of $110 million in home                         funding liabilities in 2003, compared to 66% in
equity loans generated by the Connecticut franchise                      2002. Average non-interest bearing deposits increased
was substantially offset by a $93 million reduction                      $199 million, or 11%, and average interest-bearing
in higher-yielding unsecured national personal                           core deposits increased $283 million, or 5%, due in
installment loans.                                                       part to customer preferences for more liquid deposit
    Average securities comprised 23% of average                          products in a low interest rate environment. Average
earning assets in 2003, compared to 26% in 2002.                         rates paid on total deposits declined 63 basis points
The decrease in the average securities portfolio reflects                 from 2002, primarily due to continued strong growth
the decision earlier in 2003 not to fully reinvest                       in non-interest-bearing deposits and the general
proceeds from maturing debt securities given the                         decline in market interest rates.
level of interest rates at the time.                                         Average purchased funds decreased $447 million,
    The 129 basis point reduction in the overall                         or 19%, from 2002, and comprised 17% and 20%
yield on average earning assets compared to 2002                         of average funding liabilities in 2003 and 2002,
reflects a 300 basis point decline in the yield on                        respectively. Average off-balance-sheet credit card
average credit card receivables, which represents                        receivables decreased $328 million, reflecting net
People’s highest yielding loan portfolio, primarily due                  repayments to investors and securitization activities
to lower market interest rates and growth in bal-                        in 2002 and 2003. The 18 basis point increase in cost
ances at promotional rates for new and existing                          on the average off-balance-sheet credit card receiv-
accounts. The yield on average residential mortgage                      ables reflects higher interest costs on certain of People’s
loans declined 121 basis points in 2003, reflecting                       retained interests in its credit card securitizations,
higher levels of prepayments, and refinancings and                        partially offset by lower commercial paper-based
new originations at relatively low market interest                       interest rates on the floating rate instruments sold to
rates that existed throughout the year. The 103 basis                    investors. Average borrowings decreased $418 million,
point decrease in the yield on average securities                        or 19%, in 2003, primarily due to higher levels of
reflects lower yields on securities in general given                      borrowings required in 2002 for the Repayment
lower market interest rates.                                             Funds. Classified as other assets in the average
    In 2003, average funding liabilities decreased                       balance sheet, the Repayment Funds added approxi-
$292 million, while the mix continued to shift to                        mately $70 million and $475 million to People’s
lower-cost core deposits. Excluding the impact from                      total borrowing requirements in 2003 and 2002,
additional short-term borrowing requirements during                      repectively. Interest income earned on the Repay-
                                                                         ment Funds is recorded in credit card securitization
                                                                         income in the Consolidated Statements of Income.
N E T I N T E R EST M A R G I N – M A N AG E D P O RT FO L I O
                                                                             For 2002 compared to 2001, People’s managed
Years ended December 31 (percent)
                                                                         net interest margin declined 29 basis points to 4.04%
2003                                                             3.41    compared to 4.33% in 2001. Excluding the impact
2002                                                             4.04
                                                                         on net interest income from the incremental borrow-
                                                                         ing expense relating to the Repayment Funds, the net
2001                                                             4.33
                                                                         interest margin would have been approximately 4.11%
2000                                                             4.47    in 2002. Net interest income decreased $44 million,
1999                                                             4. 26   or 8%, in 2002 as total interest income decreased
                                                                         $209 million and was partially offset by a $165 mil-
                                                                         lion reduction in total interest expense. A 160 basis



                                                                                                                   People’s Bank   23
point reduction in the yield on average earning assets   earning assets was the shifting composition of earn-
reflects a significant decrease in average credit card     ing assets and lower market interest rates. Average
receivable balances compared to 2001 and a 134           other assets declined $460 million in 2003 compared
basis point decline in the yield on these receivables.   to 2002, reflecting the lower level of Repayment
In addition, higher levels of prepayments and origi-     Funds required in 2003.
nations of People’s mortgage loan and mortgage-              Average funding liabilities increased $36 million
backed securities portfolios and the reinvestment of     in 2003 with a shift in mix toward lower-cost core
these proceeds at low market interest rates had          deposits from higher-cost purchased funds. Average
adverse effects on People’s interest income in 2002.     non-interest bearing deposits increased $199 million
The decrease in interest expense reflects the general     and average interest-bearing core deposits increased
decline in interest rates and the changing mix from      $283 million, while average borrowings decreased
average purchased funds to lower-cost average core       $418 million. Lower market interest rates were the
deposits.                                                main driver for the decrease in interest expense.
                                                             For 2002 compared to 2001, net interest income
OWNED PORTFOLIO
                                                         decreased $3 million and the net interest margin
In analyzing the owned portfolio, the only difference
                                                         declined 13 basis points. Total interest income declined
from the discussion of the managed portfolio is the
                                                         $113 million, reflecting a 129 basis point decrease
exclusion of off-balance-sheet securitized and sold
                                                         in yield, partially offset by a $294 million increase in
credit card receivables and related securities sold
                                                         average earning assets. Total interest expense decreased
to investors.
                                                         $110 million, reflecting lower market interest rates
    Net interest income decreased $33 million, or
                                                         in 2002.
9%, compared to 2002, reflecting decreases of $102
million in total interest income and $69 million in      AVERAGE BALANCE, INTEREST AND YIELD/RATE ANALYSIS
total interest expense.                                  The table on the following page presents average
    The decline in interest income reflects a 119 basis   balance sheets, FTE-basis interest income, interest
point decrease in the yield on average earning assets,   expense and the corresponding average yields earned
partially offset by a $501 million, or 5%, increase      and rates paid for the years 2003, 2002 and 2001.
in average earning assets. Average loans increased       This table also shows the interest earned on off-
$894 million, reflecting increases of $401 million,       balance-sheet securitized and sold credit card receiv-
$275 million and $122 million in credit card receiv-     ables, as well as the interest paid on the related
ables, residential mortgage loans, and commercial        off-balance-sheet securities sold. The average balances
loans, respectively, while average securities declined   are principally daily averages, and for loans, include
$313 million and average short-term investments          both performing and non-performing balances. Interest
decreased $80 million. The increase in average credit    income on loans includes the effect of deferred loan
card receivables reflects growth in balances at pro-      fees and costs accounted for as yield adjustments, but
motional rates for new and existing accounts and, to     does not include interest on loans for which People’s
a lesser extent, the decision not to securitize all of   has ceased to accrue interest. The impact of People’s
the credit card securitizations that matured during      use of derivative instruments in managing interest
2002, thereby increasing on-balance-sheet credit card    rate risk is also reflected in the table, classified
balances and reducing the amount of off-balance-         according to the instrument hedged and the risk
sheet securitized and sold credit card receivables.      management objective.
Contributing to the decrease in the yield on average




24   2003 Annual Report
A V E R A G E B A L A N C E , I N T E R E S T A N D Y I E L D / R A T E A N A LY S I S


                                                                2003                                   2002                                     2001
Years ended December 31                            Average                   Yield/      Average                     Yield/      Average                      Yield/
(dollars in millions)                              Balance     Interest      Rate        Balance       Interest      Rate        Balance        Interest      Rate
On-Balance-Sheet
Earning assets:
Short-term investments                         $     265.4     $     4.9     1.80%     $      345.6    $     8.6      2.48%     $     761.6     $ 35.3        4.65%
Securities (1)                                     2,794.4          95.7     3.43           3,107.5        138.5      4.46          2,492.4      145.6        5.84
Loans:
  Residential mortgage                           3,062.4         141.7       4.63        2,787.4         162.7       5.84         2,651.8         180.1       6.79
  Commercial real estate finance                  1,647.0         103.1       6.26        1,564.7         108.9       6.96         1,475.3         119.2       8.08
  Commercial                                     1,259.6          66.3       5.27        1,137.8          68.3       6.00         1,128.7          84.7       7.51
  Credit card                                      994.7          50.6       5.09          593.6          62.3      10.48           786.0          83.4      10.61
  Other consumer                                   943.5          55.1       5.84          929.7          69.6       7.48           876.8          83.5       9.52
     Total loans                                 7,907.2         416.8       5.27        7,013.2         471.8       6.73         6,918.6         550.9       7.96
     Total earning assets                       10,967.0       $ 517.4       4.72%      10,466.3       $ 618.9       5.91%       10,172.6       $ 731.8       7.20%
Other assets                                       835.7                                 1,295.5                                    985.8
     Total assets                              $11,802.7                               $11,761.8                                $11,158.4

Funding liabilities:
Deposits:
  Non-interest-bearing deposits          $ 1,993.3             $      .–      .–%      $ 1,794.3       $      .–       .–%      $ 1,581.8       $      .–       .–%
  Savings, interest-bearing
     checking and money market             3,973.6                  35.5     0.89           3,498.9         46.5      1.33          2,857.4          62.6     2.19
  Time                                     2,489.4                  65.0     2.61           2,681.3         98.7      3.68          2,954.7         154.0     5.21
     Total core deposits                   8,456.3                 100.5     1.19           7,974.5        145.2      1.82          7,393.9         216.6     2.93
  Brokered deposits and
     municipal interest-bearing deposits     175.2                   2.0     1.17             203.8          3.7      1.79            361.4          17.5     4.85
     Total deposits                        8,631.5                 102.5     1.19           8,178.3        148.9      1.82          7,755.3         234.1     3.02
Borrowings:
  Federal Home Loan Bank advances          1,059.5                53.8       5.08           1,341.2       68.8        5.13        1,462.9          90.6       6.20
  Federal funds purchased                    517.9                 9.3       1.80             608.8       16.2        2.67          390.1          18.1       4.62
  Repurchase agreements                      201.7                 5.9       2.91             247.2        6.3        2.54          125.5           6.4       5.09
     Total borrowings                      1,779.1                69.0       3.88           2,197.2       91.3        4.16        1,978.5         115.1       5.82
Subordinated notes                           252.7                22.8       9.04             252.3       22.8        9.06          265.5          23.9       8.99
     Total funding liabilities            10,663.3             $ 194.3       1.82%         10,627.8    $ 263.0        2.48%       9,999.3       $ 373.1       3.73%
Other liabilities                            177.0                                            192.7                                 239.3
     Total liabilities                    10,840.3                                         10,820.5                              10,238.6
Stockholders’ equity                         962.4                                            941.3                                 919.8
  Total liabilities and
     stockholders’ equity                $11,802.7                                     $11,761.8                                $11,158.4
Net interest income/spread (2)                                 $ 323.1       2.90%                     $ 355.9        3.43%                     $ 358.7       3.47%
Net interest margin                                                          2.95%                                    3.40%                                   3.53%

Off-Balance-Sheet
Securitized and sold credit
  card receivables                             $ 1,160.9       $ 126.2     10.87%      $ 1,488.6       $ 170.7      11.47%      $ 2,007.2       $ 267.0      13.30%
Related securities sold                          1,160.9          36.1      3.11         1,488.6          43.6       2.93         2,007.2          98.8       4.92
Net interest income/spread (3)                                 $ 90.1       7.76%                      $ 127.1       8.54%                      $ 168.2       8.38%

Managed Net Interest Margin Analysis
Earning assets                       $12,127.9                 $ 643.6       5.31%     $11,954.9       $ 789.6        6.60%     $12,179.8       $ 998.8       8.20%
Funding liabilities                   11,824.2                   230.4       1.95       12,116.4         306.6        2.53       12,006.5         471.9       3.93
Excess of earning assets over
  funding liabilities                $ 303.7                                           $     (161.5)                            $    173.3
Net interest income/spread                                     $ 413.2       3.36%                     $ 483.0        4.07%                     $ 526.9       4.27%
Net interest margin                                                          3.41%                                    4.04%                                   4.33%

(1) Average balances and yields for securities available for sale are based on amortized cost.
(2) The FTE adjustment for 2003, 2002, and 2001 was $2.7 million, $4.7 million and $4.7 million, respectively.
(3) Net interest income associated with the off-balance-sheet portfolio is included in “credit card securitization income” in the Consolidated Statements of Income.




                                                                                                                                                 People’s Bank         25
V O L U M E A N D R A T E A N A LY S I S                         relating to: changes in volume (changes in average
The following table shows the extent to which                    balances multiplied by the prior year’s average inter-
changes in interest rates and changes in the volume of           est rate); changes in rates (changes in average interest
average earning assets and average interest-bearing              rates multiplied by the prior year’s average balance);
liabilities have affected People’s FTE-basis net interest        and the total change. Changes attributable to both
income. For each category of earning assets and                  volume and rate have been allocated proportionately.
interest-bearing liabilities, information is provided

                                                               2003 Compared to 2002                     2002 Compared to 2001
                                                                    Increase (Decrease)                        Increase (Decrease)

(in millions)                                              Volume             Rate         Total    Volume            Rate             Total
On-Balance-Sheet
Interest and dividend income:
   Short-term investments                                  $ (1.7)       $     (2.0)   $    (3.7)   $ (14.5)       $ (12.2)     $ (26.7)
   Securities                                               (13.0)            (29.8)       (42.8)      31.6          (38.7)         (7.1)
   Loans:
     Residential mortgage                                    15.0             (36.0)       (21.0)      8.9            (26.3)           (17.4)
     Commercial real estate finance                            5.5             (11.3)        (5.8)      6.9            (17.2)           (10.3)
     Commercial                                               6.9              (8.9)        (2.0)      0.7            (17.1)           (16.4)
     Credit card                                             29.8             (41.5)       (11.7)    (20.2)             (0.9)          (21.1)
     Other consumer                                           1.0             (15.5)       (14.5)      4.8            (18.7)           (13.9)
       Total                                                 58.2            (113.2)       (55.0)      1.1            (80.2)           (79.1)
       Total change in interest and dividend income          43.5            (145.0)      (101.5)     18.2           (131.1)         (112.9)
Interest expense:
   Deposits:
     Savings, interest-bearing checking and money market      5.7             (16.7)       (11.0)     12.2            (28.3)          (16.1)
     Time                                                    (6.7)            (27.0)       (33.7)    (13.2)           (42.1)          (55.3)
       Total                                                 (1.0)            (43.7)       (44.7)      (1.0)          (70.4)          (71.4)
     Brokered and municipal deposits                         (0.5)             (1.2)        (1.7)      (5.4)            (8.4)         (13.8)
       Total                                                 (1.5)            (44.9)       (46.4)      (6.4)          (78.8)          (85.2)
   Borrowings:
     Federal Home Loan Bank advances                        (14.3)          (0.7)        (15.0)        (7.1)          (14.7)       (21.8)
     Federal funds purchased                                 (2.2)          (4.7)         (6.9)         7.7             (9.6)       (1.9)
     Repurchase agreements                                   (1.2)           0.8          (0.4)         4.1             (4.2)       (0.1)
       Total                                                (17.7)          (4.6)        (22.3)         4.7           (28.5)       (23.8)
     Subordinated notes                                        .–             .–            .–         (1.2)             0.1         (1.1)
       Total change in interest expense                     (19.2)         (49.5)        (68.7)        (2.9)        (107.2)      (110.1)
       Change in net interest income                       $ 62.7        $ (95.5)      $ (32.8)     $ 21.1         $ (23.9)     $ (2.8)

Off-Balance-Sheet
Securitized and sold credit card receivables               $ (36.0)      $  (8.5)      $ (44.5)     $ (62.8)       $ (33.5)     $ (96.3)
Related securities sold                                      (10.1)          2.6          (7.5)       (21.5)         (33.7)       (55.2)
       Change in net interest income                       $ (25.9)      $ (11.1)      $ (37.0)     $ (41.3)       $ 0.2        $ 41.1

Total Managed Portfolio
Earning assets                                             $ 7.5         $(153.5)      $(146.0)     $ (44.6)       $(164.6)     $(209.2)
Interest-bearing liabilities                                (29.3)         (46.9)        (76.2)       (24.4)        (140.9)      (165.3)
       Change in managed net interest income               $ 36.8        $(106.6)      $ (69.8)     $ (20.2)       $ (23.7)     $ (43.9)




26    2003 Annual Report
NON-INTEREST INCOME


                                                                                                    Percentage
                                                                                                Increase (Decrease)

Years ended December 31 (dollars in millions)       2003            2002          2001       2003/2002        2002/2001
Fee-based revenues:
  Credit card securitization income                 $ 55.0         $ 74.2        $ 74.8        (25.9)%            (0.8)%
  Credit card fees                                    28.4           21.5          26.0         32.1            (17.3)
     Total credit card fee-based revenues             83.4           95.7         100.8        (12.9)             (5.1)
  Service charges on deposit accounts                 68.7           66.0          59.8          4.1             10.4
  Insurance revenue                                   26.0           24.9          21.2          4.4             17.5
  Brokerage commissions                               13.0           13.4          12.9         (3.0)              3.9
  Other fee-based revenues:
     Other banking service charges and fees           13.7            12.9         11.4          6.2             13.2
     Investment management fees                        8.7             8.7          9.3           .–              (6.5)
     Other fees                                       12.7            11.0          8.1         15.5             35.8
     Total other fee-based revenues                   35.1            32.6         28.8          7.7             13.2
     Total fee-based revenues                        226.2           232.6        223.5         (2.8)              4.1
Net security (losses) gains:
  Equity securities available for sale                (0.2)           (7.3)        (21.7)       n/m              n/m
  Debt securities available for sale                  (1.5)            4.1           2.2        n/m              n/m
  Trading account securities                           1.1            (0.1)          1.0        n/m              n/m
     Total net security losses                        (0.6)           (3.3)        (18.5)       n/m              n/m
Net gains on sales of residential mortgage loans      14.8             8.4           8.5        76.2              (1.2)
Net gain on sale of U.K. business                       .–             2.6          78.0        n/m              n/m
Gains on other sales of assets                          .–              .–          20.0        n/m              n/m
Other non-interest income                             10.6             8.4          10.3        26.2            (18.4)
     Total non-interest income                      $251.0         $248.7        $321.8          0.9%           (22.7)%

n/m – not meaningful



Non-interest income (especially fee-based revenues)          securitization net interest income and fees, respec-
is an important revenue source for People’s that             tively. Contributing to the reduction in credit card
can mitigate the impact of interest rate volatility          securitization income was a $328 million decline in
on net interest income. People’s has focused on              the average off-balance-sheet securitized and sold
enhancing these revenue streams by leveraging its            portfolio and higher interest expense on certain of
commercial banking relationships, growing existing           People’s other retained interests, partially offset by
fee-based revenue generating businesses, and                 the favorable impact of lower market interest rates
strengthening its retail delivery network and products.      on the coupon paid to investors.
    Total non-interest income increased $2.3 million              The increase in credit card fees (which include
in 2003 compared to 2002, reflecting an increase              membership fees, late charges, interchange fees and
in net gains on sales of residential mortgage loans,         other credit card processing fees for the owned
lower net security losses and higher other non-interest      portfolio) in 2003 reflects a $401 million increase
income, partially offset by lower fee-based revenues.        in average on-balance-sheet receivable balances, in
Included in other non-interest income in 2003 is             part related to the reduction in average off-balance-
$4.3 million of interest related to the completion of        sheet receivables discussed above. Total owned credit
a routine IRS audit. Fee-based revenues decreased            card receivables averaged $995 million in 2003,
primarily due to lower credit card securitization            $594 million in 2002 and $786 million in 2001.
income and brokerage commissions, partially offset           See “Credit Card Services” on page 37.
by increases in all other fee-based categories.                   The increase in service charges on deposit accounts
    Credit card securitization income decreased              is attributable to the expanding retail and commercial
$19.2 million compared to 2002 as a $33.4 million            deposit base combined with increased debit card usage,
improvement in net charge-offs in the securitized            partially offset by lower interchange fees resulting from
and sold credit card portfolio was more than offset          the settlement of a lawsuit discussed below. Growth
by reductions of $37.0 million and $22.8 million in          in this fee-based revenue category is a direct result of


                                                                                                         People’s Bank     27
the continued efforts to expand the People’s franchise     the NYCE Corporation, following a change in own-
and grow deposit market share in Connecticut.              ership structure of that company, and $3 million
    Insurance revenue increased primarily due to the       from the sale of a branch that was located outside
impact of firmer pricing in the insurance market.           of People’s core market.
Lower brokerage commissions reflects reduced mutual              Total non-interest income decreased $73 million
fund commissions and fees, in part due to the low level    in 2002 compared to 2001, reflecting the gains on
of interest rates, partially offset by higher commission   asset sales recorded in 2001, partially offset by an
revenue from the sale of annuity products and higher       increase in fee-based revenues and lower net security
trading volume. People’s brokerage business conducted      losses in 2002. The increase in fee-based revenues
via the Internet accounted for approximately 60% of        is primarily due to higher service charges on deposit
total discount transaction volume in 2003, compared        accounts, insurance revenue and other fee-based
to approximately 45% in 2002.                              revenues, partially offset by lower credit card securi-
    Other banking service charges and fees increased       tization income and fees.
primarily due to growth in retail banking fees asso-            On June 5, 2003, MasterCard International
ciated with People’s ATM network. The increase in          (“MasterCard”) announced that it had signed a
other fees reflects higher lending-related charges and      settlement agreement with respect to all claims raised
fees, including higher prepayment penalties in a low       in a class-action antitrust lawsuit brought in 1996
interest rate environment.                                 by United States merchants against MasterCard and
    Net security losses in 2003, 2002 and 2001             Visa U.S.A. A hearing on the fairness of the proposed
included $1.4 million, $7.5 million and $10.9 million,     settlement was held on September 25, 2003 and a
respectively, in write-downs in the carrying amount        favorable ruling was issued in December, concluding
of certain equity securities due to declines in value      the settlement.
deemed to be other than temporary, reflecting the                People’s was not a party to the lawsuit. However,
equity markets at the time. During 2003, People’s          as an issuer of MasterCard debit cards, People’s
reduced the size of its preferred stock portfolio by       was affected by certain aspects of the settlement.
$99 million and sold virtually the entire individual       On August 1, 2003, MasterCard implemented new,
common stock portfolio at essentially breakeven.           lower interchange rates for its U.S. debit card program
People’s began the year with an unrealized loss of         as required under the settlement agreement. People’s
$19.7 million on its common stock portfolio. See           estimates that its revenues from debit card transactions
“Capital Markets - Securities” on page 31.                 for the year ended December 31, 2003 were reduced
    Net gains on sales of residential mortgage loans       by approximately $1.8 million due to lower inter-
increased $6.4 million compared to 2002, reflecting         change fees resulting from the settlement. People’s
a 36% increase in the volume of fixed-rate residential      expects the full-year impact in 2004 to reduce
mortgage loan sales, as well as higher premiums            interchange fees by approximately $4 million.
offered in the secondary market. Residential mortgage            MasterCard had previously announced an
originations, including refinancings, increased 18%         agreement to make payments into a settlement fund
from 2002 and reached $3.2 billion for the year            account over the next ten years, in annual installments
ended December 31, 2003. Given present expecta-            of $100 million except for the first year when the pay-
tions for a substantial decline in origination volume      ment will be $125 million. On September 19, 2003,
during 2004, net gains on sales of residential mortgage    the Board of Directors of MasterCard determined
loans are expected to be significantly lower in 2004.       that a special assessment to satisfy the financial
    The net gain recognized on the sale of the U.K.        obligations in the settlement agreement would not
operation in 2001 totaled $80.6 million, including         be imposed on members.
residual gains of $2.6 million recorded in 2002.
The gains on other sales of assets in 2001 included
$17 million from the sale of People’s investment in




28   2003 Annual Report
NON-INTEREST EXPENSE


                                                                                                             Percentage
                                                                                                         Increase (Decrease)

Years ended December 31 (dollars in millions)       2003            2002             2001             2003/2002      2002/2001
Compensation and benefits                           $212.9           $211.2           $198.0               0.8%             6.7%
Occupancy and equipment                              82.0             82.9             78.7              (1.1)             5.3
Professional and outside service fees                52.8             50.8             54.6               3.9             (7.0)
Advertising and promotion                            31.6             36.3             47.1             (12.9)          (22.9)
Stationery, printing and postage                     13.4             14.7             16.0              (8.8)           (8.1)
Amortization of goodwill and other
 acquisition-related intangibles                      3.5              3.1             10.0             12.9            (69.0)
Other non-interest expense                           39.7             42.8             54.0             (7.2)           (20.7)
   Total non-interest expense                      $435.9           $441.8           $458.4             (1.3)%            (3.6)%


Total non-interest expense decreased $5.9 million           compared to 2001, reflecting the expansion of
in 2003 compared to 2002 reflective of People’s              People’s Connecticut franchise (six branch openings
continuing efforts to control operating expenses.           in 2001 and eight branch openings in 2002), addi-
However, People’s managed efficiency ratio rose to           tional disaster recovery-related expenses and costs
66.0% for 2003, as a 1% reduction in operating              associated with upgrading and enhancing computer
expenses was more than offset by a 10% decline in           systems and software.
managed operating revenue.                                      Advertising and promotion decreased $4.7 million
    The $1.7 million increase in compensation and           compared to 2002, reflecting higher amortization of
benefits compared to 2002 reflects a $3.1 million             deferred credit card marketing expenses in 2002,
increase in pension-related expenses, additional            partially offset by an increase in spending on bank-
commission expense on increases in mortgage origi-          wide advertising campaigns during 2003. Advertis-
nation and insurance volume, and normal salary              ing and promotion decreased $10.8 million for 2002
increases, partially offset by an 8% reduction in the       compared to 2001, the result of lower credit card
number of full-time equivalent employees during             marketing expenditures and a reduction in bank-wide
2003. Pension expense is expected to increase by            advertising expenditures.
approximately $4 million in 2004, primarily due to              Professional and outside service fees increased
a lower discount rate and a lower expected long-            $2.0 million in 2003 compared to 2002, resulting
term rate of return on pension plan assets, as well as      from the increase in mortgage origination volume in
the amortization of unrecognized actuarial losses           2003, higher expenses associated with credit card
generated in a declining stock market over the past         collection efforts and the year-over-year increase in
few years. See Note 16 to the Consolidated Finan-           credit card balances. Professional and outside service
cial Statements. Compensation and benefits expense
increased $13.2 million in 2002 compared to 2001,
reflecting normal salary increases, higher incentive-        M A N AG E D E F F I C I E N CY RAT I O
related expenses and additional commission expense          Years ended December 31 (percent)
relating to increased residential mortgage origination
                                                            2003                                                            66.0
volume.
    Occupancy and equipment decreased $0.9 million          2002                                                            6 0 .1

compared to 2002, reflecting lower levels of capital         2001                                                            55.4
spending during 2003 and 2002, and a corresponding          2000                                                            5 4 .7
$3.3 million reduction in depreciation expense in
                                                            1999                                                            5 4 .7
2003, partially offset by the full-year impact in 2003
of opening eight new branches in 2002. Occupancy
and equipment increased $4.2 million in 2002




                                                                                                                 People’s Bank       29
fees, and stationery, printing and postage declined       disclosure requirements regarding pension plans
in 2002 compared to 2001, reflecting lower credit          and postretirement benefit plans in both annual and
card balances and reduced spending on direct mail         interim financial statements beginning after Decem-
marketing campaigns.                                      ber 15, 2003. Included in Note 16 to the Consolidated
    The reduction in amortization of goodwill and         Financial Statements are People’s disclosure require-
other acquisition-related intangibles in 2002 compared    ments relating to SFAS No. 132.
to 2001 was attributable to a new accounting stan-             The FASB issued FASB Staff Position 106-1
dard adopted by People’s effective January 1, 2002,       (“FSP106-1”), “Accounting and Disclosure Require-
whereby goodwill (including goodwill recorded in          ments Related to the Medicare Prescription Drug,
prior acquisitions) is no longer amortized to expense,    Improvement and Modernization Act of 2003,” in
but instead is reviewed for impairment, with              January 2004. The guidance in FSP106-1 is effective
impairment losses charged to expense when they occur.     for annual or interim financial statements of fiscal
Goodwill amortization expense in 2001 totaled $7.0        years ending after December 7, 2003. FSP106-1
million. See Note 1 to the Consolidated Financial         permits a sponsor of a postretirement healthcare plan
Statements for a further discussion of the accounting     that provides a prescription drug benefit to make a
treatment of goodwill and other acquisition-related       one-time election to defer accounting for the effects
intangible assets.                                        of the Medicare Prescription Drug, Improvement and
    Included in other non-interest expense in 2003 and    Modernization Act of 2003 (the “Act”). People’s
2001 are $1.2 million and $16.6 million, respectively,    elected to defer recognizing the effects of the Act,
for prepayment fees relating to the paydown of            as permitted by FSP106-1, in the accounting for its
FHLB advances in both years. Other non-interest           postretirement plan under SFAS No. 106, “Employers’
expense in 2002 included charges totaling $2.5 million,   Accounting for Postretirement Benefits Other Than
relating to a system conversion and asset write-offs,     Pensions,” and in providing disclosures related to
and a $3.0 million increase in expenses compared to       its retirement plan as required by SFAS No.132. The
2001 relating to a credit card promotion.                 adoption of the provisions of the Act has not been
    In December 2003, the Financial Accounting Stan-      reflected in the disclosure included in Note 16 to the
dards Board (the “FASB”) issued a revised Statement       Consolidated Financial Statements at December 31,
of Financial Accounting Standards (“SFAS”) No. 132,       2003. The adoption of FSP106-1 is not expected to
“Employers’ Disclosures about Pensions and Other          have a material effect on People’s Consolidated
Postretirement Benefits.” This standard revises the        Financial Statements.

I N C O M E TA X E S

Income tax expense was $23.1 million in 2003, $25.0       effective January 1, 2002. Income tax expense in
million in 2002 and $40.5 million in 2001. People’s       2002 includes a $0.9 million benefit relating to the
effective income tax rate was 26.6% in 2003, 31.1%        favorable resolution of certain prior years’ tax
in 2002 and 34.8% in 2001. The decrease in People’s       matters.
income tax expense and effective income tax rate in           Income tax expense for all three years reflects
2003 compared to 2002 was primarily due to a $6.0         the state tax benefit resulting from the formation of
million income tax benefit recorded in 2003 resulting      People’s Mortgage Investment Company, a wholly
from the completion of a routine IRS audit, partially     owned subsidiary. The formation of this subsidiary
offset by lower tax-exempt interest and dividend          was a result of Connecticut tax legislation, which
income. The decrease in People’s effective income         became effective on January 1, 1999, that allows for
tax rate in 2002 compared to 2001 was primarily           the transfer of mortgage loans to a passive investment
due to the elimination of goodwill amortization           subsidiary. The related earnings of the subsidiary, and
(including the portion that is not tax deductible)        any dividends it pays to the parent, are not subject
upon the adoption of a new accounting standard            to Connecticut income tax.




30   2003 Annual Report
EARNING ASSETS

The discussion of earning assets has been grouped according to People’s four business segments: Capital
Markets, Consumer Financial Services, Commercial Banking and Credit Card Services.

C A P I TA L M A R K E T S - S E C U R I T I E S


                                                                  2003                                     2002                                   2001
                                                   Carrying                   Fair           Carrying                  Fair        Carrying                   Fair
As of December 31 (in millions)                    Amount                    Value           Amount                   Value        Amount                    Value
Trading account securities                         $     18.1            $     18.1         $        .–           $           .–   $       2.1           $       2.1
Securities held to maturity:
   Corporate and other                                     1.3                   1.3                1.3                   1.3              1.3                   1.3
   Mortgage-backed securities and
     collateralized mortgage obligations
     (“CMOs”)                                              0.1                   0.1                0.1                   0.1              2.6                   2.6
       Total securities held to maturity                   1.4                   1.4                1.4                   1.4              3.9                   3.9
Securities available for sale:
   Debt securities:
     Mortgage-backed securities and CMOs               1,408.9               1,406.2            1,888.4               1,899.0          1,961.7               1,963.4
     U.S. Treasury and agency                            666.1                 663.3              610.6                 611.1             18.1                  18.1
     Corporate and other                                 343.9                 339.2              543.3                 530.9            618.8                 606.6
     State and municipal                                   1.6                   1.6                1.6                   1.6              7.7                   7.9
       Total debt securities                           2,420.5               2,410.3            3,043.9               3,042.6          2,606.3               2,596.0
   Equity securities:
     FHLB stock                                           93.8                  93.8               93.8                  93.8             89.9                  89.9
     Preferred stocks                                     18.7                  18.4              131.3                 117.2            157.0                 138.0
     Common stocks                                         1.1                   1.1               92.7                  73.0             69.7                  59.7
     Other                                                14.4                  12.9               12.8                   8.0             13.0                  10.2
       Total equity securities                           128.0                 126.2              330.6                 292.0            329.6                 297.8
       Total securities available for sale             2,548.5               2,536.5            3,374.5               3,334.6          2,935.9               2,893.8
    Net unrealized loss on
       securities available for sale                     (12.0)                   .–              (39.9)                      .–         (42.1)                      .–
       Total securities available for sale,
         at fair value                               2,536.5               2,536.5           3,334.6                3,334.6         2,893.8                2,893.8
       Total securities                            $ 2,556.0             $ 2,556.0          $3,336.0              $ 3,336.0        $2,899.8              $ 2,899.8


People’s utilizes the securities portfolio for earnings                                virtually all of the common stock portfolio. The
generation (in the form of interest and dividend                                       decrease in debt securities was primarily due to the
income and security gains), liquidity, interest rate risk                              decision in early 2003 not to fully reinvest proceeds
management, asset diversification and tax planning.                                     from maturities and prepayments of debt securities
    Securities available for sale are used as part of                                  given the historically low levels of interest rates.
People’s asset/liability management strategy and may                                       At December 31, 2003, the net unrealized loss
be sold in response to, or in anticipation of, factors                                 on the securities available for sale portfolio totaled
such as changes in market conditions and interest                                      $12.0 million, compared to $39.9 million at year-
rates, changes in security prepayment rates, liquidity                                 end 2002 and $42.1 million at year-end 2001. The
considerations and regulatory capital requirements.                                    improvement since December 31, 2002 reflects the
    At December 31, 2003, People’s securities port-                                    sales of preferred and common stocks in 2003 and
folio totaled $2.6 billion, a $780 million, or 23%,                                    lower levels of market interest rates. All unrealized
decline from year-end 2002. The significant reduc-                                      gains and those unrealized losses representing tempo-
tion in the securities portfolio was part of manage-                                   rary declines in value are recorded in stockholders’
ment’s plan to strengthen the balance sheet and to                                     equity, net of income taxes. As a result, management
be in a better position for a rising interest rate envi-                               anticipates continued fluctuations in stockholders’
ronment. The reduction in the securities portfolio                                     equity due to changes in the fair value of these
from 2002 included a $632 million, or 21%,                                             securities. For a discussion of the regulatory capital
decrease in debt securities and the sale of a signifi-                                  treatment of unrealized gains and losses, see “Capi-
cant portion of the preferred stock portfolio and                                      tal” on page 47.

                                                                                                                                                  People’s Bank           31
Debt Securities Portfolio                                                approximately 1.8 years at year-end 2003, reflecting
People’s primarily invests in debt securities rated in                   management’s decision to invest in low duration assets
the four highest categories assigned by a nationally                     given the low level of market interest rates. The net
recognized statistical ratings organization. Manage-                     unrealized loss on the debt securities available for
ment has internal guidelines for the credit quality and                  sale portfolio was $10.2 million at December 31,
duration of People’s debt securities portfolio and                       2003 compared to $1.3 million at year-end 2002.
monitors these on a regular basis.                                           When interest rates begin to rise, the market
    In 2003, People’s decreased both its debt securities                 value of People’s debt securities portfolio will decline.
available for sale and short-term investments portfo-                    People’s believes it has taken appropriate action
lios. The mortgage-backed securities and CMOs,                           during 2003 by investing in low duration assets,
and corporate and other portfolios were reduced, while                   which should mitigate the impact of such interest
the U.S. Treasury and agency portfolio was increased.                    rate increases on the market value of this portfolio.
The duration of the debt securities portfolio was

D E B T S E C U R I T I E S P O R T F O L I O C R E D I T R AT I N G A N D D U R AT I O N


                                                                                                                 Weighted Average      Duration
As of December 31, 2003 (dollars in millions)                                                       Amount            Rating            (Years)
Mortgage-backed securities and CMOs                                                                 $ 1,406            AAA                1.8
U.S. Treasury and agency                                                                                663            AAA                2.3
Corporate and other                                                                                     341            A-                 0.3
State and municipal                                                                                       2            A+                 1.0
 Total                                                                                              $ 2,412            AA+                1.8


Equity Securities Portfolio                                              in the net unrealized loss on the preferred stock port-
People’s invests in preferred stocks that offer a tax-                   folio but to a much lesser extent given the current
equivalent, risk-adjusted return profile greater than                     size of this portfolio.
comparable corporate bonds, while investing in com-                          In 2004, People’s will be evaluating the overall size
mon stocks has historically been part of People’s                        of its securities portfolio as part of the Restructuring.
overall portfolio management strategy. In 2003,                          See page 15.
People’s significantly reduced its preferred stock
portfolio to take advantage of market opportunities                       S ECU R I T I ES P O RT FO L I O D I ST R I B U T I O N
and sold virtually its entire portfolio of common                         As of December 31, 2003
stocks to mitigate the earnings volatility associated
with the equity markets.                                                             13%                                            6%
                                                                                Corporate                                           Other Securities
    Although classified as equity securities for external                        and Other
financial reporting, preferred stocks are managed
internally as part of the debt securities portfolio as the
level of interest rates heavily influences their perform-                              26%                                           55%
                                                                             U.S. Treasury                                          Mortgage-Backed
ance. At December 31, 2003, the net unrealized loss                            and Agency                                           Securities and
                                                                                                                                    CMOs
on preferred stocks totaled $0.3 million, compared
to $14.1 million at year-end 2002, reflecting the sales
of preferred stocks during 2003. When interest rates
begin to rise, People’s would expect to see an increase




32   2003 Annual Report
LENDING ACTIVITIES

People’s conducts its lending activities through the            growth in the residential mortgage and Commercial
Consumer Financial Services, Commercial Banking                 Banking portfolios, as well as a $354 million increase
and Credit Card Services business segments. People’s            in on-balance-sheet credit card receivables.
lending activities consist of originating loans secured
by residential and commercial properties, and
extending secured and unsecured loans to consumers
and businesses. People’s ongoing significant focus               TOTA L M A N AG E D LOA N S
each year on community development lending has                  As of December 31 (dollars in billions)
helped it maintain an “outstanding” Community
                                                                2003                                                             9. 4
Reinvestment Act rating from the FDIC.
                                                                2002                                                             8 .7
    Total managed loans increased $707 million, or
8%, in 2003 compared to 2002 after a 2% decline in              2001                                                             8 .9
2002 compared to 2001. People’s on-balance-sheet                2000                                                             9. 6
loan portfolio (owned portfolio) totaled $8.2 billion
                                                                1999                                                             9. 6
at December 31, 2003 compared to $7.5 billion at
year-end 2002 and $7.1 billion at December 31, 2001.
The $784 million, or 11%, increase in 2003 reflects

The following table summarizes the managed loan portfolio, including off-balance-sheet securitized and sold
credit card receivables. Amounts represent gross loans before deducting the allowance for loan losses.

As of December 31 (in millions)                       2003               2002            2001               2000             1999
Consumer Financial Services:
  Residential mortgage:
    Adjustable rate                                 $ 2,940.0          $ 2,515.7       $ 2,266.4          $ 2,131.1         $ 2,129.3
    Fixed rate                                          149.1              355.6           464.9              479.1             508.6
      Total residential mortgage                      3,089.1            2,871.3         2,731.3            2,610.2           2,637.9
  Other consumer                                          6.8                7.0             6.2                5.8               6.1

Commercial Banking:
  Commercial real estate finance                       1,699.9           1,610.2          1,540.2           1,423.7           1,235.6
  Commercial                                          1,335.5           1,224.6          1,174.0           1,174.9           1,000.6

Credit Card Services:
  Managed credit card receivables                     2,297.2            2,020.2         2,505.6            3,530.3           4,286.1
  Other consumer                                        973.7              962.3           921.9              891.0             413.0
      Total managed loans                           $ 9,402.2          $ 8,695.6       $ 8,879.2          $ 9,635.9         $ 9,579.3


CONSUMER FINANCIAL SERVICES                                     of the residential mortgage portfolio was secured by
Residential Mortgage Lending                                    properties located in Connecticut. Included in residen-
People’s offers its customers a wide range of residential       tial mortgage loans are construction loans totaling
mortgage loan products. These include conventional              $126 million and $117 million at December 31, 2003
fixed rate loans, jumbo fixed rate loans (loans with              and 2002, respectively.
principal balances greater than established Freddie                  The mix and volume of residential mortgage loan
Mac and Fannie Mae limits), adjustable rate (“ARM”)             originations varies in response to changes in market
loans, as well as Federal Housing Authority (“FHA”)             interest rates and customer preferences. Residential
insured and Connecticut Housing Finance Authority               mortgage originations have increased substantially
(“CHFA”) loans. People’s originated these loans                 over the past few years, reflecting the low interest rate
through its network of branches and calling officers,            environment. ARM loans accounted for 65% of total
as well as in the wholesale market, which accounted             residential mortgage originations in 2003, 69% in
for approximately 49% of People’s mortgage loan                 2002 and 67% in 2001. Overall, the volume of refi-
originations in 2003. At December 31, 2003, 94%                 nancings (approximately 79% of 2003 originations)

                                                                                                                      People’s Bank     33
                                                                     residential ARM loans for its own portfolio. In addi-
R ES I D E N T I A L M O RTGAG E O R I G I N AT I O N S              tion, People’s purchased $250 million of adjustable-
Years ended December 31                                              rate residential mortgage loans in the first quarter of
                                                                     2003. Total residential ARM loans increased $424
2003                                                      3,235
                                                                     million compared to year-end 2002, including $147
2002                                                      2,562      million remaining on the purchased loan portfolios,
2001                                                      1 , 6 07   while fixed-rate mortgage loans decreased $207
                                                                     million in 2003. People’s may sell residential ARM
2000                                                         70 1
                                                                     loans in the secondary market from time to time as
1999                                                      1 , 24 8   conditions warrant. The continued growth and per-
                                                                     formance of the residential mortgage loan portfolio
                                                                     in 2004 may be adversely impacted by the level and
                                                                     direction of interest rates, consumer preferences and
                                                                     the Connecticut economy.
increased faster than the volume of purchase mortgages                   Consumer Financial Services also includes other
as the downward change in interest rates made the                    consumer loans associated with overdraft protection
refinancing market relatively more attractive for                     linked to retail checking accounts.
consumers.
     According to the Commercial Record Monthly
Mortgage Report, People’s has, for the last 12 years,                RESIDENTIAL MORTGAGE ORIGINATIONS BY PRODUCT
maintained a leading market share position for                       Year ended December 31, 2003
Connecticut residential mortgage loan originations.
In 2003, People’s record level of residential mortgage                          7%
                                                                              Other
originations reached $3.2 billion, compared to $2.6
billion in 2002 and $1.6 billion in 2001, reflecting                             14%
                                                                       15-Year Fixed
the market conditions described previously. These                                                              46%
originations represent approximately 5% of the                                 16%
                                                                                                               5-Year ARMs

Connecticut market for 2003.                                           3-Year ARMs

     People’s strategy is to sell substantially all newly
originated fixed-rate residential mortgage loans                                 17%
                                                                       30-Year Fixed
(servicing released) and to retain most newly originated

COMMERCIAL BANKING
The Commercial Banking loan portfolio includes commercial real estate finance loans and the commercial
lending portfolio.
Commercial Real Estate Finance

As of December 31 (in millions)                                                                       2003         2002
Property Type:
  Retail                                                                                            $ 491.9       $ 443.9
  Office buildings                                                                                      441.0         400.9
  Residential                                                                                          261.0         265.7
  Industrial/manufacturing                                                                             209.9         220.0
  Hospitality and entertainment                                                                         92.0          89.6
  Self storage/industrial                                                                               64.7          59.9
  Special use                                                                                           50.0          52.6
  Health care                                                                                           39.1          34.6
  Land                                                                                                  33.6          25.6
  Other properties                                                                                      16.7          17.4
     Total commercial real estate finance                                                            $1,699.9      $1,610.2




34   2003 Annual Report
    People’s manages the commercial real estate                          real estate market and, to a large extent, Connecticut’s
finance portfolio by limiting the concentration in any                    economy. The commercial real estate finance portfolio
loan type, term, industry, or to any individual borrower.                increased 6% in 2003 (after growing 5% in 2002 and
People’s highest loan concentration continues to be                      8% in 2001) while continuing to focus on maintaining
the retail sector, which represented 29% of the total                    strong asset quality. The growth and performance of
loan portfolio at December 31, 2003, compared to 28%                     this portfolio is largely dependent on the economic
at year-end 2002. People’s primary strategy is to focus                  environment in Connecticut and may be adversely
on lending in the state of Connecticut. However,                         impacted if the economy slows in 2004.
People’s will originate loans outside of Connecticut                         At December 31, 2003, approximately 79% of
when requested by an existing customer and for port-                     People’s commercial real estate finance portfolio
folio diversification. In addition, People’s will consider                was secured by properties located in Connecticut,
purchasing interests in out-of-state loan participations.                compared to approximately 81% at December 31,
    Commercial real estate finance is dependent on the                    2002. Included in this portfolio are construction
successful operation of the related income-producing                     loans totaling $325 million and $275 million at
real estate. Accordingly, the income streams generated                   December 31, 2003 and 2002, respectively.
by this portfolio can be impacted by changes in the


                                                                          COMMERCIAL REAL ESTATE FINANCE DIVERSIFICATION
CO M M E R C I A L R E A L ESTAT E F I N A N C E P O RT FO L I O
                                                                          As of December 31, 2003
As of December 31 (dollars in millions)

2003                                                          1 ,70 0
                                                                                    18%
2002                                                          1,610            All Other
                                                                          Property Types                               29%
2001                                                          1,540                                                    Retail
                                                                                    12%
                                                                              Industrial/
2000                                                          1 , 4 24     Manufacturing
                                                                                                                       26%
1999                                                          1,236                 15%                                Office Buildings
                                                                              Residential




Commercial Lending

As of December 31 (in millions)                                                                              2003               2002
Industry:
   Manufacturing                                                                                         $   551.3         $ 485.5
   Service                                                                                                   217.8            186.0
   Wholesale distribution                                                                                    148.2            143.4
   Finance, insurance and real estate                                                                        124.5            127.5
   Retail sales                                                                                               80.5             55.6
   Health services                                                                                            68.0             63.2
   Arts/entertainment/recreation                                                                              39.1             43.2
   Transportation/utility                                                                                     36.4             34.2
   Other                                                                                                      69.7             86.0
      Total commercial                                                                                    $1,335.5         $1,224.6




                                                                                                                     People’s Bank     35
People’s provides diversified products and services to                          The borrower’s ability to repay a commercial
its commercial customers, including short-term work-                       loan is closely tied to the ongoing profitability and
ing capital credit facilities, term financing, asset-based                  cash flow of the borrower’s business. Consequently,
loans, letters of credit, Internet-based cash management                   a commercial loan tends to be more directly impacted
services, commercial deposit accounts, and equipment                       by changes in economic cycles that affect businesses
leasing and financing through PCLC.                                         generally and the borrower’s business specifically.
     Commercial products are packaged together                             The availability of adequate collateral is a factor in
to create a financing solution specifically tailored to                      commercial loan decisions, and loans are generally
the needs of the customer. Taking a total relationship-                    collateralized and/or guaranteed by third parties.
focused approach with commercial customers to meet                             In 2003 the commercial lending portfolio
their financing needs has resulted in substantial growth                    increased $111 million, or 9%, after showing a 4%
in non-interest-bearing deposits, as well as creating                      increase in 2002 and no growth in 2001. At Decem-
opportunities to provide other banking services                            ber 31, 2003, approximately 60% of the commercial
to principals and employees of these commercial                            loan portfolio consisted of loans to Connecticut-
customers.                                                                 based businesses (approximately 76% excluding
     Commercial deposits continue to fund a significant                     PCLC), compared to approximately 66% (approxi-
portion of the loan growth, while non-deposit cash                         mately 79% excluding PCLC) at December 31,
management balances are a source of fee-based                              2002. The manufacturing sector remains People’s
revenue. Average non-interest-bearing commercial                           highest loan concentration and, at December 31,
deposits increased $105 million, or 13%, in 2003 and                       2003, included $244 million of loans and leases
increased $123 million, or 18%, in 2002.                                   originated by PCLC. While People’s continues to
                                                                           focus on asset quality, the performance of this port-
                                                                           folio may be adversely impacted if the economy
CO M M E R C I A L L E N D I N G D I V E R S I F I CAT I O N
                                                                           slows in 2004.
As of December 31, 2003
                                                                               PCLC provides equipment financing for customers
                                                                           in over 40 states, specializing in financing for the
            23%
       All Other                                                           printing, packaging, transportation and manufacturing
                                                                           industries. PCLC will buy or sell portions of financ-
            9%                                                             ing transactions in the secondary market to manage
       Finance,
     Insurance
                                                           41%             the concentration risk of the overall portfolio. At
                                                           Manufacturing
and Real Estate                                                            December 31, 2003, PCLC had $300 million in
                                                                           loans and leases compared to $222 million at
             11%
       Wholesale                                               16%         December 31, 2002 and $225 million at December
     Distribution                                              Service
                                                                           31, 2001. The increase reflects management’s deci-
                                                                           sion to retain more leases in 2003, and increased
                                                                           customer demand for this type of lending product.
                                                                           Operating on a national scale, PCLC represented
                                                                           22% of the commercial loan portfolio at year-end
                                                                           2003, compared to 18% at year-end 2002. In 2004,
                                                                           People’s expects to continue growing this portfolio
                                                                           at double-digit rates through a combination of
                                                                           higher loan originations and reduced loan sales.




36   2003 Annual Report
    People’s will sell and purchase interests in shared
national credits to and from other financial institu-      CO M M E R C I A L L E N D I N G P O RT FO L I O
tions having comparable asset quality standards.          As of December 31 (dollars in millions)
At December 31, 2003, this portfolio totaled $280
                                                          2003                                                             1,336
million, representing 9% of the Commercial Banking
loan portfolio, and included $226 million in loans        2002                                                             1,225

purchased from other financial institutions and $54        2001                                                             1 ,1 74
million in loans originated by People’s. Approximately
                                                          2000                                                             1 ,1 75
$74 million, or 26% of the shared national credit
portfolio is to borrowers that are headquartered in       1999                                                             1,001

Connecticut. In 2004, People’s intends to devote
additional resources to the shared national credits
business and may grow this portfolio to represent
up to 15% of the overall Commercial Banking loan
portfolio.


CREDIT CARD SERVICES

Credit Card Services is presented on a managed basis and includes the owned credit card portfolio,
off-balance-sheet securitized and sold credit card receivables, and other types of consumer lending. People’s
resources and marketing efforts on consumer lending are primarily concentrated in Connecticut, while
credit cards were marketed nationally prior to announcing the agreement to sell the credit card business
in early 2004.
As of December 31 (in millions)                                                                       2003             2002
Credit card receivables:
  Securitized and sold portfolio                                                                    $ 1,167.9        $ 1,245.2
  Owned portfolio                                                                                     1,129.3            775.0
     Total managed credit card receivables                                                            2,297.2          2,020.2
Other consumer:
  Home equity credit lines                                                                              622.6            403.0
  Second mortgages                                                                                      175.4            237.5
  Personal installment loans                                                                            156.0            301.6
  Other loans                                                                                            19.7             20.2
     Total other consumer loans                                                                         973.7            962.3
     Total credit card services                                                                     $ 3,270.9        $ 2,982.5


    In general, for both credit cards and consumer        51% of the balances outstanding were fixed rate
loans, People’s identifies and solicits prospects using    receivables. Each offer is based on a segment’s
various modeling techniques, with a significant portion    potential risk/reward relationship and is priced
of all applications fully underwritten by a credit        accordingly. As of December 31, 2003, according to
analyst upon receipt. People’s has invested in infor-     the Nilson Report, People’s was ranked the 20th-
mation-based strategies for originating and managing      largest Visa and MasterCard credit card issuer in the
accounts, and uses these strategies to develop credit     United States based on outstanding balances.
risk models that management believes increase the              On the consumer lending side, People’s offers
credit quality of new solicitations and facilitate        Connecticut-based customers a full range of compet-
active risk management of the overall portfolio.          itive products, such as home equity lines of credit,
    With respect to credit card receivables, People’s     second mortgage loans, and other forms of installment
strategy had been to segment the credit card market       and revolving credit loans. Other consumer loans also
by risk classification and offer a fixed rate or            include unsecured personal installment loans that
variable rate credit card to individuals who carry        had been originated nationally in prior years. Future
balances. At December 31, 2003, approximately             growth of People’s consumer loan portfolio is highly


                                                                                                                People’s Bank    37
dependent upon economic conditions and competi-                                      consumer loans reflects the strong growth in home
tors’ strategies, as well as the success of People’s                                 equity lending, substantially offset by a 50% decline in
marketing programs and information-based                                             national personal installment loans, which continue
strategies.                                                                          to run off by design. The $220 million, or 55%,
    The Credit Card Services portfolio increased $288                                increase in home equity credit lines in 2003 predom-
million, or 10%, from December 31, 2002. Managed                                     inantly relates to the increased focus placed on this
credit card receivables increased $277 million,                                      line of business by People’s, including extensive
while other consumer loans increased $11 million.                                    marketing campaigns, new programs partnered with
The increase in managed credit card receivables was                                  residential mortgage products and customers prefer-
attributable to growth in balances at promotional                                    ences in a low interest rate environment.
rates for new and existing accounts. In addition, the                                    At December 31, 2003, approximately 32% of
changing mix of the Credit Card Services portfolio                                   Credit Card Services balances were to individuals and
reflects the decision in 2002 to shift resources and                                  businesses located in Connecticut, compared to 29%
marketing efforts from national consumer lending                                     in 2002. In general, the distribution of People’s Credit
toward the origination of home equity loans and                                      Card Services balances in other states is consistent
lines of credit in Connecticut. The increase in other                                with the population distribution of the U.S.

C R E D I T C A R D S E R V I C E S N E T C H A R G E- O F F S


                                                                    2003                              2002                         2001
                                                                          Percent of                     Percent of                   Percent of
                                                                           Average                        Average                      Average
Years ended December 31 (dollars in millions)            Amount            Portfolio        Amount        Portfolio       Amount       Portfolio
Credit card receivables:
  Securitized and sold portfolio (1)                      $ 82.4             7.02%          $ 115.8          7.74%        $170.4          8.44%
  Owned portfolio (2)                                       34.9             3.51              51.5          8.68           52.8          6.72
     Total managed credit card receivables                 117.3             5.41             167.3          8.00          223.2          7.96
Other consumer (2)                                          13.8             1.47              22.5          2.44           27.5          3.16
     Total credit card services                           $131.1             4.22%          $ 189.8          6.30%        $250.7          6.82%

(1) Net charge-offs are reflected in credit card securitization income.
(2) Net charge-offs are reflected in the provision and allowance for loan losses.



CREDIT CARD SERVICES DELINQUENCIES


                                                                    2003                              2002                         2001
                                                                             Percent of                      Percent of                   Percent of
As of December 31 (dollars in millions)                  Amount               Portfolio    Amount             Portfolio   Amount           Portfolio
Number of days delinquent:
30-59 days                                               $ 24.2                0.74%       $ 31.8             1.06%       $ 44.9           1.31%
60-89 days                                                 17.0                0.52           23.6            0.79          33.5           0.98
90 days and over                                           30.0                0.92           46.5            1.56          61.6           1.80
  Total                                                  $ 71.2                2.18%       $ 101.9            3.41%       $140.0           4.08%



    Net charge-offs for Credit Card Services decreased                               charge-off ratio in the other consumer loan portfolio
$58.7 million, or 31%, in 2003, leading to a 208                                     compared to 2002 is primarily attributable to a 39%
basis point decrease in the net charge-off ratio. With                               reduction in the total dollar amount of net charge-
respect to managed credit card receivables, the 259                                  offs, reflecting a 38% decrease in the national
basis point reduction in the net charge-off ratio                                    consumer loan portfolio.
reflects a $50 million, or 30%, decrease in the total                                     Credit Card Services’ delinquencies decreased
dollar amount of net charge-offs in 2003 and a $78                                   $30.7 million, or 30%, from December 31, 2002,
million increase in average managed credit card                                      reflecting proactive measures taken to identify and
receivables. The 97 basis point decrease in the net                                  minimize losses and more effective collection efforts.


38   2003 Annual Report
Delinquencies as a percentage of the year-end port-        and the Transferor Interest) and off-balance-sheet
folio balances decreased 123 basis points in 2003,         securitized receivables that have been sold. The retained
reflecting the absolute dollar decline in delinquencies     interest representing the principal portion of the Trans-
and the $288 million increase in portfolio balances        feror Interest totaled $299 million at December 31,
in 2003.                                                   2003 and $458 million at December 31, 2002.
    These positive trends in Credit Card Services               For securitized and sold receivables represented
generally reflect improvements in the risk profile           by the Investor Certificates, amounts that would have
of the credit card portfolio, stronger underwriting,       been reported as net interest income, credit card fees
lower net charge-offs in the national consumer loan        and provision for loan losses (if such receivables had
portfolio, more effective collection efforts and asset     not been sold but remained on-balance-sheet) are
growth. In general, the level of charge-offs in the        instead combined and reported in credit card securi-
consumer loan portfolios is highly dependent on            tization income in the Consolidated Statements of
growth in the portfolios and economic conditions           Income. People’s credit card securitization income will
primarily in Connecticut.                                  vary over the term of the transactions depending upon
                                                           the level of interest and fees charged on credit card
C R E D I T C A R D S E C U R I T I Z AT I O N S
                                                           accounts, the interest rate and competitive environ-
Since 1993, People’s has periodically securitized credit
                                                           ment, and the credit performance of the receivables.
card receivables and sold asset-backed certificates
                                                           However, People’s potential exposure to losses on
in the capital markets as part of its ongoing balance
                                                           the off-balance-sheet receivables is contractually
sheet management strategies. The aggregate out-
                                                           limited to future excess spread revenue and its other
standing principal balance of such asset-backed
                                                           retained interests (subordinated interests and accrued
certificates was $1.2 billion at both December 31,
                                                           interest receivable) established in connection with
2003 and December 31, 2002.
                                                           its securitization transactions. These other retained
     Securitization involves the transfer of a group of
                                                           interests had total fair value amounts of $177 million
credit card receivables in a 2-step process, first from
                                                           at December 31, 2003 ($140 million at December 31,
People’s to its wholly owned subsidiary, People’s
                                                           2002) and are reported in securities available for
Structured Finance Corp. (“PSFC”), and second from
                                                           sale and other assets (treated on an available-for-sale
PSFC to the People’s Bank Credit Card Master Trust
                                                           basis).
(the “Trust”). These receivables arise from credit card
                                                                FASB Interpretation No. 46 (revised) (“FIN
accounts whose ownership and servicing responsibil-
                                                           46R”), “Consolidation of Variable Interest Entities,
ities are retained by People’s. In addition to existing
                                                           an interpretation of ARB No. 51,” was issued by
receivables, rights to new receivables and most fees
                                                           the FASB in December 2003. FIN 46R addresses the
generated by these accounts are also transferred to
                                                           consolidation by business enterprises of variable
the Trust. The Trust then issues undivided interests
                                                           interest entities, as defined in FIN 46R. For public
represented by Investor Certificates and a Transferor
                                                           enterprises, such as People’s, FIN 46R is applied to
Interest. Investor Certificates are sold by the Trust to
                                                           the enterprise no later than the end of the first report-
investors, generally either through private placements
                                                           ing period that ends after March 15, 2004. The
to asset-backed commercial paper conduits or through
                                                           application of FIN 46R is not expected to have an
underwritten public offerings. PSFC retains the
                                                           impact on People’s Consolidated Financial Statements.
Transferor Interest and People’s continues to service
                                                                All outstanding credit card securitizations, both
the credit card accounts. At December 31, 2003,
                                                           retained and sold, will be prepaid in advance of their
People’s outstanding credit card securitizations
                                                           final maturity in the first quarter of 2004. Additional
used the asset-backed commercial paper conduit
                                                           information concerning People’s credit card securiti-
structure.
                                                           zations is included in Notes 1, 5, 6, 7 and 18 to the
     As a result of securitization activities, People’s
                                                           Consolidated Financial Statements.
managed credit card portfolio includes an on-balance-
sheet owned portfolio (receivables not in the Trust




                                                                                                    People’s Bank   39
The following table illustrates People’s operating results, capital ratios and certain other financial information
on a managed basis:

                                                              2003                                          2002
As of and for the years ended December 31   Managed         Impact of          As            Managed       Impact of             As
(dollars in millions)                        Basis        Securitization    Reported          Basis       Securitization       Reported
Interest and dividend income                $    640.9    $ (126.2)        $    514.7    $      784.9      $ (170.7)       $      614.2
Interest expense                                (230.4)       36.1             (194.3)         (306.6)          43.6             (263.0)
     Net interest income                         410.5       (90.1)             320.4           478.3        (127.1)              351.2
Provision for loan losses                       (131.0)       82.4              (48.6)         (193.5)        115.8                (77.7)
Credit card securitization income                   .–        55.0               55.0               .–          74.2                74.2
Credit card fees                                  72.2       (43.8)              28.4             80.5         (59.0)               21.5
Other non-interest income                        168.8        (1.2)             167.6           161.8            (8.8)            153.0
Non-interest expense                            (435.9)         .–             (435.9)         (441.8)             .–            (441.8)
Income tax expense                               (22.2)       (0.9)             (23.1)           (26.7)           1.7              (25.0)
     Net income                             $     62.4    $    1.4         $     63.8    $        58.6     $    (3.2)      $        55.4
Stockholders’ equity to total assets               7.9%         0.7%              8.6%            7.2%            0.5%              7.7%
Tier 1 leverage capital ratio                      7.4          0.6               8.0             6.9             0.5               7.4
Risk-based capital ratios:
      Tier 1                                      9.9            .–              9.9              9.2            (0.1)              9.1
      Total                                      13.1            .–             13.1             12.7            (0.2)             12.5

Operating revenue                           $   653.0     $   (82.4)       $   570.6     $     726.0       $ (115.8)       $     610.2
Net interest margin                              3.41%        (0.46)%           2.95%           4.04%         (0.64)%             3.40%
Efficiency ratio                                  66.0           9.5             75.5            60.1           11.4               71.5

Credit card receivables                     $ 2,297.2     $(1,167.9)       $ 1,129.3     $ 2,020.2         $(1,245.2)      $      775.0
Non-performing credit card receivables           27.5         (20.6)             6.9          43.2              (30.9)             12.3
Total average earning assets                 11,987.6      (1,020.6)        10,967.0      11,896.5          (1,430.2)          10,466.3
Year end assets                              12,662.3        (990.8)        11,671.5      13,084.4            (823.8)          12,260.6


ASSET QUALITY

People’s actively manages asset quality through its                   losses inherent in the existing loan portfolio, based
underwriting practices and collection operations.                     on a quarterly evaluation of a variety of factors. These
Underwriting practices tend to focus on optimizing the                factors include, but are not limited to: People’s
return of a given risk classification while collection                 historical loan loss experience and recent trends in
operations focus on minimizing losses once an account                 that experience; migration analysis; risk ratings
becomes delinquent. The following discussion pertains                 assigned by lending personnel to commercial real
to the on-balance-sheet loan (owned) portfolio and                    estate finance and commercial loans, and the results
does not include net charge-offs or non-performing                    of ongoing reviews of those ratings by People’s
loans relating to off-balance-sheet securitized and sold              independent loan review function; an evaluation of
credit card receivables. See “Credit Card Services” on                non-performing loans and related collateral values;
page 37 for a discussion of the Credit Card Services                  the probability of loss in view of geographic and
portfolio and asset quality.                                          industry concentrations and other portfolio risk
    The allowance for loan losses is established                      characteristics; the present financial condition of
through provisions for loan losses charged to income.                 borrowers; and current economic conditions. While
Losses on loans, including impaired loans, are charged                People’s seeks to use the best available information
to the allowance for loan losses when all or a portion                to make these evaluations, future adjustments to the
of a loan is deemed to be uncollectible. Recoveries                   allowance for loan losses may be necessary based on
of loans previously charged off are credited to the                   changes in economic conditions, results of regulatory
allowance for loan losses when realized. People’s                     examinations, further information obtained regarding
maintains the allowance for loan losses at a level                    known problem loans, the identification of additional
that is believed to be adequate to absorb probable                    problem loans and other factors.




40   2003 Annual Report
P R OV I S I O N A N D A L LO WA N C E F O R LOA N LO S S E S


Years ended December 31 (dollars in millions)                   2003             2002          2001         2000              1999
Beginning allowance for loan losses                             $114.2           $114.7       $104.7       $105.0            $105.0
Charge-offs:
  Credit card (owned portfolio)                                  (41.2)           (58.0)        (57.2)       (57.5)            (54.9)
  Other consumer                                                 (16.8)           (25.3)        (29.4)         (4.6)             (1.9)
  Commercial                                                      (3.2)             (5.8)       (12.1)        (5.5)             (2.3)
  Residential mortgage                                            (0.1)               .–          (0.9)       (1.9)             (3.4)
  Commercial real estate finance                                     .–                .–          (0.1)          .–             (1.8)
     Total charge-offs                                           (61.3)           (89.1)        (99.7)       (69.5)            (64.3)
Recoveries:
  Credit card (owned portfolio)                                    6.3              6.5           4.4          5.8              5.5
  Other consumer                                                   2.9              2.6           1.8          0.5              0.5
  Commercial                                                       1.5              0.8           0.4          0.7              1.6
  Residential mortgage                                             0.1              0.4           0.4          0.9              1.0
  Commercial real estate finance                                    0.2              0.6           1.6          1.4              1.2
     Total recoveries                                             11.0             10.9           8.6          9.3              9.8
     Net loan charge-offs                                        (50.3)           (78.2)        (91.1)       (60.2)           (54.5)
Provision for loan losses                                         48.6             77.7        101.1          59.9             54.5
Ending allowance for loan losses                                $112.5           $114.2       $114.7       $104.7            $105.0
Allowance for loan losses as a percentage of total loans          1.37%            1.53%        1.63%        1.41%              1.48%
Allowance for loan losses as a percentage of
   non-performing loans                                          276.3            241.9        259.9        168.3             236.2


    Net loan charge-offs in 2003 decreased $27.9                          “reclassification”) in conjunction with the reclassifi-
million, or 36%, compared to 2002, including a $16.6                      cation of certain balances from credit card receivables
million reduction in the owned credit card portfolio,                     to other assets. To effect this reclassification, the
reflecting the improving trends in credit card asset                       provision for loan losses was reduced by $3.0 million
quality, and lower commercial loan net charge-offs.                       and was offset by reductions of $2.0 million and $1.0
Other consumer loan net charge-offs declined $8.8                         million in interest income on credit card receivables
million compared to 2002, reflecting a reduction in                        and credit card fees, respectively.
the dollar amount of national consumer loan net                               The provision for loan losses decreased $29.1
charge-offs given a $92 million, or 30%, decrease                         million in 2003 compared to 2002, reflecting sub-
in average balances during 2003.                                          stantially lower net loan charge-offs in 2003 and the
    The $12.9 million decrease in net loan charge-offs                    reclassification. The allowance for loan losses as a
in 2002 compared to 2001 reflects a $6.7 million                           percentage of total loans was 1.37% at December 31,
decline in commercial loan net charge-offs and a $4.9                     2003, compared to 1.53% a year ago. The increase in
million improvement in other consumer loan net                            total loans of $784 million in 2003 was the primary
charge-offs. The reduction in commercial loan net                         reason for the decline in this ratio.
charge-offs reflects $7.4 million in charge-offs taken                         Net loan charge-offs as a percentage of average
in 2001 on one commercial loan. Lower national                            total loans decreased 47 basis points to 0.64% in
consumer loan net charge-offs, reflecting a $121                           2003 compared to the year-ago period. In addition
million decline in average balances, was the primary                      to the $27.9 million decrease in net loan charge-offs,
reason for the improvement in other consumer loans.                       the improvement in the net loan charge-off ratio
    People’s completed a comprehensive review of its                      reflects an $894 million increase in average loans
credit card securitization program during the third                       (including a $328 million increase in on-balance-sheet
quarter of 2003. As a result of this review and to                        average credit card receivables that had previously
better conform People’s accounting practice to the                        been reported in off-balance-sheet securitized and
documentation governing its credit card securitization                    sold credit card receivables). The very low level of
program, a technical reclassification was made that                        net loan charge-offs in terms of absolute dollars and
had no impact on net income. Results for 2003 reflect                      as a percentage of average loans for the residential
a reclassification of $3.0 million of the allowance for                    mortgage, commercial real estate finance and com-
loan losses related to credit card to other assets (the                   mercial portfolios may not be sustainable in the future.

                                                                                                                       People’s Bank     41
N E T L O A N C H A R G E - O F F S ( R E C O V E R I E S ) A S A P E R C E N TA G E O F AV E R A G E L O A N S


Years ended December 31                                               2003               2002            2001               2000             1999
Credit card (owned portfolio)                                         3.51%              8.68%            6.72%             3.78%            3.00%
Other consumer                                                        1.47               2.44             3.15              0.62             0.37
Commercial                                                            0.14               0.45             1.03              0.45             0.08
Residential mortgage                                                   .–               (0.02)            0.02              0.04             0.10
Commercial real estate finance                                        (0.02)             (0.04)           (0.10)            (0.11)            0.05
  Total owned portfolio                                               0.64%              1.11%            1.32%             0.86%            0.83%


    Credit losses associated with off-balance-sheet                              Such credit losses are absorbed directly by the Trust,
securitized and sold credit card receivables are not                             thereby reducing credit card securitization income.
charged against People’s allowance for loan losses.

A L L O WA N C E F O R L O A N L O S S E S A L L O C AT E D B Y T Y P E O F L O A N


                                           2003                    2002                  2001                     2000                   1999
                                             Percent                  Percent                Percent                 Percent                  Percent
As of December 31                            of Loan                  of Loan                of Loan                 of Loan                  of Loan
(dollars in millions)            Amount      Portfolio   Amount       Portfolio     Amount   Portfolio    Amount     Portfolio      Amount    Portfolio
Credit card (owned portfolio)     $ 42.0       3.72%     $ 45.0           5.81%     $ 41.0       6.10%    $ 38.0         2.83%      $ 38.0      2.13%
Commercial                          30.0       2.25        26.5           2.16        25.3       2.15       28.0         2.38         25.0      2.50
Commercial real
  estate finance                     28.0       1.65        28.2           1.75        26.4       1.71       22.7         1.59         25.0      2.02
Other consumer                       9.5       0.97        11.5           1.19        14.0       1.51        8.0         0.89          6.0      1.43
Residential mortgage                 3.0       0.10         3.0           0.10         8.0       0.29        8.0         0.31         11.0      0.42
  Total allowance for
     loan losses                  $112.5       1.37%     $ 114.2          1.53%     $114.7       1.63%    $104.7         1.41%      $105.0      1.48%


    Based on a review of trends in key factors used                              no longer exist or until a loan is determined to be
in determining the adequacy of the allowance for loan                            uncollectible and is charged off against the allowance
losses allocated by type of loan, People’s increased                             for loan losses. The classification of a loan as non-
the allowance for loan losses and the provision for                              performing does not necessarily indicate that loan
loan losses by $3.5 million in the commercial loan                               principal and interest ultimately will not be collected.
portfolio (primarily PCLC-related) in 2003. This                                 People’s historical experience suggests that a portion
increase was partially offset by a reduction to the                              of these assets will eventually be recovered. All
allowance for loan losses and a corresponding                                    non-performing loans are in various stages of collec-
reduction to the provision for loan losses in the                                tion, workout, settlement or foreclosure. When loan
other consumer loan portfolio totaling $2.0 million.                             workout efforts are exhausted and it is determined
As a result of the sale of the credit card portfolio,                            that the borrower is unable to repay the obligation,
the allowance for loan losses and the provision for                              People’s will complete foreclosure procedures, if
loan losses will be reduced in 2004 by the amount                                applicable. Restructured commercial and commercial
allocated to this portfolio.                                                     real estate finance loans are those for which conces-
    A loan is classified as non-accrual when it                                   sions to below market terms, such as below market
becomes 90 days past due as to interest or principal                             interest rates or deferral of interest, have been granted
payments. A loan remains on non-accrual status                                   due to the borrowers’ financial condition.
until the factors that indicated doubtful collectibility




42   2003 Annual Report
NON-PERFORMING ASSETS


As of December 31 (dollars in millions)                   2003           2002         2001         2000             1999
Non-accrual loans:
  Residential mortgage                                    $11.4          $ 13.2       $ 14.7        $ 19.1          $ 23.1
  Commercial real estate finance                            11.4            10.2          5.9           1.3             0.8
  Commercial                                                7.5             8.1          4.5          22.6             6.1
  Credit card (owned portfolio)                             6.9            12.3         15.0          17.0            13.1
  Other consumer                                            2.5             3.4          4.0           2.2             1.3
     Total non-accrual loans                               39.7            47.2         44.1          62.2            44.4
Restructured loans                                          1.0              .–           .–            .–              .–
     Total non-performing loans                            40.7            47.2         44.1          62.2            44.4
Real estate owned (“REO”) and other assets, net             0.5             0.7          1.4           2.9             2.8
     Total non-performing assets                          $41.2          $ 47.9       $ 45.5        $ 65.1          $ 47.2

Non-performing loans as a percentage of total loans        0.49%          0.63%         0.63%        0.84%           0.63%
Non-performing assets as a percentage of total loans,
  REO and other assets                                     0.50           0.64          0.65         0.87            0.67
Non-performing assets as a percentage of stockholders’
  equity and allowance for loan losses                     3.70           4.55          4.34         6.60            5.32


    Total non-performing assets decreased $6.7 mil-               commercial real estate finance non-performing loans
lion from December 31, 2002 and improved 14 basis                 included one $10 million loan that became non-
points to 0.50% of total loans, REO and other assets              performing in the fourth quarter of 2002. People’s
at December 31, 2003. Reductions of $5.4 million                  position in this loan is well-collateralized and, there-
and $1.8 million in non-performing credit card loans              fore, People’s does not expect to record a significant
and residential mortgage loans, respectively, were                loss on the resolution of this loan.
partially offset by increases of $1.2 million and $0.4                In future periods, the level of non-performing
million in non-performing commercial real estate                  assets is expected to fluctuate in response to changing
finance loans and commercial loans (including restruc-            economic and market conditions, along with manage-
tured loans), respectively. As of December 31, 2003,              ment’s degree of success in resolving problem assets.

O F F- B A L A N C E- S H E E T A R R A N G E M E N T S

Detailed discussions pertaining to People’s off-balance-sheet arrangements are included in the following
sections: Funding, Liquidity, Capital, and Market Risk Management.

FUNDING

People’s primary funding sources are deposits,                    People’s plans to use a portion of the Sale proceeds
borrowings and subordinated notes. Credit card                    to restructure its balance sheet, including repaying
securitizations have been used as an additional off-              long-term borrowings and repurchasing a portion of
balance-sheet funding source and a method of                      its subordinated notes. See page 15.
diversifying People’s funding base. In the near-term,




                                                                                                             People’s Bank   43
DEPOSITS


                                                                 2003                                   2002                             2001
                                                                     Weighted                              Weighted                         Weighted
As of December 31 (dollars in millions)               Amount        Average Rate             Amount       Average Rate         Amount      Average Rate
Core deposits:
  Non-interest-bearing deposits                      $ 2,036.2                 .–%          $1,931.8             .–%       $ 1,788.7              .–%
  Savings, interest-bearing checking and
    money market deposits                             4,135.5            0.79                3,691.0           1.15            3,203.4          1.79
    Total                                             6,171.7            0.53                5,622.8           0.76            4,992.1          1.15
Time deposits maturing:
  Within 6 months                                        915.2           1.73                1,102.7           2.80          1,276.5            4.27
  After 6 months but within 1 year                       504.5           1.80                   545.4          2.66            852.0            4.60
  After 1 but within 2 years                             597.6           2.98                   441.2          3.00            533.6            4.53
  After 2 but within 3 years                             173.1           3.61                   342.2          3.81             73.9            4.48
  After 3 years                                          156.7           3.86                   175.4          4.47             85.6            4.99
    Total                                              2,347.1           2.34                2,606.9           3.05          2,821.6            4.45
    Total core deposits                                8,518.8           1.03                8,229.7           1.48          7,813.7            2.34
Brokered and municipal deposits                          195.2           1.75                   196.4          2.93            169.7            1.89
    Total deposits                                   $ 8,714.0           1.04%              $ 8,426.1          1.51%       $ 7,983.4            2.32%


                                                                                     with its customers are integral components of People’s
N O N - I N T E R EST- B E A R I N G D E P OS I TS
                                                                                     strategy to leverage the success of its supermarket
As of December 31 (dollars in millions)
                                                                                     banking initiative, expand market share and continue
                                                                                     growing deposits. At December 31, 2003, People’s
                  1 ,1 0 9                    91 2
2003                                                                2 , 078          statewide network of 64 Super Stop & Shop branches
2002
                  9 75                  858
                                                                    1 ,9 4 0         held deposits totaling $1.8 billion and deposits in
                 944                  74 2                                           supermarket branches open for more than one year
2001                                                                1 ,7 9 0
                857              656
                                                                                     averaged $28 million per store. People’s is planning
2000                                                                1,590            to open up to five new Super Stop & Shop branches
               737             609
1999                                                                 1,416           in 2004.
                                                                                         Non-interest-bearing deposits are an important
     Retail       Commercial          Other
                                                                                     source of low-cost funding and fee income for People’s.
                                                                                     In addition, People’s believes that checking accounts
                                                                                     represent one of the core relationships between a
     People’s strategy is to focus on increasing deposits                            financial institution and its customers, and it is from
by providing a wide range of convenient services to                                  these relationships that cross-selling of other finan-
individuals, corporations and municipalities. People’s                               cial services can be achieved. At December 31, 2003
provides customers access to their deposits through                                  and 2002, non-interest-bearing deposits equaled 24%
64 supermarket branches, 8 financial centers, 74                                      and 23% of core deposits, respectively.
traditional branches, 8 limited-services branches, 238
ATMs, telephone banking and an Internet banking
site that is fully integrated with People’s brokerage                                S U P E R M A R K E T TOTA L D E P OS I TS

subsidiary. This focus on customer service, combined                                 As of December 31 (dollars in millions)

with targeted direct marketing based on consumer                                     2003                                                         1,810
behavior characteristics, contributed to the $289
                                                                                     2002                                                          1 ,7 3 1
million, or 4%, increase in core deposit balances in
2003. Core deposits equaled 66% of total managed                                     2001                                                          1 ,7 1 8

assets at December 31, 2003, compared to 61% at                                      2000                                                         1,484
year-end 2002.
                                                                                     1999                                                         1,222
     The expansion of People’s branch network and
its commitment to develop full-service relationships



44   2003 Annual Report
    Time deposits of $100,000 or more totaled $366                 mature after six months but within one year and $142
million at December 31, 2003, of which $107 million                million mature after one year. Brokered certificates
mature within three months, $52 million mature after               of deposit totaled $70 million and $120 million at
three months but within six months, $65 million                    December 31, 2003 and 2002, respectively.

BORROWINGS


                                                     2003                             2002                           2001
                                                         Weighted                           Weighted                      Weighted
As of December 31 (dollars in millions)   Amount        Average Rate        Amount         Average Rate   Amount         Average Rate
FHLB advances maturing:
  Within 1 year                           $ 165.1           0.94%          $ 793.9             2.43%      $ 228.1            3.48%
  After 1 but within 2 years                303.6           4.87                0.2            5.00          293.7           6.35
  After 2 but within 3 years                  1.8           6.91              305.8            4.96            0.3           5.00
  After 3 but within 4 years                 25.6           6.26                1.8            6.91          305.9           5.12
  After 4 but within 5 years                  1.3           6.74               25.7            6.26            1.8           6.91
  After 5 years                             466.9           4.79              468.5            4.83          494.6           4.98
    Total FHLB advances                     964.3           4.20            1,595.9            3.69        1,324.4           5.06
Federal funds purchased maturing
  within 3 months                           348.9           0.88              565.9            1.16         845.4            1.61
Repurchase agreements maturing:
  Within 3 months                             93.0          0.95              165.5            1.33          312.2           1.89
  After 2 years but within 3 years            60.0          4.82                 .–               .–            .–              .–
  After 3 but within 4 years                    .–             .–              60.0            4.82             .–              .–
  After 4 but within 5 years                    .–             .–                .–               .–          60.0           4.82
  After 5 years                               50.0          3.99               50.0            3.99             .–              .–
    Total repurchase agreements              203.0          2.84              275.5            2.57          372.2           2.36
    Total borrowings                      $1,516.2          3.25%          $2,437.3            2.98%      $2,542.0           3.52%



    At December 31, 2003, total borrowings equaled                 money center and large regional banks, and numerous
12% of total managed assets, compared to 18% at                    smaller banks that typically sell excess funds to
December 31, 2002. The primary source for borrow-                  People’s on a regular basis. Federal funds purchased
ings is advances from the FHLB of Boston, which                    represented 3% of total managed assets at December
provides credit for member institutions within its                 31, 2003, compared to 4% a year ago.
assigned region. People’s outstanding FHLB advances
                                                                   S U B O R D I N AT E D N O T E S
at December 31, 2003 represented 7% of total man-
                                                                   Subordinated notes totaled $253 million at both
aged assets compared to 12% at December 31, 2002.
                                                                   December 31, 2003 and December 31, 2002. The
    People’s also uses repurchase agreements as a
                                                                   7.20% subordinated notes are due in 2006 and the
source of funds. These transactions involve the sale
                                                                   9.875% subordinated notes are due in 2010. Both
of securities to broker/dealers under agreements to
                                                                   issues of subordinated notes are unsecured general
repurchase the same (or substantially the same)
                                                                   obligations of People’s with interest payable semi-
securities. Repurchase agreements with broker/dealers
                                                                   annually; are subordinated to the claims of depositors
are limited to Reporting Federal Reserve Dealers in
                                                                   and People’s other creditors; and are not redeemable
government securities that have been approved by
                                                                   prior to maturity without the prior consent of the
People’s Board of Directors. Repurchase agreements
                                                                   FDIC. In addition to being a source of funds, the
represented 2% of total managed assets at both
                                                                   subordinated notes qualify, up to certain limits,
December 31, 2003 and December 31, 2002. The
                                                                   as supplementary (tier 2) capital for risk-based
repurchase agreements outstanding at December 31,
                                                                   capital purposes.
2003 were collateralized by securities with a fair
                                                                       On March 1, 2004, People’s announced a cash
value of $222 million.
                                                                   tender offer to repurchase all of its outstanding sub-
    Another source of funds has been federal funds
                                                                   ordinated notes. As of March 9, 2004, $62 million
purchased, which are typically unsecured overnight
                                                                   of the 7.20% subordinated notes and $70 million of
loans among banks. Sources include three of the
                                                                   the 9.875% subordinated notes had been tendered.
twelve regional Federal Home Loan Banks, several

                                                                                                                     People’s Bank      45
C R E D I T C A R D S E C U R I T I Z AT I O N S                                           billion outstanding at December 31, 2003. Amortiza-
Credit card securitizations diversified People’s fund-                                      tion of prior series of asset-backed certificates totaled
ing sources. Since beginning its securitization pro-                                       $382 million in 2003. In the first quarter of 2004, all
gram in 1993, People’s has securitized and sold cred-                                      outstanding credit card securitizations will be prepaid
it card receivables totaling $4.6 billion, with $1.2                                       in advance of their final maturities.

The following table summarizes People’s outstanding credit card securitization transactions:

                                                                                           Original          Remaining               Expected          Index on Privately
As of December 31, 2003 (dollars in millions)                                              Amount             Amount               Final Maturity     Offered Certificates
Series:
2002-1 VFC                                                                                 $ 750              $ 750                Mar. 2004 (1)      One-month CP(2)
2002-2 VFC                                                                                    400                400               Mar.   2004 (1)    One-month CP(2)
  Total                                                                                    $1,150             $1,150

(1) Expected final maturities are subject to change based on mutually agreed upon terms and conditions between People’s and the counterparties to the
    conduit securitizations.
(2) Commercial paper (CP)


C O N T R A C T U A L C A S H O B L I G AT I O N S                                         card securitizations and operating leases. Additional
The following table is a summary of People’s contrac-                                      information concerning these contractual cash obli-
tual cash obligations other than deposit liabilities,                                      gations is included in Notes 6, 9, 10 and 19 to the
including obligations under off-balance-sheet credit                                       Consolidated Financial Statements.
                                                                                                            Payments Due by Period
                                                                                                 Less Than           1–3            3–5                     After
As of December 31, 2003 (dollars in millions)                                   To t a l           1 Ye a r        Ye a r s        Ye a r s                5 Ye a r s
Borrowings(1)                                                                 $1,516.2            $ 607.0                $365.4              $ 26.9          $516.9
Subordinated notes(1)                                                            252.9                  .–                 104.7                 .–           148.2
  Total on-balance-sheet                                                       1,769.1               607.0                 470.1               26.9           665.1
Credit card securitizations                                                    1,000.5             1,000.5                    .–                 .–              .–
Purchase obligations(2),(3)                                                       98.2                51.0                  30.2               11.3             5.7
Operating leases                                                                 121.5                17.6                  33.5               26.6            43.8
  Total                                                                       $2,989.3            $1,676.1               $ 533.8             $ 64.8          $714.6

(1) Has not been adjusted to reflect the Restructuring. See page 15.
(2) Purchase obligations represent those agreements to purchase goods or services that are enforceable and legally binding and that specify all significant
    terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transactions.
    A substantial majority of People’s purchase obligations are renewable on a year-to-year basis. As such, the purchase obligations included in this table only reflect
    the contractual commitment.
(3) Excluded from purchase obligations at December 31, 2003 were those obligations relating to the credit card business, which was sold on March 5, 2004.


LIQUIDITY

Liquidity is defined as the ability to generate sufficient                                       Asset liquidity is provided by: cash; short-term
cash flows to meet all present and future funding                                           investments; proceeds from security sales, maturities
requirements at reasonable costs. Liquidity manage-                                        and principal repayments; proceeds from scheduled
ment addresses People’s ability to fund new loans and                                      principal collections, prepayments and sales of loans;
investments as opportunities arise, to meet customer                                       and proceeds from sales of securitized credit card
deposit withdrawals and to repay borrowings, sub-                                          receivables (prior to the credit card sale). In addition,
ordinated notes and off-balance-sheet credit card                                          certain securities may be used to collateralize borrow-
securitizations as they mature. People’s liquidity                                         ings under repurchase agreements. The Consolidated
position is monitored daily by management. The                                             Statements of Cash Flows, on page 55, present data
Asset/Liability Committee (“ALCO”) is responsible                                          on cash provided by and used in People’s operating,
for setting guidelines to ensure maintenance of prudent                                    investing and financing activities. At December 31,
levels of liquidity. The mix of the various deposit                                        2003, People’s liquid assets included $415 million
products and borrowings utilized and the level of                                          in cash and cash equivalents, $2.4 billion in debt
liquid assets reflect management’s view of the most                                         securities available for sale and $19 million in mar-
efficient use of these sources of funds at that time.                                       ketable equity securities (including preferred stock of

46    2003 Annual Report
$18 million and common stock of $1 million). At
                                                            M A N AG E D E A R N I N G ASS E T M I X
December 31, 2003, People’s had pledged debt
                                                            $12.0 billion as of December 31, 2003 (distribution)
securities with a total fair value of $304 million as
collateral for public deposits, to secure repurchase
agreements borrowings, for derivatives transactions                       9%
                                                                        Other
and for other purposes.                                                                                                           26%
                                                                                                                                  Residential
     Liability liquidity is measured by People’s ability               19%                                                        Mortgage
to obtain core deposits and purchased funds at cost-           Credit Card*

effective rates that are diversified with respect to
                                                                       21%                                                        25%
markets and maturities. Core deposits, which are                  Securities                                                      Commercial
                                                                                                                                  Banking
considered the most stable source of liability liquidity,
totaled $8.5 billion at December 31, 2003, compared          * Includes $1.2 billion in off-balance-sheet securitized and sold credit card receivables.

to $8.2 billion at December 31, 2002 (representing
67% and 62% of total managed funding at the
respective dates). Purchased funds are routinely used
to diversify People’s funding mix and to support            M A N AG E D F U N D I N G BAS E
asset growth. People’s purchased funds totaled $1.7         $12.6 billion as of December 31, 2003 (distribution)
billion at December 31, 2003, compared to $2.6
billion at December 31, 2002 (representing 14% and
20% of total managed funding at the respective dates).
     People’s sources of purchased funds include:
                                                                         10%
municipal deposits, brokered certificates of deposit,                    Other
                                                                                                                                  67%
federal funds purchased, advances from the FHLB of                       9%
                                                                                                                                  Core Deposits
Boston and repurchase agreements. At December 31,               Credit Card
                                                             Securitizations
2003, People’s borrowing limit from repurchase                         14%
agreements and FHLB advances was $4.3 billion,                    Purchased
                                                                      Funds
based on the level of qualifying collateral available
for these borrowing sources, with remaining borrow-
ing capacity of $3.1 billion at that date. Prior to the
credit card sale, People’s securitized and sold credit      for the managed credit card portfolio, which has
card receivables as an additional method of diversi-        been eliminated as a result of the credit card sale).
fying its funding base.                                     See Note 18 to the Consolidated Financial Statements.
     At December 31, 2003, People’s had outstanding             The sources of liquidity discussed above are
commitments to originate loans totaling $468 million        deemed by management to be sufficient to fund out-
and approved, but unused, lines of credit extended to       standing loan commitments and to meet People’s
customers totaling $7.7 billion (including $6.4 billion     other obligations.

C A P I TA L

People’s total stockholders’ equity was $1.0 billion at     respectively. Stockholders’ equity equaled 8.6% of
December 31, 2003, a $62 million net increase com-          total owned assets at December 31, 2003, compared
pared to $940 million at December 31, 2002. This            to 7.7% at December 31, 2002.
increase primarily reflects net income of $64 million             People’s tier 1 leverage capital ratio was 8.0% at
and improvements in the after-tax net unrealized            December 31, 2003, compared to the minimum ratio
losses on securities available for sale and derivatives     of 4.0% generally required by FDIC regulations.
accounted for as cash flow hedges of $21 million             People’s is also subject to the FDIC’s risk-based capi-
and $9 million, respectively, partially offset by divi-     tal regulations, which require minimum ratios of tier
dends paid of $41 million. Dividends declared per           1 capital and total capital to risk-adjusted assets of
common share (other than shares on which People’s           4.0% and 8.0%, respectively. People’s satisfied these
Mutual Holdings waived receipt of dividends) were           requirements at December 31, 2003 with ratios of
$1.53, $1.42 and $1.34 in 2003, 2002 and 2001,              9.9% and 13.1%, respectively.
                                                                                                                               People’s Bank          47
The following summary compares People’s risk-based capital amounts and ratios as of December 31, 2003
to the FDIC requirements for minimum capital adequacy:

                                                                                                                                                   FDIC Minimum
                                                                                                                People’s                            Requirements
(dollars in millions)                                                                                 Amount               Ratio(1)          Amount (1)            Ratio
Tier 1 capital                                                                                      $   922.9(2)            9.9%              $373.9                4.0%
Total capital                                                                                        1,225.4(3)            13.1                747.9                8.0

(1) Based on People’s risk-adjusted total assets, as defined, of $9.3 billion.
(2) Represents total stockholders’ equity, excluding (i) the after-tax net unrealized losses on debt and certain equity securities classified as available for sale, (ii) the
    after-tax net unrealized loss on derivatives qualifying as cash flow hedges, and (iii) certain assets not recognized in tier 1 capital (principally goodwill and other
    acquisition-related intangibles).
(3) Represents tier 1 capital plus subordinated notes, up to certain limits, and the allowance for loan losses up to 1.25% of risk-adjusted total assets.



    People’s regulatory capital ratios at December 31,
                                                                                           P EO P L E ’S CA P I TA L RAT I OS CO M PA R E D
2003 exceeded the FDIC’s numeric criteria for classi-                                      TO R EG U L ATO RY R EQ U I R E M E N TS
fication as a “well capitalized” bank. See Note 12 to                                       As of December 31, 2003 (percent)
the Consolidated Financial Statements for additional
information concerning People’s regulatory capital                                         To ta l R i s k-                 8 .0                 1 0 .0
                                                                                                                                                                           1 3 .1
                                                                                                  Ba s e d
amounts and ratios.
    People’s will continue to manage its capital                                                                   4.0             6 .0
                                                                                           Ti e r 1 R i s k-
position through strategic balance sheet management                                                                                                                        9.9
                                                                                                   Ba s e d
and retention of earnings. Depending on prevailing
                                                                                                                   4.0        5 .0
market conditions, People’s may: raise additional                                                Ti e r 1
                                                                                                                                                                           8.0
                                                                                              Leve ra g e
regulatory capital through the issuance of common
or preferred stock or qualifying debt instruments or                                             Minimum Capital         Well-Capitalized      Actual
                                                                                                 Adequacy                Requirements
through the sale of minority interests in consolidated
subsidiaries; further restructure its asset mix for risk-
based capital purposes; or decrease its asset size as a
means of managing its regulatory capital adequacy.

MARKET RISK MANAGEMENT

Market risk is the risk of loss resulting from changes                                    for assets, liabilities and off-balance-sheet financial
in interest rates or equity prices. The primary market                                    instruments. Actual conditions may vary significantly
risk for People’s is interest rate risk, although equity                                  from People’s assumptions. People’s uses an earnings
price risk is also a consideration.                                                       simulation model to quantify IRR.
                                                                                              Management evaluates the IRR impact on
I N T E R E S T R AT E R I S K
                                                                                          managed net interest income using a simulation model
People’s primary market risk is interest rate risk
                                                                                          to project earnings under multiple interest rate
(“IRR”), which is the potential exposure to earnings
                                                                                          environments over a 12- to 24-month time horizon.
or capital that may result from changes in interest
                                                                                          Managed net interest income includes net interest
rates. People’s actively manages its IRR to achieve
                                                                                          income reported in the Consolidated Statements of
a balance between risk, earnings and capital. ALCO
                                                                                          Income and the net interest income earned on People’s
has primary responsibility for managing People’s IRR
                                                                                          off-balance-sheet credit card securitizations.
and reports to the Investment Committee of the Board
                                                                                              The earnings projections are based on a static
of Directors. To evaluate People’s IRR profile, ALCO
                                                                                          balance sheet and estimates of pricing levels for
monitors economic conditions, interest rates, yield
                                                                                          People’s products under multiple scenarios intended
curves, liquidity levels and capital ratios. Management
                                                                                          to reflect instantaneous yield curve shocks. People’s
also reviews assumptions for projected customer
                                                                                          estimates its base case managed net interest income
and competitor behavior, in addition to the expected
                                                                                          using current interest rates. Internal guidelines regard-
repricing characteristics and cash flow projections


48    2003 Annual Report
ing IRR simulation specify that for instantaneous             Rate Change                      Percent Change in
                                                             (basis points)                   Market Value of Equity
parallel shifts of the yield curve, estimated managed
                                                                 +300                                (3.13)%
net interest income for the subsequent one-year period           +200                                (0.34)
should not decline by more than: 5% for a 100 basis              +100                                 1.19
point shift; 10% for a 200 basis point shift; and                  -50                               (0.43)

15% for a 300 basis point shift. The following table
shows the estimated percentage increase (decrease) in          Management believes that People’s interest rate
People’s managed net interest income over a two-          risk position at December 31, 2003 represents a
year simulation period beginning December 31,             reasonable level of risk. However, given the uncer-
2003. Given the historically low interest rate environ-   tainty of the magnitude, timing and direction of
ment at December 31, 2003, simulations for declines       future interest rate movements and the shape of the
in interest rates of 100, 200 and 300 basis points        yield curve, actual results may vary from those pre-
were not meaningful.                                      dicted by People’s models. People’s IRR profile is not
                                                          expected to change materially after the sale of the
                               Percent Change             credit card receivables.
    Rate Change        in Managed Net Interest Income
   (basis points)       Year 1               Year 2            People’s uses derivative financial instruments,
       +300              2.67%                0.04%       including interest rate swaps, corridors, and caps as
       +200              2.38                 0.37        components of its IRR management. People’s has
       +100              2.35                 1.19        written guidelines that have been approved by the
        -50             (0.80)               (2.05)
                                                          Board of Directors and ALCO governing the use
     While managed net interest income simulation         of these financial instruments, including approved
identifies earnings exposure over a relatively short       counterparties and risk limits, and controls the
time horizon, Market Value of Equity (“MVE”)              credit risk of these instruments through collateral,
takes a long-term economic perspective when quan-         credit approvals and monitoring procedures. At
tifying IRR. MVE identifies possible margin behav-         December 31, 2003, each of People’s counterparties
ior over a longer time horizon and is therefore a         had an investment grade credit rating from the major
valuable complement. Base case MVE is calculated          rating agencies and is specifically approved up to a
by estimating the net present value of all future cash    maximum credit exposure. Derivative financial instru-
flows from existing assets, liabilities and off-balance    ments have been used for risk management purposes
sheet items using current interest rates. The base        and not for trading or speculative purposes.
case scenario assumes that future interest rates               People’s uses interest rate swaps and interest rate
remain unchanged.                                         corridors to manage IRR associated with interest-
     Internal guidelines limit the exposure of a          earning assets and interest-bearing liabilities. Interest
decrease in MVE resulting from instantaneous paral-       rate swaps are used to match more closely the
lel shifts of the yield curve in the following manner:    repricing of assets and liabilities and to reduce Peo-
for 100 basis points – 10% of base case MVE; for          ple’s exposure to increases in interest rates and their
200 basis points – 15% of base case MVE; and for          effect on net interest income. Interest rate corridors
300 basis points – 20% of base case MVE.                  offer protection against adverse interest rate changes
     The following table shows the estimated percent-     but still offer a benefit from favorable interest rate
age increase (decrease) in People’s MVE, assuming an      changes. Interest rate caps, which matured by March
instantaneous 100 basis point shift in interest rates.    31, 2003, were used in connection with certain cred-
Given the historically low interest rate environment,     it card securitization transactions.
simulations for declines in interest rates of 100, 200
and 300 basis points were not meaningful.




                                                                                                   People’s Bank   49
EQUITY PORTFOLIO PRICE RISK                                 based on the overall relative valuations in the mar-
People’s manages its equity securities portfolio with the   kets, risk to capital due to market volatility and
objective of achieving long-term capital appreciation.      other pertinent factors. During 2003, People’s sold
The level of exposure to equity securities is monitored     substantially its entire common stock portfolio.

D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S
The following table summarizes certain information concerning the derivative financial instruments utilized
by People’s in its management of IRR. Also see Note 18 to the Consolidated Financial Statements.

As of and for the year ended December 31, 2003                                            Interest Rate    Interest Rate
(dollars in millions)                                                                        Swaps           Corridors
Notional amount at year end                                                                  $ 432.6          $435.0
Weighted average remaining term to maturity (months)                                             46               36
Decrease in pre-tax income                                                                   $ (16.3)         $ (4.0)
Fair value:
  Recognized as an asset                                                                          .–              4.7
  Recognized as a liability                                                                     28.8               .–


As of and for the year ended December 31, 2002                                             Interest Rate   Interest Rate
(dollars in millions)                                                                         Swaps          Corridors
Notional amount at year end                                                                  $ 629.5          $435.0
Weighted average remaining term to maturity (months)                                              46              48
Decrease in pre-tax income                                                                   $ (23.6)         $ (0.2)
Fair value:
  Recognized as an asset                                                                          .–              6.8
  Recognized as a liability                                                                     40.1               .–


    In conjunction with the balance sheet restruc-          unwind derivative positions related to the borrow-
turing discussed on page 15, People’s plans to              ings that are repaid.

H O L D I N G C O M PA N Y S T R U C T U R E

In 1988, People’s became a capital stock savings bank       for consideration by the shareholders of People’s.
as part of a reorganization from its original form as           Holdings is different in significant aspects from an
a mutual savings bank. That process also resulted           ordinary financial holding company or a bank holding
in the formation of People’s Mutual Holdings                company. Holdings is a corporation without shares
(“Holdings”), a mutual-form financial holding                of capital stock, and Holdings’ Articles of Incorpo-
company that is subject to regulation by the Board          ration require its Board of Trustees to consider the
of Governors of the Federal Reserve System.                 impact of its actions on a variety of constituencies in
    At December 31, 2003, Holdings owned 36.5               making certain business decisions. These include the
million shares of People’s common stock, representing       depositors, employees and debtholders of People’s,
58.8% of the total number of outstanding shares of          and the well-being of the communities in which
People’s common stock. By virtue of its ownership of        People’s conducts business, but do not include People’s
a majority of People’s outstanding shares, Holdings         shareholders. Thus, Holdings will act in a manner
is able to elect all of the members of the Board of         that furthers the general interests of these various
Directors of People’s and will generally be able to         constituencies.
significantly affect the outcome of all matters presented




50   2003 Annual Report
    Since its formation in 1988, Holdings has           There can be no assurance that Holdings will continue
consistently waived the receipt of cash dividends on    to waive the receipt of cash dividends in any future
substantially all of the shares of People’s common      period, and Holdings retains the right to accept pay-
stock it owns. The Board of Directors of People’s       ment of future cash dividends on all of the People’s
establishes the rate at which dividends are declared    common stock it owns, at its discretion.
with advance knowledge of the amount of dividends           People’s and Holdings are aware of regulatory
to be waived by Holdings. No dividends are declared     orders issued in second-step conversions by certain
on shares for which Holdings waives the dividend. If    mutual holding companies that have required dilution
dividends had actually been declared and paid on all    of the public minority shareholders’ interest to reflect
outstanding shares of People’s common stock at the      the amount of cash dividends previously waived by
same rate as was declared and paid on shares not        the parent holding company. Neither People’s nor
subject to the waiver, Holdings would have received     the Board of Trustees of Holdings has expressed any
dividends of approximately $368 million since the       intention to undertake a second-step conversion in
date of its formation through December 31, 2003.        the future.

F O R WA R D - L O O K I N G S TAT E M E N T S

Periodic and other filings made by People’s with the          All forward-looking statements are subject to risks
FDIC pursuant to the Securities Exchange Act of 1934    and uncertainties that could cause People’s actual
may from time to time contain information and           results or financial condition to differ materially from
statements that are forward-looking in nature. Such     those expressed in or implied by such statements.
filings include the Annual Report to Shareholders,       Factors of particular importance to People’s include,
Form 10-K, Form 10-Q and Form 8-K, and may              but are not limited to: (i) changes in general economic
include other forms such as proxy statements. Other     conditions, including interest rates; (ii) potential
written or oral statements made by People’s or its      improvements or deterioration in credit quality; (iii)
representatives from time to time may also contain      competition among providers of financial services;
forward-looking statements.                             (iv) residential mortgage and secondary market
    In general, forward-looking statements usually      activity; (v) changes in accounting and regulatory
use words such as “expect,” “anticipate,” “believe,”    guidance applicable to banks; and (vi) price levels
“should,” and similar expressions, and include all      and conditions in the public securities markets
statements about People’s operating results or          generally. People’s does not undertake any obligation
financial position for future periods. Forward-look-     to update or revise any forward-looking statements,
ing statements represent management’s beliefs, based    whether as a result of new information, future
upon information available at the time the statements   events or otherwise.
are made, with regard to the matters addressed; they
are not guarantees of future performance.




                                                                                                People’s Bank   51
C O N S O L I D AT E D S TAT E M E N T S O F C O N D I T I O N



As of December 31 (in millions)                                                       2003          2002

Assets
Cash and due from banks (note 3)                                                 $     343.0    $     451.9
Short-term investments (note 3)                                                         71.9          269.1
     Total cash and cash equivalents                                                   414.9          721.0
Securities (note 4):
  Trading account securities, at fair value                                              18.1              .–
  Securities available for sale, at fair value (including $221.5 and $279.3
    pledged as collateral for borrowings under repurchase agreements)                 2,536.5        3,334.6
  Securities held to maturity, at amortized cost (fair value of $1.4 and $1.4)            1.4            1.4
     Total securities                                                                 2,556.0        3,336.0
Loans (note 5):
  Residential mortgage                                                              3,089.1        2,871.3
  Commercial real estate finance                                                     1,699.9        1,610.2
  Commercial                                                                        1,335.5        1,224.6
  Credit card                                                                       1,129.3          775.0
  Other consumer                                                                      980.5          969.3
     Total loans                                                                    8,234.3        7,450.4
  Less allowance for loan losses                                                     (112.5)        (114.2)
     Total loans, net                                                               8,121.8        7,336.2
Premises and equipment, net                                                           156.9          178.8
Goodwill (note1)                                                                      103.5           99.9
Other acquisition-related intangibles (note 1)                                          9.8           13.3
Other assets (note 7)                                                                 308.6          575.4
     Total assets                                                                $ 11,671.5     $ 12,260.6

Liabilities
Deposits (note 8):
   Non-interest-bearing                                                          $ 2,078.0      $ 1,939.6
   Savings, interest-bearing checking and money market                             4,179.7        3,705.0
   Time                                                                            2,456.3        2,781.5
     Total deposits                                                                8,714.0        8,426.1
Borrowings (note 9):
   Federal Home Loan Bank advances                                                      964.3        1,595.9
   Federal funds purchased                                                              348.9          565.9
   Repurchase agreements                                                                203.0          275.5
     Total borrowings                                                                 1,516.2        2,437.3
Subordinated notes (note 10)                                                            252.9          252.5
Other liabilities                                                                       186.4          205.1
     Total liabilities                                                               10,669.5       11,321.0
Commitments and contingencies (notes 18 and 19)

Stockholders’ Equity (notes 12 and 13)
Common stock (without par value; 100.0 shares authorized;
  62.0 shares and 61.7 shares issued and outstanding)                                  62.0            61.7
Additional paid-in capital                                                            215.2          206.9
Retained earnings                                                                     759.8          736.6
Accumulated other comprehensive loss (note 15)                                        (35.0)          (65.6)
     Total stockholders’ equity                                                     1,002.0          939.6
     Total liabilities and stockholders’ equity                                  $ 11,671.5     $ 12,260.6

See accompanying notes to consolidated financial statements.




52   2003 Annual Report
C O N S O L I D AT E D S TAT E M E N T S O F I N C O M E



Years ended December 31 (in millions, except per share data)                     2003      2002              2001

Interest and dividend income:
   Residential mortgage                                                          $ 141.7   $ 162.7          $ 180.1
   Commercial real estate finance                                                   103.0     108.8            119.1
   Commercial                                                                       66.3      68.3             84.7
   Other consumer                                                                   55.1      69.6             83.5
   Credit card                                                                      50.6      62.3             83.4
     Total interest on loans                                                       416.7     471.7            550.8
   Securities (note 4)                                                              94.2     135.4            141.8
   Short-term investments                                                            3.8       7.1             34.5
     Total interest and dividend income                                            514.7     614.2            727.1

Interest expense:
   Deposits                                                                       102.5     148.9             234.1
   Borrowings (note 9)                                                             69.0      91.3             115.1
   Subordinated notes                                                              22.8      22.8              23.9
     Total interest expense                                                       194.3     263.0             373.1
     Net interest income                                                          320.4     351.2             354.0
Provision for loan losses (note 5)                                                 48.6      77.7             101.1
     Net interest income after provision for loan losses                          271.8     273.5             252.9

Non-interest income:
  Fee-based revenues:
    Credit card securitization income (note 6)                                     55.0      74.2              74.8
    Credit card fees                                                               28.4      21.5              26.0
    Service charges on deposit accounts                                            68.7      66.0              59.8
    Insurance revenue                                                              26.0      24.9              21.2
    Brokerage commissions                                                          13.0      13.4              12.9
    Other fees                                                                     35.1      32.6              28.8
    Total fee-based revenues                                                      226.2     232.6             223.5
  Net security losses (note 4)                                                     (0.6)      (3.3)           (18.5)
  Net gains on sales of residential mortgage loans (note 5)                        14.8        8.4              8.5
  Net gain on sale of U.K. business (note 2)                                         .–        2.6             78.0
  Gains on other sales of assets (note 2)                                            .–         .–             20.0
  Other non-interest income                                                        10.6        8.4             10.3
    Total non-interest income                                                     251.0     248.7             321.8

Non-interest expense:
   Compensation and benefits (notes 16 and 17)                                     212.9     211.2            198.0
   Occupancy and equipment                                                         82.0      82.9             78.7
   Professional and outside service fees                                           52.8      50.8             54.6
   Advertising and promotion                                                       31.6      36.3             47.1
   Amortization of goodwill and other acquisition-related intangibles (note 1)      3.5       3.1             10.0
   Other non-interest expense                                                      53.1      57.5             70.0
     Total non-interest expense                                                   435.9     441.8            458.4
     Income before income tax expense                                              86.9      80.4            116.3
Income tax expense (note 11)                                                       23.1      25.0             40.5
     Net income                                                                  $ 63.8    $ 55.4           $ 75.8

Basic and diluted earnings per common share (note 14)                            $ 1.03    $ 0.90           $ 1.23

See accompanying notes to consolidated financial statements.




                                                                                                      People’s Bank    53
C O N S O L I D AT E D S TAT E M E N T S O F C H A N G E S I N S T O C K H O L D E R S ’ E Q U I T Y


                                                                                                              Accumulated
                                                                               Additional                        Other          Total
                                                                Common          Paid-In         Retained     Comprehensive   Stockholders’
(in millions, except per share data)                             Stock          Capital         Earnings         Loss           Equity

Balance at December 31, 2000                                     $ 61.3          $ 201.6        $680.1          $ (61.2)      $ 881.8
Net income                                                           .–               .–          75.8               .–          75.8
Other comprehensive income, net of tax,
  including transition adjustment upon adoption
  of SFAS No. 133 (note 15)                                          .–               .–               .–         11.6             11.6
     Total comprehensive income                                                                                                    87.4
Cash dividends on common
  stock ($1.34 per share)                                            .–               .–          (37.4)             .–           (37.4)
Stock options, restricted stock
  and related tax benefits                                           0.2             3.0                 .–           .–             3.2

Balance at December 31, 2001                                       61.5           204.6           718.5          (49.6)          935.0
Net income                                                           .–              .–            55.4             .–            55.4
Other comprehensive loss,
  net of tax (note 15)                                               .–               .–               .–        (16.0)           (16.0)
     Total comprehensive income                                                                                                    39.4
Cash dividends on common
  stock ($1.42 per share)                                            .–               .–          (37.3)             .–           (37.3)
Stock options, restricted stock
  and related tax benefits                                           0.2             2.3                –             .–             2.5

Balance at December 31, 2002                                       61.7           206.9           736.6          (65.6)          939.6
Net income                                                           .–              .–            63.8             .–            63.8
Other comprehensive income,
  net of tax (note 15)                                               .–               .–               .–         30.6             30.6
     Total comprehensive income                                                                                                    94.4
Cash dividends on common
  stock ($1.53 per share)                                            .–               .–          (40.6)             .–           (40.6)
Stock options, restricted stock
  and related tax benefits                                           0.3              8.3            .–               .–            8.6
Balance at December 31, 2003                                     $ 62.0          $ 215.2        $759.8          $ (35.0)      $1,002.0

See accompanying notes to consolidated financial statements.




54   2003 Annual Report
C O N S O L I D AT E D S TAT E M E N T S O F C A S H F L O W S



Years ended December 31 (in millions)                                            2003            2002                 2001

Cash Flows from Operating Activities:
Net income                                                                   $      63.8     $      55.4          $      75.8
Adjustments to reconcile net income to net cash provided by
  (used in) operating activities:
  Provision for loan losses                                                         48.6            77.7                101.1
  Depreciation and amortization of premises and equipment                           34.2            37.5                  36.3
  Amortization of goodwill and other acquisition-related intangibles                 3.5              3.1                 10.0
  Deferred income tax benefit                                                        (8.6)            (2.7)              (13.6)
  Net security losses                                                                0.6              3.3                 18.5
  Net gains on sales of residential mortgage loans                                 (14.8)            (8.4)                (8.5)
  Net gain on sale of U.K. business                                                   .–             (2.6)              (78.0)
  Gains on other sales of assets                                                      .–               .–                (20.0)
  Net (increase) decrease in trading account securities                            (18.1)             2.1                  2.2
  Net changes in other assets and liabilities                                       36.4          (128.7)              (452.9)
     Net cash provided by (used in) operating activities                           145.6            36.7               (329.1)

Cash Flows from Investing Activities:
  Proceeds from sales of securities available for sale                            1,459.5           607.5              1,501.0
  Purchases of securities available for sale                                     (2,342.5)       (1,719.3)            (2,414.0)
  Proceeds from principal repayments of securities available for sale             1,699.6           774.0                493.8
  Proceeds from principal repayments of securities held to maturity                    .–             2.5                 24.5
  Proceeds from sales of loans (other than credit card receivables)               1,084.4           637.5                566.0
  Disbursements for loan originations, net of principal collections              (1,876.4)         (534.0)              (345.5)
  Principal repayments of securitized credit card receivables,
     net of proceeds from sales                                                    203.8          (254.8)              (322.4)
  Proceeds from sale of U.K. business                                                 .–               .–               521.8
  Proceeds from other sales of assets                                                 .–               .–                 44.6
  Purchases of premises and equipment                                              (12.3)           (14.1)               (33.4)
     Net cash provided by (used in) investing activities                           216.1          (500.7)                 36.4

Cash Flows from Financing Activities:
  Net increase in deposits                                                      287.9           442.7                195.7
  Net (decrease) increase in borrowings with terms of three months or less     (734.8)          131.8                413.5
  Proceeds from borrowings with terms greater than three months                    .–             50.0               360.0
  Repayments of borrowings with terms greater than three months                (186.3)         (286.5)              (697.1)
  Repurchases of subordinated notes                                                .–               .–                (14.6)
  Cash dividends paid on common stock                                           (40.6)           (37.3)               (37.4)
  Proceeds from issuance of common stock                                          6.0              0.3                  1.1
     Net cash (used in) provided by financing activities                        (667.8)          301.0                221.2
Net decrease in cash and cash equivalents                                      (306.1)         (163.0)                (71.5)
Cash and cash equivalents at beginning of year                                  721.0           884.0                955.5
Cash and cash equivalents at the end of year                                 $ 414.9         $ 721.0              $ 884.0

Supplemental Information:
  Interest payments                                                          $     195.4     $     264.1          $     374.9
  Income tax payments                                                               27.5            26.3                 49.3
  Real estate properties acquired by foreclosure                                     0.3             2.4                  3.3
  Securities transferred from held to maturity to available
     for sale upon adoption of SFAS No. 133                                             .–   .         .–                31.6

See accompanying notes to consolidated financial statements.




                                                                                                             People’s Bank        55
N OT E S TO CO N S O L I DAT E D F I N A N C I A L STAT E M E N TS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

People’s Bank (“People’s”) is a state-chartered stock                   accounting policies, which are included in the discus-
savings bank offering a full range of financial services                 sion below, are reviewed with the Audit Committee
to individual, corporate and municipal customers.                       of the Board of Directors.
People’s provides traditional banking services of                           For purposes of the Consolidated Statements of
accepting deposits and making loans, as well as                         Cash Flows, cash equivalents include highly liquid
specialized financial services through its subsidiaries,                 instruments with an original maturity of three months
including: brokerage and investment planning                            or less, including money market preferred stocks,
through People’s Securities, Inc. (“PSI”); equipment                    investment grade corporate debt securities and
leasing and financing through People’s Capital and                       commercial paper. These instruments are reported
Leasing Corp. (“PCLC”); asset management through                        as short-term investments in the Consolidated
Olson Mobeck Investment Advisors, Inc. (“OMIA”);                        Statements of Condition at amortized cost, which
and insurance services through R.C. Knox and                            approximates fair value.
Company, Inc. (“RC Knox”).                                                  Certain reclassifications have been made to
    People’s overall financial results are particularly                  prior year amounts to conform to the current year
dependent on economic conditions in the state of                        presentation.
Connecticut, which is its primary market, although
                                                                        SECURITIES
economic conditions in the United States significantly
                                                                        Marketable equity and debt securities (other than
affect its credit card and national consumer lending
                                                                        those reported as short-term investments) are classified
businesses. Deposits are insured up to applicable limits
                                                                        as either trading account securities, held to maturity
by the Bank Insurance Fund of the Federal Deposit
                                                                        securities (applicable only to debt securities) or avail-
Insurance Corporation (“FDIC”). People’s primary
                                                                        able for sale securities. Management determines the
regulators are the FDIC and the State of Connecticut
                                                                        classification of a security at the time of its purchase.
Department of Banking.
                                                                            Securities purchased for sale in the near term are
B A S I S O F F I N A N C I A L S TAT E M E N T P R E S E N TAT I O N   classified as trading account securities and reported
The consolidated financial statements have been                          at fair value. Unrealized gains and losses are reported
prepared in conformity with accounting principles                       in non-interest income.
generally accepted in the United States of America                          Debt securities for which People’s has the positive
and include the accounts of People’s and its sub-                       intent and ability to hold to maturity are classified as
sidiaries. All significant intercompany transactions                     held to maturity securities and reported at amortized
and balances are eliminated in consolidation.                           cost. All other securities are classified as available
    In preparing the consolidated financial statements,                  for sale and reported at fair value. Unrealized gains
management is required to make significant estimates                     and losses on securities available for sale are reported
and assumptions that affect the reported amounts of                     on an after-tax basis in stockholders’ equity as
assets, liabilities, revenues and expenses. Actual results              accumulated other comprehensive income or loss.
could differ from management’s current estimates,                       Premiums are amortized and discounts are accreted
as a result of changing conditions and future events.                   to interest income for debt securities, using the
Several estimates are particularly critical and are                     interest method over the remaining period to con-
susceptible to significant near-term change, including                   tractual maturity, adjusted for the effect of actual
the allowance for loan losses, the valuation of retained                prepayments in the case of mortgage-backed securities,
interests in credit card securitizations, the valuation                 collateralized mortgage obligations (“CMOs”) and
of derivative financial instruments, and asset impair-                   other asset-backed securities. Federal Home Loan
ment judgments including other-than-temporary                           Bank (“FHLB”) stock is a non-marketable security
declines in the value of securities and the recoverability              reported at cost.
of goodwill and other intangible assets. These critical


56   2003 Annual Report
     Security transactions are recorded on the trade         portfolio risk characteristics; the present financial
date. Realized gains and losses are determined using         condition of borrowers; and current economic
the specific identification method and reported in             conditions. While management seeks to use the best
non-interest income.                                         available information to make these evaluations,
     Management conducts a periodic review and               future adjustments to the allowance for loan losses
evaluation of the securities portfolio to determine          may be necessary based on changes in economic
if the decline in fair value of any security appears to      conditions, results of regulatory examinations, further
be other than temporary. If the decline is deemed to         information obtained regarding known problem loans,
be other than temporary, the security is written down        the identification of additional problem loans and
to a new cost basis and the resulting loss is reported       other factors.
in non-interest income. The factors considered by                The allowance for loan losses consists of amounts
management in its periodic review include, but are           determined in accordance with Statement of Financial
not limited to: the length of time and extent to which       Accounting Standards (“SFAS”) No. 5, “Accounting
the fair value has been less than cost; the financial         for Contingencies,” and SFAS No. 114, “Accounting
condition and near-term prospects of the issuer;             by Creditors for Impairment of a Loan.” In applying
whether the decline in fair value appears to be issuer       SFAS No. 5, management considers the factors listed
specific or, alternatively, a reflection of general market     in the preceding paragraph in order to estimate a loss
or industry conditions; and People’s intent and ability      allowance for (i) each homogeneous pool of smaller
to hold the security for a period of time sufficient to       balance loans (residential mortgage, owned credit
allow for a recovery in fair value.                          card and other consumer loans) that are evaluated
                                                             on a collective basis, and (ii) commercial real estate
LOA N S A N D A L LO WA N C E F O R LOA N LO S S E S
                                                             finance and commercial loans that are not considered
Loans held for sale are reported at the lower of cost
                                                             impaired under SFAS No. 114. A loan is considered
or estimated fair value in the aggregate, considering
                                                             impaired when, based on current information and
the effect of forward sales commitments, with any
                                                             events, it is probable that People’s will be unable to
adjustment for net unrealized losses reported in
                                                             collect all principal and interest due according to the
non-interest income. All other loans are reported at
                                                             contractual terms of the loan. People’s applies SFAS
amortized cost less the allowance for loan losses.
                                                             No. 114 to loans that are individually evaluated for
    The allowance for loan losses is established
                                                             collectibility in accordance with its normal loan
through provisions for loan losses charged to income.
                                                             review procedures. Under SFAS No. 114, impaired
Losses on loans, including impaired loans, are charged
                                                             loans are reported based on one of three measures:
to the allowance for loan losses when all or a portion
                                                             the present value of expected future cash flows
of a loan is deemed to be uncollectible. Recoveries
                                                             discounted at the loan’s effective interest rate; the
of loans previously charged off are credited to the
                                                             loan’s observable market price; or the fair value of
allowance when realized. Management maintains the
                                                             the collateral if the loan is collateral dependent. If
allowance for loan losses at a level that is believed
                                                             the measure is less than an impaired loan’s recorded
to be adequate to absorb probable losses inherent in
                                                             investment, an impairment loss is recognized as part
the existing loan portfolio, based on a periodic evalu-
                                                             of the allowance for loan losses.
ation of a variety of factors. These factors include,
                                                                 Credit losses associated with securitized and sold
but are not limited to: People’s historical loan loss
                                                             credit card receivables are not reflected in People’s
experience and recent trends in that experience;
                                                             provision and allowance for loan losses. Such credit
migration analysis; risk ratings assigned by lending
                                                             losses are absorbed directly under the contractual
personnel to commercial real estate finance and
                                                             agreements of the credit card master trust, thereby
commercial loans, and the results of ongoing reviews
                                                             reducing credit card securitization income (a compo-
of those ratings by People’s independent loan review
                                                             nent of non-interest income) rather than being charged
function; an evaluation of non-performing loans and
                                                             against the allowance for loan losses.
related collateral values; the probability of loss in view
of geographic and industry concentrations and other




                                                                                                      People’s Bank   57
INTEREST AND FEES ON LOANS                                         financial assets, the transferor recognizes the finan-
Interest on loans is accrued to income monthly based               cial and servicing assets it controls and the
on outstanding principal balances. Loans that are                  liabilities it has incurred, and derecognizes financial
past due 90 days or more are placed on non-accrual                 assets when control has been surrendered.
status. All previously accrued but unpaid interest                      As a result of People’s securitization activities,
on non-accrual loans is reversed from interest income              fee-based revenues in the Consolidated Statements
in the current period. Interest payments received on               of Income include “credit card securitization income,”
non-accrual loans (including impaired loans) are                   representing excess spread revenue, servicing fee
generally recognized as income. Depending on the                   revenue and related hedge income or expense attrib-
loan portfolio, such interest payments may be applied              utable to the sold credit card receivables represented
as a reduction of principal if future collections are              by the Investor Certificates. Excess spread revenue
doubtful. A loan remains on non-accrual status                     principally consists of credit card interest and fees less
until the factors that indicated doubtful collectibility           interest paid on Investor Certificates, credit losses,
no longer exist or until a loan is determined to be                servicing fees and other Trust expenses. People’s
uncollectible and is charged off against the allowance             recognizes an asset (“capitalized excess spread”) for
for loan losses.                                                   the present value of certain components of future
     Loan origination fees and certain direct loan                 excess spread revenue expected to be earned over the
origination costs are deferred, and the net fee or cost            estimated life of the receivable balances sold. The
is recognized in interest income as an adjustment of               amount capitalized is recognized in credit card secu-
yield using the interest method. Depending on the loan             ritization income upon transfer of ownership interests
portfolio, deferred amounts are amortized using either             in the Trust. Amounts capitalized are amortized as
the average or contractual life of the loan. Credit                a reduction of credit card securitization income over
card origination costs are deferred and amortized                  the estimated life of the receivables sold. Servicing
on a straight-line basis over 12 months.                           fees are considered to be adequate compensation, as
C R E D I T C A R D S E C U R I T I Z AT I O N S A N D S A L E S
                                                                   defined in SFAS No. 140, and, therefore, are included
Securitizations involve the transfer of a group of                 in credit card securitization income as earned. Secu-
credit card receivables in a two-step process, first from           ritization transaction costs, including premiums paid
People’s to its wholly owned subsidiary, People’s                  for interest rate cap agreements entered into by the
Structured Finance Corp. (“PSFC”), and second, from                Trust, are deferred and amortized over the expected
PSFC to the People’s Bank Credit Card Master Trust                 average term of the related securitization as a reduc-
(the “Trust”). Undivided interests represented by                  tion of excess spread revenue.
Investor Certificates and a Transferor Interest are                      In addition to capitalized excess spread, People’s
issued by the Trust, and the Investor Certificates are              retained interests in credit card securitizations include
sold by the Trust to investors. People’s accounts for              subordinated interests in the securitized receivables,
these transfers of ownership interests as sales for                accrued interest receivable and collateral accounts. The
financial reporting purposes and, accordingly, its on-              retained interest representing the principal portion of
balance-sheet credit card portfolio is reduced by the              the Transferor Certificate is reported in loans, while
receivables sold upon issuance of the Investor Cer-                all other retained interests are reported in securities
tificates. Ownership transfers are accounted for as                 available for sale and other assets. These retained
sales based on application of the criteria set forth in            interests are reported at fair value based on market
SFAS No. 140, “Accounting for Transfers and Ser-                   estimates and discounted cash flow analyses that
vicing of Financial Assets and Extinguishments of                  incorporate management’s best estimate of future
Liabilities,” which superseded SFAS No. 125. Under                 cash flows and assumptions regarding credit losses,
SFAS No. 140, the determination as to whether a trans-             payment rates and discount rates commensurate with
fer of financial assets should be accounted for as a sale           the risks involved. Disclosures with respect to these
or as a secured borrowing is based on a financial                   retained interests and People’s overall credit card
components approach that focuses on control.                       securitization activities are included in Note 6.
Under this approach, subsequent to a transfer of



58   2003 Annual Report
PREMISES AND EQUIPMENT                                                 expense when they occur. Amortization of goodwill
Premises and equipment are reported at cost less                       (including goodwill recorded in prior acquisitions)
accumulated depreciation and amortization, except                      ceased at the SFAS No. 142 adoption date, which for
for land, which is reported at cost. Buildings, data                   People’s was January 1, 2002. SFAS No. 142 requires
processing and other equipment, computer software,                     that acquisition-related intangible assets other than
furniture, and fixtures are depreciated using the                       goodwill continue to be amortized to expense over
straight-line method over the estimated useful lives                   their estimated useful lives.
of the assets. Leasehold improvements are amortized                         SFAS No. 142 requires that goodwill be tested
using the straight-line method over the shorter of the                 for impairment at least annually, using a two-step
remaining lease term or estimated useful life of the                   approach that involves the identification of “reporting
improvements. Capitalized costs are amortized on a                     units” and the estimation of fair values. An impairment
straight-line basis over the estimated useful life of                  loss is recognized as a charge to expense for any
the software.                                                          excess of the goodwill carrying amount over implied
G O O D W I L L A N D O T H E R A C Q U I S I T I O N - R E L AT E D   fair value. Management evaluated goodwill for
I N TA N G I B L E S
                                                                       impairment as of December 31, 2003 using the two-
The assets and liabilities of companies acquired in
                                                                       step approach. It was determined that the fair value
business combinations accounted for by the purchase
                                                                       of People’s reporting units exceeded the carrying
method are recorded at fair value at the date of
                                                                       amounts and, therefore, no impairment loss was
acquisition. Intangible assets are recognized in an
                                                                       recognized for 2003.
amount equal to the excess of the acquisition cost
                                                                            People’s goodwill totaled $103.5 million and
over the fair value of the net assets acquired. “Other
                                                                       $99.9 million at December 31, 2003 and 2002,
acquisition-related intangibles” are separately identi-
                                                                       respectively. At December 31, 2003, goodwill was
fied, where appropriate, for the estimated value of
                                                                       allocated to the Consumer Financial Services and
acquired customer relationships and are amortized
                                                                       Commercial Banking segments in the amounts of
on a straight-line basis over the estimated remaining
                                                                       $98.8 million ($98.2 million at December 31, 2002)
average life of those relationships (ranging from 6 to
                                                                       and $4.7 million ($1.7 million at December 31, 2002),
12 years from the respective acquisition dates). The
                                                                       respectively. The $0.6 million increase in goodwill
remaining intangible asset is classified as goodwill.
                                                                       allocated to Consumer Financial Services since
Prior to January 1, 2002, goodwill was amortized
                                                                       December 31, 2002 reflects People's final contractual
to expense on a straight-line basis over the expected
                                                                       payment relating to its acquisition of OMIA. Goodwill
periods to be benefited (ranging from 15 to 20 years).
                                                                       allocated to Commercial Banking increased $3.0 million
Intangible assets are periodically reviewed by man-
                                                                       as a result of People’s increasing its ownership interest
agement to assess recoverability and impairment is
                                                                       to 100% in PCLC.
recognized as a charge to income if carrying amounts
                                                                            People’s other acquisition-related intangible
exceed fair values.
                                                                       assets totaled $9.8 million and $13.3 million at
    In July 2001, the Financial Accounting Standards
                                                                       December 31, 2003 and 2002, respectively, and had
Board (the “FASB”) issued SFAS No. 141, “Business
                                                                       gross carrying amounts of $27.1 million and $27.1
Combinations,” and SFAS No. 142, “Goodwill and
                                                                       million, and accumulated amortization of $17.3
Other Intangible Assets.” Among other things, SFAS
                                                                       million and $13.8 million, respectively. Other acqui-
No. 141 requires use of the purchase method to
                                                                       sition-related intangible assets have an original
account for all business combinations initiated after
                                                                       weighted-average amortization period of 9 years.
June 30, 2001 and specifies criteria that acquired
                                                                       Amortization expense of other acquisition-related
intangible assets must meet in order to be recognized
                                                                       intangible assets totaled $3.5 million, $3.1 million
and reported separately from goodwill. SFAS No.
                                                                       and $3.0 million for the years ended December 31,
142 requires that goodwill no longer be amortized
                                                                       2003, 2002 and 2001, respectively. The estimated
to expense, but instead be reviewed for impairment
                                                                       aggregate amortization expense over each of the
at least annually, with impairment losses charged to
                                                                       next five years for other acquisition-related intangible




                                                                                                                 People’s Bank   59
assets is as follows: $3.5 million in 2004; $1.8 million   I N C O M E TA X E S

in 2005; and $1.1 million in 2006, 2007 and 2008.          Deferred taxes are recognized for the estimated future
If the requirements of SFAS No. 142 had been applied       tax effects attributable to “temporary differences”
to prior period results, net income would have been        and tax loss carryforwards. Temporary differences are
reduced by $6.5 million relating to the after-tax effect   differences between the financial statement carrying
of goodwill amortization, and adjusted net income          amounts and the tax bases of existing assets and
and adjusted diluted earnings per share would have         liabilities. A deferred tax liability is recognized for all
been $82.3 million and $1.34, respectively, for the        temporary differences that will result in future taxable
year ended December 31, 2001.                              income. A deferred tax asset is recognized for all
                                                           temporary differences that will result in future tax
R E A L E S TAT E O W N E D
                                                           deductions and for all tax loss carryforwards, subject
Real estate owned (“REO”) properties acquired              to reduction of the asset by a valuation allowance in
through foreclosure or deed-in-lieu of foreclosure are     certain circumstances. This valuation allowance is
recorded initially at the lower of cost or estimated       recognized if, based on an analysis of available
fair value less costs to sell. Any write-down of the       evidence, management determines that it is more likely
recorded investment in the related loan is charged to      than not that some portion or all of the deferred tax
the allowance for loan losses upon transfer to REO.        asset will not be realized. The valuation allowance
Thereafter, an allowance for REO losses is established     is subject to ongoing adjustment based on changes
for any further declines in the property’s value.          in circumstances that affect management’s judgment
This allowance is increased by provisions charged          about the realizability of the deferred tax asset.
to income and decreased by charge-offs for realized            Deferred tax assets and liabilities are measured
losses. Management’s periodic evaluation of the            using the enacted tax rates expected to apply to future
adequacy of the allowance is based on an analysis of       taxable income. The effect on deferred tax assets
individual properties, as well as a general assessment     and liabilities of a change in tax laws or rates is
of current real estate market conditions.                  recognized in income tax expense in the period that
SECURITIES REPURCHASE AGREEMENTS                           includes the enactment date of the change. Tax
In securities repurchase agreements, People’s transfers    benefits attributable to deductions arising from the
securities to a counterparty under an agreement to         exercise of non-statutory stock options are credited
repurchase the same (or substantially the same) secu-      to additional paid-in capital.
rities at a fixed price in the future. These agreements     EARNINGS PER COMMON SHARE
are accounted for as secured financing transactions         Basic earnings per share (“EPS”) excludes dilution and
since People’s maintains effective control over the        is computed by dividing net income applicable to
transferred securities and the transfer meets the other    common stock by the weighted average number of
criteria for such accounting as specified in SFAS           common shares outstanding for the period. Diluted
No. 140. The transferred securities are pledged by         EPS reflects the potential dilution that could occur if
People’s as collateral and the counterparty has the        securities or other contracts to issue common stock
right by contract to sell or repledge that collateral.     (such as stock options) were exercised or converted
Therefore, in accordance with SFAS No. 140, separate       into additional common shares that would then share
disclosure of the pledged securities has been made in      in the earnings of the entity. Diluted EPS is computed
the Consolidated Statements of Condition.                  by dividing net income by the weighted average
                                                           number of common shares outstanding for the period,
                                                           plus an incremental number of common-equivalent
                                                           shares computed using the treasury stock method.




60   2003 Annual Report
D E R I VAT I V E I N S T R U M E N T S A N D H E D G I N G A C T I V I T I E S   S T O C K- B A S E D C O M P E N S AT I O N
People’s uses derivatives for market risk management                              People’s accounts for stock options and restricted
purposes (principally interest rate risk) and not for                             stock in accordance with Accounting Principles Board
trading or speculation purposes.                                                  (“APB”) Opinion No. 25, “Accounting for Stock
    All derivatives are recognized as either assets or                            Issued to Employees,” and related interpretations.
liabilities and are measured at fair value. Favorable                             Accordingly, compensation expense is not recognized
changes in fair values result in unrealized gains that                            for fixed stock options if the exercise price of the
are recognized as assets, while unfavorable changes                               option equals the fair value of the underlying stock
result in unrealized losses that are recognized as                                at the grant date. The fair value of restricted stock
liabilities. People’s hedge accounting methods vary                               awards, measured at the grant date, is recorded as a
depending on whether the derivative instrument is                                 component of stockholders’ equity and is amortized
classified as a fair value hedge, a cash flow hedge                                 to compensation expense on a straight-line basis
or a foreign currency hedge. Hedge accounting is                                  over the vesting period. SFAS No. 123, “Accounting
permitted only if specific criteria are met, including                             for Stock-Based Compensation,” encourages recog-
a requirement that a highly effective relationship exist                          nition of the fair value of all stock-based awards on
between the derivative instrument and the hedged                                  the date of grant as expense over the vesting period.
item, both at inception of the hedge and on an ongoing                            However, as permitted by SFAS No. 123, People’s
basis. Results of effective hedges are recognized:                                continues to apply the intrinsic value-based method
in current earnings for fair value hedges; in other                               of accounting prescribed by APB Opinion No. 25
comprehensive income for cash flow hedges; and as                                  and discloses certain pro-forma amounts as if the fair
part of the cumulative translation adjustments in                                 value approach of SFAS No. 123 had been applied.
other comprehensive income for foreign currency                                       SFAS No. 148, “Accounting for Stock-Based
net investment hedges. Ineffective portions of hedge                              Compensation-Transition and Disclosure, an
results are recognized in current earnings.                                       amendment of SFAS No. 123,” provides alternative
    People’s formally documents all relationships                                 methods of transition for a voluntary change to the
between the derivative instruments and the hedged                                 fair value method of accounting for stock-based
items, as well as its risk management objectives and                              employee compensation. In addition, this standard
strategies for undertaking the hedge transactions.                                amends the disclosure requirements of SFAS No. 123
This process includes linking all derivatives that are                            by requiring prominent pro-forma disclosures in both
designated as hedges to specific assets and liabilities,                           annual and interim financial statements, which are
or to specific firm commitments or forecasted                                       included in the following table. See Note 17 for a
transactions. People’s also formally assesses, both                               further discussion of SFAS No. 123.
at inception of the hedge and on an ongoing basis,
whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes
in the fair values or cash flows of the hedged items.
When it is determined that a derivative is not highly
effective or has ceased to be a highly effective hedge,
People’s discontinues hedge accounting prospectively
for that derivative.




                                                                                                                                People’s Bank   61
The following table illustrates the effect on net income and earnings per common share if People’s had
applied the fair value recognition provisions of SFAS No. 123:

Years ended December 31 (in millions, except per share data)                      2003         2002        2001
Net income, as reported                                                           $ 63.8      $ 55.4       $ 75.8
Add: stock-based employee compensation
 expense included in reported net income,
 net of related tax effects                                                          2.1         1.6         0.7
Less: total stock-based employee compensation
 expense determined under the fair value based
 method for all awards, net of related tax effects                                  (2.6)        (2.5)       (1.6)
Pro forma net income                                                              $ 63.3      $ 54.5       $ 74.9

Basic and diluted EPS:
 As reported                                                                      $ 1.03      $ 0.90       $ 1.23
 Pro forma                                                                          1.02        0.88         1.22


     Compensation expense for stock price apprecia-            and interim financial statements beginning after
tion units is recognized over the vesting period. The          December 15, 2003. Included in Note 16 are People’s
accrued liability is based on the excess, if any, of (i)       disclosure requirements relating to SFAS No. 132.
the current fair value of People’s common stock                     The FASB issued FASB Staff Position 106-1
(subject to a “cap price” as described in Note 17) over        (“FSP106-1”), “Accounting and Disclosure Require-
(ii) the base price of the units that equals the fair          ments Related to the Medicare Prescription Drug,
value of the stock at the original grant date. Changes         Improvement and Modernization Act of 2003,” in
in the accrued liability attributable to fluctuations in        January 2004. The guidance in FSP106-1 is effective
the fair value of People’s common stock are recognized         for annual or interim financial statements of fiscal
as a charge or credit to compensation expense.                 years ending after December 7, 2003. FSP106-1
                                                               permits a sponsor of a postretirement healthcare plan
A C C O U N T I N G S TA N D A R D S
                                                               that provides a prescription drug benefit to make a
FASB Interpretation No. 46 (revised) (“FIN 46R”),
                                                               one-time election to defer accounting for the effects
“Consolidation of Variable Interest Entities, an inter-
                                                               of the Medicare Prescription Drug, Improvement and
pretation of ARB No. 51,” was issued by the FASB in
                                                               Modernization Act of 2003 (the “Act”). People’s
December 2003. FIN 46R addresses the consolidation
                                                               elected to defer recognizing the effects of the Act,
by business enterprises of variable interest entities,
                                                               as permitted by FSP106-1, in the accounting for its
as defined in FIN 46R. For public enterprises, such
                                                               postretirement plan under SFAS No. 106, “Employers’
as People’s, FIN 46R is applied to the enterprise no
                                                               Accounting for Postretirement Benefits Other Than
later than the end of the first reporting period that
                                                               Pensions,” and in providing disclosures related to
ends after March 15, 2004. The application of FIN
                                                               its retirement plan as required by SFAS No.132. The
46R is not expected to have an impact on People’s
                                                               adoption of the provisions of the Act has not been
Consolidated Financial Statements.
                                                               reflected in the disclosure included in Note 16 at
    In December 2003, the FASB issued a revised SFAS
                                                               December 31, 2003. The adoption of FSP106-1 is
No. 132, “Employers’ Disclosures about Pensions
                                                               not expected to have a material effect on People’s
and Other Postretirement Benefits.” This standard
                                                               Consolidated Financial Statements.
revises the disclosure requirements regarding pension
plans and postretirement benefit plans in both annual




62   2003 Annual Report
NOTE 2 – ASSET SALES

People’s sold its United Kingdom business in April                  structure of that company, for cash proceeds of $20.9
2001, including all credit card accounts and consumer               million and recorded a gain of $16.9 million. The
loans, for net cash proceeds of $521.8 million. The                 NYCE common stock was a non-marketable equity
net gain on sale, after deducting transaction-related               security reported at cost prior to the sale. People’s
costs and other adjustments, amounted to $80.6                      also recorded a $3.1 million gain in 2001 from
million, of which $2.6 million was recorded in 2002                 the sale of a branch office, including the associated
and $78.0 million in 2001. These amounts are                        deposit liabilities, that was located outside of its
included in non-interest income in the Consolidated                 core market. These gains on other sales of assets
Statements of Income.                                               totaled $20.0 million for 2001 and are included in
    In 2001 People’s sold its investment in the NYCE                non-interest income in the Consolidated Statements
Corporation, following a change in ownership                        of Income.

N O T E 3 – C A S H A N D S H O R T-T E R M I N V E S T M E N T S

Reserves in the form of deposits with the Federal                   2002, respectively. These amounts are included
Reserve Bank and vault cash totaling $110.1 million                 in cash and due from banks in the Consolidated
and $111.5 million were maintained to satisfy federal               Statements of Condition.
regulatory requirements at December 31, 2003 and

Short-term investments include the following cash equivalents:

As of December 31 (in millions)                                                                      2003             2002
Money market preferred stocks                                                                       $ 49.3           $233.1
Money market mutual funds                                                                             10.2              7.9
Commercial paper                                                                                       8.6              5.6
Corporate debt securities                                                                               .–             18.0
Other                                                                                                  3.8              4.5
  Total short-term investments                                                                      $ 71.9           $269.1


    People’s engages in purchases of securities under               less than 90 days. The amounts advanced by People’s
resale agreements with government securities dealers                in these transactions are collateralized by the under-
that have been approved by its Board of Directors.                  lying securities that are held by the counterparties
Original maturities of these agreements are generally               during the transaction term.

Information concerning securities purchased under resale agreements is presented below:

As of and for the years ended December 31 (in millions)                                 2003         2002             2001
Carrying amount of agreements at year end                                              $     .–     $     .–         $      .–
Fair value of collateral securities at year end                                              .–           .–                .–
Average agreements during the year                                                          9.7          9.5              20.9
Maximum agreements outstanding at any month end                                            50.0         50.0             100.0




                                                                                                               People’s Bank     63
NOTE 4 – SECURITIES

The amortized cost, gross unrealized gains and losses, and fair value of People’s securities are as follows:
                                                                               Gross        Gross
                                                               Amortized     Unrealized   Unrealized           Fair
As of December 31, 2003 (in millions)                            Cost          Gains       Losses             Value
Trading account securities                                     $     18.0       $ 0.1       $      .–     $     18.1
Securities available for sale:
Debt securities:
   Mortgage-backed securities and CMOs                             1,408.9         5.4           (8.1)        1,406.2
   U.S. Treasury and agency                                          666.1         0.6           (3.4)          663.3
   Corporate and other                                               343.9         5.4          (10.1)          339.2
   State and municipal                                                 1.6          .–             .–             1.6
     Total debt securities                                         2,420.5        11.4          (21.6)        2,410.3
Equity securities:
   FHLB stock                                                         93.8          .–             .–            93.8
   Preferred stocks                                                   18.7         0.2           (0.5)           18.4
   Common stocks                                                       1.1          .–             .–             1.1
   Other                                                              14.4          .–           (1.5)           12.9
     Total equity securities                                         128.0         0.2           (2.0)          126.2
     Total securities available for sale                           2,548.5        11.6          (23.6)        2,536.5
Securities held to maturity:
   Corporate and other                                               1.3           .–            .–             1.3
   Mortgage-backed securities                                        0.1           .–            .–             0.1
     Total securities held to maturity                               1.4           .–            .–             1.4
     Total securities                                          $ 2,567.9        $11.7       $ (23.6)      $ 2,556.0

                                                                               Gross        Gross
                                                               Amortized     Unrealized   Unrealized           Fair
As of December 31, 2002 (in millions)                            Cost          Gains       Losses             Value
Securities available for sale:
Debt securities:
  Mortgage-backed securities and CMOs                          $ 1,888.4        $12.4       $ (1.8)       $ 1,899.0
  U.S. Treasury and agency                                         610.6          1.1         (0.6)           611.1
  Corporate and other                                              543.3          7.5        (19.9)           530.9
  State and municipal                                                1.6           .–           .–              1.6
     Total debt securities                                       3,043.9         21.0        (22.3)         3,042.6
Equity securities:
  Preferred stocks                                                   131.3          .–          (14.1)          117.2
  FHLB stock                                                          93.8          .–              .–           93.8
  Common stocks                                                       92.7         0.1          (19.8)           73.0
  Other                                                               12.8          .–            (4.8)           8.0
     Total equity securities                                         330.6         0.1          (38.7)          292.0
     Total securities available for sale                           3,374.5        21.1          (61.0)        3,334.6
Securities held to maturity:
  Corporate and other                                                1.3            .–             .–           1.3
  Mortgage-backed securities                                         0.1            .–             .–           0.1
     Total securities held to maturity                               1.4            .–             .–           1.4
     Total securities                                          $ 3,375.9        $21.1       $ (61.0)      $ 3,336.0




64   2003 Annual Report
People’s mortgage-backed securities and CMOs had                             and other purposes had a total fair value of $82.2
carrying values of $1.4 billion and $1.9 billion at                          million at December 31, 2003. In addition, securities
December 31, 2003 and 2002, respectively. These                              available for sale with a fair value of $221.5 million
amounts consisted of (i) securities issued or collater-                      were pledged as collateral to secure repurchase
alized by United States government-sponsored                                 agreement borrowings at December 31, 2003.
enterprises, such as Freddie Mac and Fannie Mae,                                 Dividend income on equity securities available for
totaling $1.2 billion in 2003 and $1.4 billion in 2002,                      sale totaled $7.3 million, $12.9 million and $17.2
and (ii) privately-issued securities of $0.2 billion in                      million for 2003, 2002 and 2001, respectively.
2003 and $0.5 billion in 2002.                                               Tax-exempt interest income totaled $0.1 million,
    Securities available for sale that were pledged as                       $0.1 million and $0.7 million for 2003, 2002 and
collateral for public deposits, derivatives transactions                     2001, respectively.

The following table is a summary of the amortized cost, fair value and fully taxable equivalent (“FTE”) yield
of debt securities. Information is shown by remaining period to contractual maturity for categories other than
mortgage-backed securities and CMOs:

                                                            Available for Sale                             Held to Maturity
                                                Amortized            Fair           FTE        Amortized         Fair            FTE
As of December 31, 2003 (dollars in millions)     Cost              Value           Yield        Cost           Value            Yield
U.S. Treasury and agency:
  Within 1 year                                 $    25.0       $     24.8          2.75%         $ .–           $ .–               .–%
  After 1 but within 5 years                        641.1            638.5          3.29            .–             .–               .–
      Total                                         666.1            663.3          3.27            .–             .–               .–
Corporate and other:
  Within 1 year                                     103.6            105.3          6.86            .–              .–              .–
  After 1 but within 5 years                        154.2            157.9          7.23           1.2             1.2           3.74
  After 5 but within 10 years                          .–               .–             .–          0.1             0.1           6.75
  After 10 years                                     86.1             76.0          4.35            .–              .–              .–
      Total                                         343.9            339.2          6.40           1.3             1.3           3.96
State and municipal:
  Within 1 year                                       0.8              0.8          5.85             .–             .–              .–
  After 1 but within 5 years                          0.8              0.8          5.99             .–             .–              .–
      Total                                           1.6              1.6          5.92             .–             .–              .–
Total:
  Within 1 year                                    129.4           130.9            6.06             .–             .–              .–
  After 1 but within 5 years                       796.1           797.2            4.06            1.2            1.2           3.74
  After 5 but within 10 years                         .–              .–               .–           0.1            0.1           6.75
  After 10 years                                    86.1            76.0            4.35             .–             .–              .–
      Total                                      1,011.6         1,004.1            4.35            1.3            1.3           3.96
Mortgage-backed securities and CMOs              1,408.9         1,406.2            3.24            0.1            0.1           9.57
      Total debt securities                     $2,420.5        $2,410.3            3.70%         $ 1.4          $ 1.4           4.18%




                                                                                                                          People’s Bank   65
The following table summarizes those securities available for sale with unrealized losses, segregated by the
length of time in a continuous unrealized loss position:

                                                      Continuous Unrealized Loss Position
                                           Less Than 12 Months                12 Months Or Longer                       Total
                                           Fair          Unrealized           Fair          Unrealized         Fair             Unrealized
As of December 31, 2003 (in millions)     Value           Losses             Value           Losses           Value              Losses
Mortgage-backed securities and CMOs       $ 443.8           $ (8.1)           $ 4.6          $    .–      $ 448.4                 $ (8.1)
U.S. Treasury and agency                    466.7              (3.4)              .–              .–         466.7                   (3.4)
Corporate and other                            .–                .–             76.0           (10.1)         76.0                  (10.1)
Preferred stocks                              5.7              (0.5)             2.4              .–           8.1                   (0.5)
Other                                          .–                .–             12.3            (1.5)         12.3                   (1.5)
  Total                                   $ 916.2           $ (12.0)          $ 95.3         $ (11.6)     $1,011.5                $ (23.6)


    Of the approximate 184 securities owned by                       sponsored enterprises ($363 million) or privately-
People’s, 47 securities available for sale, or 26%,                  issued mortgage-backed securities ($85 million), all
had unrealized losses as of December 31, 2003.                       with short durations and AAA credit ratings. The
Management reviews those securities with unrealized                  cause of the temporary impairment with respect
losses on a regular basis in accordance with current                 to these securities is directly related to changes in
impairment measurement and recognition guidelines                    interest rates. People’s generally views changes in fair
under EITF 99-20 and EITF 03-01. Of the $1.0 billion                 value caused by changes in interest rates as temporary.
in securities with unrealized losses, $915 million, or               The unrealized losses as of December 31, 2003 are
90% of these securities, are either obligations of the               not considered to be other than temporary.
U.S. Government ($467 million), U.S. government-

The components of net security losses are summarized below. All amounts relate to securities available for
sale, other than net gains (losses) on trading account securities of $1.1 million in 2003, $(0.1) million in 2002
and $1.0 million in 2001.

Years ended December 31 (in millions)                                                         2003            2002                2001
Equity securities:
  Gains                                                                                      $ 14.1           $ 1.0              $ 14.5
  Losses                                                                                      (13.2)            (8.4)              (35.2)
     Total equity securities                                                                    0.9             (7.4)              (20.7)
Debt securities:
  Gains                                                                                         1.1              5.7                  7.0
  Losses                                                                                       (2.6)            (1.6)                (4.8)
     Total debt securities                                                                     (1.5)             4.1                  2.2
     Net security losses                                                                     $ (0.6)          $ (3.3)            $ (18.5)



NOTE 5 – LOANS

The following table summarizes the geographic distribution of People’s owned loan portfolio:

                                                            2003                                              2002
As of December 31 (in millions)         Connecticut         Other            Total          Connecticut       Other               Total
Residential mortgage                     $2,918.4         $ 170.7          $3,089.1         $2,819.5      $   51.8              $2,871.3
Commercial real estate finance             1,349.8            350.1          1,699.9          1,296.4         313.8               1,610.2
Commercial                                  795.9            539.6          1,335.5            808.0         416.6               1,224.6
Credit card (owned portfolio)               100.8          1,028.5          1,129.3             68.4         706.6                 775.0
Other consumer                              850.2            130.3            980.5            687.0         282.3                 969.3
  Total loans                            $6,015.1         $2,219.2         $8,234.3         $5,679.3      $1,771.1              $7,450.4




66   2003 Annual Report
People’s loan portfolio is substantially concentrated    December 31, 2003 and 2002 includes $299.5 million
within the state of Connecticut. However, People’s       and $458.1 million, respectively, for the Transferor
originates credit cards nationally, and a sizable        Certificate arising from People’s credit card securitiza-
majority of the equipment leasing and financing           tion activities described in Note 6. Net deferred loan
activities of PCLC involves customers outside of         costs reflected in total loans and accounted for as
Connecticut. See Note 23.                                interest yield adjustments were $22.1 million and $16.9
    Residential mortgage and commercial real estate      million at December 31, 2003 and 2002, respectively.
finance loans include construction loans totaling              Certain residential mortgage loans originated by
$451.6 million and $391.2 million at December 31,        People’s are sold without recourse in the secondary
2003 and 2002, respectively, net of the unadvanced       market. Net gains on sales of residential mortgage
portion of such loans totaling $342.0 million and        loans totaled $14.8 million, $8.4 million and $8.5
$258.7 million, respectively. Commercial loans include   million in 2003, 2002 and 2001, respectively. Residen-
loans and leases originated by PCLC of $300.3 million    tial mortgage loans at December 31, 2003 and 2002
and $222.0 million at December 31, 2003 and 2002,        include loans held for sale of $20.2 million and $110.6
respectively. The owned credit card portfolio at         million, respectively, which approximate fair value.

The following is a summary of activity in the allowance for loan losses for the owned portfolio. Charge-offs
and recoveries on off-balance-sheet securitized and sold credit card receivables are reflected in credit card
securitization income (see Note 6).

Years ended December 31 (in millions)                                        2003          2002              2001
Balance at beginning of year                                                $114.2        $114.7            $ 104.7
Charge-offs:
  Credit card (owned portfolio)                                               (41.2)        (58.0)            (57.2)
  Other consumer                                                              (16.8)        (25.3)            (29.4)
  Commercial                                                                   (3.2)          (5.8)           (12.1)
  Residential mortgage                                                         (0.1)            .–              (0.9)
  Commercial real estate finance                                                  .–             .–              (0.1)
     Total charge-offs                                                        (61.3)        (89.1)            (99.7)
Recoveries:
  Credit card (owned portfolio)                                                6.3            6.5               4.4
  Other consumer                                                               2.9            2.6               1.8
  Commercial                                                                   1.5            0.8               0.4
  Residential mortgage                                                         0.1            0.4               0.4
  Commercial real estate finance                                                0.2            0.6               1.6
     Total recoveries                                                         11.0           10.9               8.6
     Net loan charge-offs                                                    (50.3)         (78.2)            (91.1)
Provision for loan losses                                                     48.6           77.7             101.1
     Balance at end of year                                                 $112.5        $114.2            $ 114.7




                                                                                                      People’s Bank     67
The principal balances of non-accrual loans are summarized as follows:

As of December 31 (in millions)                                                    2003         2002         2001
Residential mortgage                                                               $ 11.4       $ 13.2      $ 14.7
Commercial real estate finance                                                        11.4         10.2         5.9
Commercial                                                                            8.5          8.1         4.5
Credit card (owned portfolio)                                                         6.9         12.3        15.0
Other consumer                                                                        2.5          3.4         4.0
  Total non-accrual loans                                                          $ 40.7       $ 47.2      $ 44.1


    If interest payments on all loans classified as non-        for loan impairment measured under SFAS No. 114
accrual at December 31, 2003, 2002 and 2001 had                of $0.8 million and $0.3 million, respectively. These
been made during the respective years in accordance            allowances are included in the overall allowance for
with the loan agreements, interest income of $3.8              loan losses. An allowance for loan impairment under
million, $4.8 million and $5.8 million would have been         SFAS No. 114 was not required for the remaining
recognized on such loans in 2003, 2002 and 2001,               impaired loans of $18.4 million at December 31,
respectively, compared to interest income actually             2003 and $18.0 million at December 31, 2002,
recognized of $2.5 million in each year.                       primarily due to the sufficiency of collateral values.
    People’s impaired loans, as defined by SFAS No.             People’s average recorded investment in impaired loans
114, consist of non-accrual commercial real estate             was approximately $20.2 million, $13.5 million and
finance loans and commercial loans. The recorded                $21.7 million for 2003, 2002 and 2001, respectively.
investment in impaired loans at December 31, 2003              Interest collections and income recognized on impaired
and 2002 was $19.9 million and $18.3 million,                  loans, while such loans were considered impaired,
respectively. The totals include loans of $1.5 million         totaled $1.2 million, $0.2 million and $0.2 million
in 2003 and $0.3 million in 2002 that had allowances           in 2003, 2002 and 2001, respectively.

N O T E 6 – C R E D I T C A R D S E C U R I T I Z AT I O N S

People’s periodically securitizes credit card receivables      underwritten public offerings. As of December 31,
and sells asset-backed certificates in the capital              2003, all of People’s outstanding credit card securiti-
markets. Securitization involves the transfer of a group       zations used the asset-backed commercial paper
of credit card receivables in a two-step process, first         conduit structure. PSFC expects to prepay all of the
from People’s to its wholly owned subsidiary, PSFC,            outstanding Investor Certificates prior to their final
and second, from PSFC to the Trust. These receiv-              maturity.
ables arise from credit card accounts whose owner-                 Outstanding Investor Certificates, which are not
ship and servicing responsibilities are retained by            included in the Consolidated Statements of Condition,
People’s. Rights to new receivables and most fees gen-         totaled $1.2 billion at December 31, 2003 and 2002.
erated by these accounts are also transferred to the           PSFC retains the Transferor Interest and People’s
Trust, in addition to existing receivables. The Trust          continues to service the credit card accounts. People’s
then issues undivided interests represented by                 owned credit card portfolio at December 31, 2003
Investor Certificates and a Transferor Interest.                and 2002 included a retained interest in its credit
Investor Certificates are sold by the Trust to                  card securitizations of $299.5 million and $458.1
investors, generally either through private placements         million, respectively.
to asset-backed commercial paper conduits or through




68   2003 Annual Report
The following is a summary of information concerning People’s total managed credit card portfolio, segregated
between receivables owned and receivables securitized and sold:

                                                                                 2003                                                       2002
As of and for the years ended                                               Securitized          Total                                 Securitized           Total
December 31 (dollars in millions)                         Owned              and Sold           Managed              Owned              and Sold            Managed
Portfolio balances:
  End of year                                            $1,129.3            $1,167.9           $2,297.2             $775.0             $1,245.2           $2,020.2
  Average during the year                                   994.7             1,173.6            2,168.3              593.6              1,496.3            2,089.9

Delinquencies at end of year:
  30-59 days                                             $     6.4           $     14.0         $     20.4           $  7.4             $     19.0         $     26.4
  60-89 days                                                   4.9                 10.3               15.2              5.4                   14.9               20.3
  90 days and over                                             6.9                 20.6               27.5             12.3                   30.9               43.2
  Total                                                  $    18.2           $     44.9         $     63.1           $ 25.1             $     64.8         $     89.9

Net charge-offs during the year:
  Amount                                                 $    34.9           $     82.4         $ 117.3              $ 51.5             $ 115.8            $ 167.3
  Percent of average portfolio balances                       3.51%                7.02%           5.41%               8.68%               7.74%              8.00%


    People’s securitizations include (i) a revolving                                      of the Investor Certificates amounted to $124.8 million
period, during which credit card principal payments                                       in 2003, $1.4 billion in 2002 and $349.5 million in
are used to purchase new receivables for the Trust,                                       2001. People’s credit card securitizations outstanding
and (ii) a repayment period, during which credit card                                     at December 31, 2003 have expected renewal dates
principal payments on Trust receivables are distributed                                   during 2004 and scheduled funding requirements
or accumulated for distribution to holders of the                                         total $1.0 billion in 2004.
Investor Certificates based on the terms of each asset-                                        For securitized and sold receivables represented
backed certificate. Principal payments used to purchase                                    by the Investor Certificates, amounts that would
new receivables for the Trust during the revolving                                        have been reported in the Consolidated Statements
period totaled $2.6 billion in 2003, $2.5 billion                                         of Income as interest income, credit card fees and
in 2002 and $3.1 billion in 2001. People’s funding                                        provisions for loan losses (if such receivables had
requirements increase during the repayment period                                         not been sold but remained on-balance-sheet) are
since new receivables become part of People’s on-                                         instead combined and reported in credit card securi-
balance-sheet credit card portfolio. Principal payments                                   tization income.
distributed or accumulated for distribution to holders

The components of credit card securitization income are as follows:

Years ended December 31 (in millions)                                                                                 2003                  2002               2001
Interest on credit cards                                                                                             $126.2             $170.7              $ 267.0
Credit card fees and other                                                                                             45.0                67.8                 84.0
Capitalized future excess spread revenue, net (1)                                                                       2.3                 (4.9)                (7.0)
Interest on asset-backed Investor Certificates                                                                         (36.1)              (43.6)               (98.8)
Net credit card charge-offs                                                                                           (82.4)             (115.8)             (170.4)
Servicing fee paid                                                                                                    (23.2)              (29.0)               (39.7)
   Excess spread revenue                                                                                               31.8                45.2                 35.1
Servicing fee revenue                                                                                                  23.2                29.0                 39.7
   Credit card securitization income                                                                                 $ 55.0             $ 74.2              $ 74.8
(1) Represents the combined effect of gains recognized upon transfers of ownership interests in trust receivables, fair value adjustments and the subsequent
    amortization of those amounts. The asset for capitalized excess spread, which is a retained interest included in other assets and treated on an available-for-sale
    basis, amounted to $8.2 million and $9.4 million at December 31, 2003 and 2002, respectively.




                                                                                                                                                     People’s Bank       69
     In addition to the Transferor Interest, People’s                    by SFAS No. 140, the sensitivity analyses address
other retained interests in its credit card securitizations              only the impact of adverse changes in assumptions
are reported in securities available for sale and other                  (a higher discount rate, higher floating interest rates,
assets (treated on an available-for-sale basis) at fair                  a lower net portfolio yield, a shorter average term
values that totaled $177.2 million and $140.0 million                    and a higher expected charge-off rate). Favorable
at December 31, 2003 and 2002, respectively. The                         changes in assumptions would tend to increase the
total at December 31, 2003 was comprised of the                          fair values by amounts generally consistent with the
following fair values: subordinated interests in secu-                   fair value decreases.
ritized receivables of $151.0 million that are reported                       Assuming a 10% adverse change in the specific
in securities available for sale; and accrued interest                   assumption, with no change in other assumptions,
receivable of $18.0 million and capitalized excess                       the total fair value of People’s retained interests (other
spread of $8.2 million, both reported in other assets.                   than the Transferor Interest) at December 31, 2003
Fair values are based on discounted cash flow analyses                    would decrease by $0.9 million from higher discount
that incorporate management’s best estimates of the                      rates; $0.6 million from higher floating interest rates;
amount and timing of future cash flows from the                           $0.8 million from a shorter average term; $5.3 million
securitized and sold portfolio, as well as key assump-                   from a higher expected charge-off rate; and $8.8
tions such as the following as of December 31, 2003:                     million from a lower net portfolio yield. Changes in
discount rates ranging up to 13% depending on the                        fair values based on changes in assumptions generally
expected remaining term of each securitization and                       should not be extrapolated because there may not
the level of associated risk; an average term of twelve                  be a linear relationship between the change in an
months; and an expected annualized charge-off rate                       assumption and the change in fair value. To illustrate,
and net portfolio yield similar to that experienced                      at a 20% adverse change level, the decreases in fair
for the securitized and sold portfolio in 2003.                          value attributable to adverse changes in discount
     Changes in the key assumptions used in valuing                      rates, floating interest rates, average term, expected
the retained interests can have a significant impact                      charge-off rate, and expected net portfolio yield would
on the resulting fair values, as illustrated in the                      be $1.9 million, $1.1 million, $1.6 million, $10.3
sensitivity analyses that follow. These analyses are                     million, and $17.0 million, respectively.
hypothetical and should be evaluated with caution,                            All outstanding Investor Certificates have floating
as the changes in fair value are based on changing                       interest rates set at spreads over the applicable
one specific assumption without changing any of                           commercial paper rate. These floating rates ranged
the other assumptions. In reality, changes in one                        from 1.06% to 1.08% in December 2003. In order
assumption might also necessitate changes in other                       to reduce exposure to significant changes in short-
assumptions that could tend to magnify or counteract                     term funding rates and the adverse impact on credit
the effect on fair value. For example, an increase in                    card securitization income, People’s entered into
the discount rate (as a result of an increase in market                  interest rate swap and corridor agreements, which
interest rates) might also result in a higher charge-off                 are discussed in Note 18, in connection with the
rate. It should also be recognized that, as required                     outstanding certificates.

NOTE 7 – OTHER ASSETS

Selected components of other assets are as follows:

As of December 31 (in millions)                                                                             2003         2002
Receivables arising from securities brokerage and insurance businesses                                     $ 56.7        $ 48.7
Prepaid pension costs (note 16)                                                                              54.8          49.6
Receivable from sales of securities                                                                          54.3          10.7
Accrued interest receivable                                                                                  37.4          43.0
Assets attributable to credit card securitization activity:
  Other retained interests (note 6)                                                                          26.2          34.3
  Prepayments and receivables arising from transactions with the Trust                                       13.3         294.5
Net deferred tax asset (note 11)                                                                             30.1          34.7
Fair value of derivative financial instruments (note 20)                                                       5.1           6.8



70   2003 Annual Report
NOTE 8 – DEPOSITS

The following are analyses of People’s total deposits by product type and funding source:

                                                                        2003                         2002
                                                                            Weighted                     Weighted
As of December 31 (dollars in millions)                       Amount       Average Rate   Amount        Average Rate
Analysis by Product Type:
Non-interest-bearing deposits                                $2,078.0            –%       $1,939.6             –%
Savings, interest-bearing checking and
  money market deposits                                       4,179.7          0.79        3,705.0          1.15
     Total                                                    6,257.7          0.53        5,644.6          0.76
Time deposits maturing:
  Within 6 months                                               954.0          1.69        1,157.5          2.72
  After 6 months but within 1 year                              504.5          1.80          545.4          2.66
  After 1 but within 2 years                                    597.6          2.98          441.2          3.00
  After 2 but within 3 years                                    173.1          3.61          342.2          3.81
  After 3 years                                                 227.1          3.77          295.2          4.27
     Total                                                    2,456.3          2.35        2,781.5          3.05
     Total deposits                                          $8,714.0          1.04%      $8,426.1          1.51%

Analysis by Funding Source:
Core deposits                                                $8,518.8          1.03%      $8,229.7          1.48%
Brokered and municipal deposits                                 195.2          1.75          196.4          2.93
    Total deposits                                           $8,714.0          1.04%      $8,426.1          1.51%


Time deposits issued in amounts of $100,000 or more totaled $365.9 million and $411.5 million at
December 31, 2003 and 2002, respectively.

NOTE 9 - BORROWINGS

People’s borrowings are as follows:

                                                                        2003                         2002
                                                                            Weighted                     Weighted
As of December 31 (dollars in millions)                       Amount       Average Rate   Amount        Average Rate
FHLB advances:
  Fixed rate advances maturing:
     Within 1 year                                           $ 165.1            0.94%     $ 793.9           2.43%
     After 1 but within 2 years                                203.6            6.64           0.2          5.00
     After 2 but within 3 years                                  1.8            6.91         205.8          6.64
     After 3 but within 4 years                                 25.6            6.26           1.8          6.91
     After 4 but within 5 years                                  1.3            6.74          25.7          6.26
     After 5 years                                             391.9            5.45         393.5          5.46
       Total fixed rate advances                                789.3            4.85       1,420.9          3.95
  Variable rate advances maturing:
     After 1 but within 2 years                                 100.0           1.26            .–             .–
     After 2 but within 3 years                                    .–            .–          100.0          1.52
     After 5 years                                               75.0           1.31          75.0          1.57
       Total variable rate advances                             175.0           1.28         175.0          1.54
       Total FHLB advances                                      964.3           4.20       1,595.9          3.69
Federal funds purchased
  maturing within 3 months                                      348.9           0.88        565.9           1.16
Repurchase agreements maturing:
  Within 3 months                                                93.0           0.95         165.5          1.33
  After 2 years but within 3 years                               60.0           4.82            .–             .–
  After 3 but within 4 years                                       .–              .–         60.0          4.82
  After 5 years                                                  50.0           3.99          50.0          3.99
       Total repurchase agreements                              203.0           2.84         275.5          2.57
       Total borrowings                                      $1,516.2           3.25%     $2,437.3          2.98%




                                                                                                     People’s Bank     71
FHLB advances are secured by People’s investment in              At December 31, 2003, FHLB advances totaling
FHLB stock and by a blanket security agreement that          $415 million are callable at the discretion of the FHLB
requires People’s to maintain, as collateral, sufficient      in 2004. These callable advances have a weighted
qualifying assets not otherwise pledged (principally         average remaining term to contractual maturity of
securities and single-family residential mortgage            approximately four years and a weighted average
loans). People’s satisfied this collateral requirement        interest rate of 6.29%.
at December 31, 2003. People’s remaining borrowing               In 2003, People’s prepaid a total of $69 million
capacity from repurchase agreements and FHLB                 in FHLB advances and incurred prepayment fees
advances, based on the level of qualifying collateral        totaling $1.2 million, which are included in other
available for these borrowing sources, was $3.1 billion      non-interest expense in the Consolidated Statements
at December 31, 2003.                                        of Income.

Information concerning People’s borrowings under securities repurchase agreements is presented below:

As of and for the years ended December 31 (in millions)                          2003         2002         2001
Carrying amount of collateral securities at year end                            $ 221.5      $ 279.3      $ 386.2
Average repurchase agreements outstanding during the year                         201.7        247.2        125.5
Maximum repurchase agreements outstanding at any month end                        276.3        366.3        372.2


Interest expense on borrowings consists of the following:

Years ended December 31 (in millions)                                            2003         2002         2001
FHLB advances                                                                    $ 53.8       $ 68.8      $ 90.6
Federal funds purchased                                                             9.3         16.2        18.1
Repurchase agreements                                                               5.9          6.3         6.4
  Total interest expense                                                         $ 69.0       $ 91.3      $115.1


N O T E 1 0 – S U B O R D I N AT E D N O T E S

People’s subordinated notes are summarized as follows:

As of December 31 (in millions)                                                               2003         2002
9.875% subordinated notes due 2010                                                           $ 148.2      $ 147.9
7.20% subordinated notes due 2006                                                              104.7        104.6
   Total subordinated notes                                                                  $ 252.9      $ 252.5


Both issues of subordinated notes are unsecured              redeemable prior to maturity without prior approval
general obligations of People’s with interest payable        of the FDIC. The notes qualify, up to certain limits,
semi-annually; are subordinated to the claims of             as supplementary (tier 2) capital for risk-based
depositors and People’s other creditors; and are not         capital purposes.




72   2003 Annual Report
N O T E 1 1 - I N C O M E TA X E S

The components of income tax expense applicable to pre-tax income are summarized in the following table.
The income tax effects on the components of other comprehensive income (loss) are described in Note 15.

Years ended December 31 (in millions)                                                                                 2003                2002                2001
Current tax expense:
  Federal                                                                                                             $ 31.6              $ 27.6             $ 30.2
  State                                                                                                                  0.1                  0.1               0.1
  Foreign (U.K.) (1)                                                                                                      .–                   .–              23.8
     Total current tax expense                                                                                          31.7                27.7               54.1
Deferred tax benefit (2)                                                                                                 (8.6)                (2.7)            (13.6)
     Total income tax expense                                                                                         $ 23.1              $ 25.0             $ 40.5

(1) Attributable to the sale of the U.K. business and used as a credit to reduce the U.S. federal tax liability.
(2) Includes the effect of increases in the valuation allowance for state deferred tax assets of $13.4 million, $11.3 million and $8.8 million in 2003, 2002 and 2001,
    respectively.



The following is a reconciliation of expected income tax expense, computed at the U.S. federal statutory rate
of 35%, to actual income tax expense:

Years ended December 31 (in millions)                                                                                 2003                2002                2001
Expected income tax expense                                                                                           $ 30.4              $ 28.1             $ 40.7
Dividends received deduction and tax-exempt interest                                                                    (1.9)                (3.3)             (3.1)
Non-deductible amortization of goodwill and other intangible assets                                                      0.7                  0.7               2.6
Benefit from completed IRS audit                                                                                         (6.0)                  .–                .–
Other, net                                                                                                              (0.1)                (0.5)              0.3
  Actual income tax expense                                                                                           $ 23.1              $ 25.0             $ 40.5


    In 1998, People’s formed a passive investment                                       People’s has established a valuation allowance for
company, People’s Mortgage Investment Company, in                                       the full amount of its Connecticut deferred tax asset
accordance with Connecticut tax laws, which permit                                      attributable to net temporary differences and state
transfers of mortgage loans to such subsidiaries on                                     net operating loss carryforwards. Connecticut tax net
or after January 1, 1999. The related earnings of the                                   operating loss carryforwards totaled $722.1 million
subsidiary, and any dividends it pays to the parent,                                    at December 31, 2003, consisting of $145.5 million
are not subject to Connecticut income tax. As a result                                  available through 2004 and $576.6 million available
of the exclusion of such earnings and dividends from                                    through 2023.
Connecticut taxable income beginning in 1999,




                                                                                                                                                     People’s Bank       73
The tax effects of temporary differences that give rise to People’s deferred tax assets and liabilities are
as follows:

As of December 31 (in millions)                                                                             2003         2002
Deferred tax assets:
  Allowance for loan losses and non-accrual interest                                                       $ 47.6        $ 49.1
  State tax net operating loss carryforwards, net of federal tax effect                                      42.3           30.4
  Other deductible temporary differences                                                                     10.7            8.1
     Total deferred tax assets                                                                              100.6           87.6
Less valuation allowance for state deferred tax assets                                                      (44.2)         (30.8)
     Total deferred tax assets, net of the valuation allowance                                               56.4           56.8
Deferred tax liabilities:
  Book over tax income recognized on credit cards                                                           (15.0)         (15.2)
  Tax bad debt reserves                                                                                        .–            (4.5)
  Tax over book depreciation                                                                                 (5.5)           (5.8)
  Mark-to-market and original issue discounts for tax purposes                                               (6.4)           (7.2)
  Other taxable temporary differences                                                                       (18.5)         (21.7)
     Total deferred tax liabilities                                                                         (45.4)         (54.4)
     Net deferred tax asset                                                                                  11.0             2.4
Deferred tax asset for deductible temporary differences recorded in
  accumulated other comprehensive loss, net of a valuation allowance
  for state deferred tax assets of $3.2 in 2003 and $4.5 in 2002                                             19.1          32.3
     Net deferred tax asset                                                                                $ 30.1        $ 34.7


    Based on People’s recent historical and anticipated                   likely than not that People’s will realize its total
future pre-tax earnings and the reversal of taxable                       deferred tax assets, net of the valuation allowance.
temporary differences, management believes it is more

N O T E 1 2 – R E G U L AT O R Y C A P I TA L R E Q U I R E M E N T S

FDIC regulations require banks to maintain a mini-                            The foregoing capital ratios are based in part on
mum leverage ratio of tier 1 capital to total adjusted                    specific quantitative measures of assets, liabilities and
average assets of 4.0%, and minimum ratios of tier 1                      certain off-balance-sheet items as calculated under
risk-based capital and total risk-based capital to risk-                  regulatory accounting guidelines. Capital amounts
adjusted total assets of 4.0% and 8.0%, respectively.                     and classifications are also subject to qualitative
     Under its prompt corrective action regulations,                      judgments by the FDIC about capital components,
the FDIC is required to take certain supervisory                          risk weightings and other factors.
actions (and may take additional discretionary actions)                       Management believes that, as of December 31,
with respect to an undercapitalized bank. These                           2003 and 2002, People’s met all capital adequacy
actions could have a direct material effect on a bank’s                   requirements to which it is subject. Further, the most
financial statements. The regulations establish a                         recent FDIC notification categorized People’s as a
framework for the classification of banks into five                         well-capitalized institution under the prompt correc-
categories: well capitalized, adequately capitalized,                     tive action regulations. No conditions or events have
undercapitalized, significantly undercapitalized and                       occurred since that notification that have caused
critically undercapitalized. Generally, a bank is                         management to believe any change in People’s capital
considered well capitalized if it has a leverage (tier 1)                 classification would be warranted.
capital ratio of at least 5.0%, a tier 1 risk-based
capital ratio of at least 6.0% and a total risk-based
capital ratio of at least 10.0%.




74   2003 Annual Report
The following is a summary of People’s regulatory capital amounts and ratios as of December 31, 2003 and
2002, compared to the FDIC requirements for classification as a well-capitalized institution and for minimum
capital adequacy. People’s risk-adjusted total assets, as defined, totaled $9.3 billion at December 31, 2003
and $9.6 billion at December 31, 2002.

                                                                                            FDIC Requirements
                                                                             Classification as                      Minimum
                                                People’s                     Well-Capitalized                   Capital Adequacy
(dollars in millions)                 Amount               Ratio         Amount           Ratio         Amount               Ratio
December 31, 2003
Leverage capital                     $ 922.9                8.0%         $ 576.6           5.0%         $ 461.3              4.0%
Risk-based capital:
  Tier 1                                922.9               9.9           560.9            6.0            373.9              4.0
  Total                               1,225.4              13.1           934.9           10.0            747.9              8.0

December 31, 2002
Leverage capital                     $ 874.1                7.4%         $ 592.3           5.0%         $ 473.8              4.0%
Risk-based capital:
  Tier 1                                874.1               9.1           574.3            6.0            382.9              4.0
  Total                               1,198.7              12.5           957.1           10.0            765.7              8.0


NOTE 13 – COMMON STOCK AND DIVIDENDS

People’s Mutual Holdings (“Holdings”) is a mutual-form                 Connecticut-chartered banks may only pay divi-
financial holding company organized in connection                  dends (except stock dividends) from “net profits,”
with the 1988 stock offering and reorganization of                 defined as the remainder of all earnings from current
People’s Bank. At December 31, 2003, Holdings owned                operations. Without specific regulatory approval, the
36.5 million shares of People’s common stock, repre-               total of all dividends declared by a bank in a given
senting 58.8% of the total number of outstanding                   calendar year cannot exceed the total of the bank’s
shares of People’s common stock.                                   net profits for that year plus the bank’s retained
    Since its formation in 1988, Holdings has                      profits from the preceding two years. This limitation
consistently waived the receipt of cash dividends on               did not affect the dividends paid by People’s in 2003,
substantially all of the shares of People’s common                 2002 and 2001. Dividends declared and paid per
stock it owns. The Board of Directors of People’s                  common share (other than shares on which Holdings
establishes the rate at which dividends are declared               waived receipt of dividends) were $1.53, $1.42 and
with advance knowledge of the amount of dividends                  $1.34 in 2003, 2002 and 2001, respectively. People’s
to be waived by Holdings. No dividends are declared                retained profits from 2003 and 2002 totaled $41.3
on shares for which Holdings waives the dividend. If               million at December 31, 2003.
dividends had actually been declared and paid on all                   People’s has 10 million authorized preferred
outstanding shares of People’s common stock at the                 shares (without par value), none of which were
same rate as was declared and paid on shares not                   issued or outstanding at December 31, 2003 and
subject to the waiver, Holdings would have received                2002.
dividends of approximately $368 million since the
date of its formation through December 31, 2003.




                                                                                                                      People’s Bank   75
Changes in the number of common shares outstanding are summarized as follows:

Years ended December 31 (in millions)                                                                               2003                2002      2001
Outstanding at January 1                                                                                             61.7               61.5       61.3
Stock options exercised and restricted stock activity                                                                 0.3                0.2        0.2
  Outstanding at December 31                                                                                         62.0               61.7       61.5


NOTE 14 – EARNINGS PER COMMON SHARE

The following is an analysis of People’s basic and diluted EPS:

Years ended December 31 (in millions, except per share data)                                                        2003                2002      2001
Net income                                                                                                          $ 63.8             $55.4      $75.8

Average common shares outstanding for basic EPS                                                                       61.8               61.6      61.4
Effect of dilutive stock options (1)                                                                                   0.1                0.1       0.2
   Average common and common-equivalent shares for diluted EPS                                                        61.9               61.7      61.6

Basic and diluted EPS                                                                                               $ 1.03             $0.90      $1.23
(1) Excludes the effect of an average of 76,740, 1,058,637 and 1,060,344, anti-dilutive stock options in 2003, 2002 and 2001, respectively.


NOTE 15 – COMPREHENSIVE INCOME

Comprehensive income represents the sum of net                                        as cash flow hedges and securities available for sale,
income and items of “other comprehensive income or                                    minimum pension liability adjustments and foreign
loss” that are reported directly in stockholders’ equity                              currency items. People’s total comprehensive income
on an after-tax basis. These items include the net                                    for 2003, 2002 and 2001 is reported in the Consoli-
unrealized gains or losses on derivatives accounted for                               dated Statements of Changes in Stockholders’ Equity.

The components of accumulated other comprehensive loss included in People’s year-end stockholders’ equity
are as follows:

As of December 31 (in millions)                                                                                     2003                2002      2001
Net unrealized loss on derivatives accounted for as cash flow hedges                                                $(26.4)            $ (35.9)    $(20.2)
Net unrealized loss on securities available for sale                                                                 (6.2)              (27.5)     (28.3)
Minimum pension liability adjustments                                                                                (2.4)                (2.2)      (1.1)
  Total accumulated other comprehensive loss                                                                       $(35.0)            $ (65.6)    $(49.6)




76    2003 Annual Report
The following is a summary of the changes in the components of People’s other comprehensive income (loss)
for 2003, 2002 and 2001:
                                                                        Pre-Tax                       After-Tax
Year ended December 31, 2003 (in millions)                              Amount      Tax Effect        Amount
Net unrealized gains and losses on securities available for sale:
  Net unrealized holding gains arising during the year                  $ 28.4       $ (8.2)           $ 20.2
  Reclassification adjustment for net realized
    losses included in net income                                          1.7         (0.6)              1.1
  Net unrealized gains                                                    30.1         (8.8)             21.3
Net unrealized loss on derivatives accounted for as cash flow hedges:
  Net unrealized losses arising during the year                           (1.8)         0.6              (1.2)
  Reclassification adjustment for net realized
    losses included in net income                                         16.3         (5.6)             10.7
  Net unrealized gains                                                    14.5         (5.0)              9.5
Minimum pension liability adjustment                                      (0.8)         0.6              (0.2)
  Other comprehensive income                                            $ 43.8       $(13.2)           $ 30.6

Year ended December 31, 2002 (in millions)
Net unrealized gains and losses on securities available for sale:
  Net unrealized holding losses arising during the year                 $ (0.7)      $ (0.6)           $ (1.3)
  Reclassification adjustment for net realized
    losses included in net income                                          3.2         (1.1)              2.1
  Net unrealized gains                                                     2.5         (1.7)              0.8
Net unrealized loss on derivatives accounted for as cash flow hedges:
  Net unrealized losses arising during the year                          (47.7)        16.5             (31.2)
  Reclassification adjustment for net realized
    losses included in net income                                         23.6         (8.1)             15.5
  Net unrealized losses                                                  (24.1)         8.4             (15.7)
Minimum pension liability adjustment                                       (1.2)        0.1               (1.1)
  Other comprehensive loss                                              $(22.8)      $ 6.8             $(16.0)

Year ended December 31, 2001 (in millions)
Net unrealized gains and losses on securities available for sale:
  Net unrealized holding gains arising during the year                  $ 28.6       $(10.3)           $ 18.3
  Reclassification adjustment for net realized
    losses included in net income                                         19.5          (6.8)            12.7
  Net unrealized gains                                                    48.1        (17.1)             31.0
Net unrealized loss on derivatives accounted for as cash flow hedges:
  Net unrealized losses arising during the year                          (42.7)        14.9             (27.8)
  Reclassification adjustment for net realized
    losses included in net income                                         11.6         (4.0)               7.6
  Net unrealized losses                                                  (31.1)        10.9             (20.2)
Foreign currency items                                                      1.6         (0.6)              1.0
Minimum pension liability adjustment                                       (0.3)         0.1              (0.2)
  Other comprehensive income                                            $ 18.3       $ (6.7)           $ 11.6




                                                                                                 People’s Bank    77
N OT E 1 6 – E M P LOY E E B E N E F I T P L A N S

E M P LOY E E P E N S I O N   AND   OTHER   POSTRETIREMENT   a reconciliation of the funded status (or the difference
BENEFITS PLANS
                                                             between benefit obligations and plan assets) to the net
People’s maintains a noncontributory defined benefit
                                                             amount recognized in the Consolidated Statements
pension plan that covers substantially all full-time
                                                             of Condition. People’s uses a measurement date of
and part-time employees who meet certain age and
                                                             September 30 for plan accounting purposes and,
length of service requirements. Benefits are based
                                                             accordingly, changes in benefit obligations and plan
upon the employee’s years of credited service and
                                                             assets are shown for the twelve-month periods ended
average compensation for the five consecutive years
                                                             September 30, 2003 and 2002. As shown on the
that produce the highest average. People’s funding
                                                             following table, plan assets of $135.4 million as of
policy is to contribute the amounts required by
                                                             September 30, 2003 exceeded both the accumulated
applicable regulations, although additional amounts
                                                             benefit obligations of $132.6 million and the vested
may be contributed from time to time. In addition,
                                                             benefit obligations of $125.0 million for the funded
People’s maintains unfunded and nonqualified
                                                             plan at that date. Employer contributions for the
supplemental plans to provide retirement benefits
                                                             next fiscal year are expected to total $0.9 million for
to certain senior officers.
                                                             the unfunded plan and $1.1 million for other postre-
     People’s also maintains an unfunded plan that
                                                             tirement benefits.
provides retirees with optional medical, dental and
                                                                 The supplemental pension plans had total projected
life insurance benefits (“other postretirement benefits”).
                                                             benefit obligations of $19.9 million and $19.2 million
People’s accrues the cost of these benefits over the
                                                             in 2003 and 2002, respectively. Although these plans
employees’ years of service to the date of their
                                                             hold no assets, People’s has funded a trust to provide
eligibility for such benefits.
                                                             for benefit payments to the extent such benefits are
     The table on the following page summarizes
                                                             not paid directly by People’s. Trust assets of $9.6
changes in the benefit obligations and plan assets for
                                                             million and $5.3 million are included in People’s
(i) the pension plans (combining the funded plan and
                                                             securities available for sale portfolio at December 31,
the unfunded supplemental plans), and (ii) the other
                                                             2003 and 2002, respectively.
postretirement benefits plan. The table also provides




78   2003 Annual Report
                                                                                                     Pension Benefits                Other Postretirement Benefits(1)
(in millions)                                                                                    2003                2002               2003                2002
Benefit obligations:
   Beginning of period                                                                          $140.7             $117.0              $ 14.1              $ 10.0
   Service cost                                                                                    6.1                 5.2                0.5                  0.2
   Interest cost                                                                                   9.3                 8.6                0.8                  0.7
   Special termination benefits                                                                      .–                 0.3                 .–                   .–
   Actuarial loss                                                                                 20.6               14.3                 0.3                  4.0
   Benefits paid                                                                                   (5.4)               (4.7)              (0.5)                (0.8)
      End of period                                                                              171.3              140.7                15.2                14.1
Fair value of plan assets:
   Beginning of period                                                                           108.6              100.1                  .–                   .–
   Actual return (loss) on assets                                                                 21.8                 (6.2)               .–                   .–
   Employer contributions                                                                         10.4                19.4                0.5                  0.8
   Benefits paid                                                                                   (5.4)                (4.7)             (0.5)                (0.8)
      End of period                                                                              135.4              108.6                  .–                   .–
Funded status at September 30                                                                    (35.9)              (32.1)             (15.2)              (14.1)
Unrecognized net actuarial loss(2)                                                                76.0                68.0                2.9                  2.6
Fourth-quarter contributions                                                                       0.2                  0.2               0.2                  0.1
Unrecognized net transition obligation                                                              .–                   .–               3.4                  3.8
Unrecognized prior service cost                                                                    0.4                  0.7                .–                   .–
      Net amount recognized at end of year                                                      $ 40.7             $ 36.8              $ (8.7)             $ (7.6)

Components of the net amount recognized:
  Prepaid benefit cost                                                                           $ 54.8             $ 49.6              $   .–              $   .–
  Accrued benefit cost                                                                            (14.0)              (12.8)              (8.7)               (7.6)
  Additional minimum liability                                                                    (3.8)                (3.0)               .–                  .–
  Intangible asset                                                                                 0.1                  0.2                .–                  .–
  Accumulated other comprehensive loss (pre-tax basis)                                             3.6                  2.8                .–                  .–
     Net amount recognized at end of year                                                       $ 40.7             $ 36.8              $ (8.7)             $ (7.6)

(1) People’s has elected to defer recognizing the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003. See Note 1.
(2) Unrecognized net actuarial gains and losses in excess of 10% of the greater of the projected benefit obligation or the fair value of plan assets are amortized over
    the average remaining service period of active plan participants.


The following tables summarizes the accumulated and vested benefit obligations for the funded and
unfunded plans at the respective September 30 measurement dates.
                                                                                                                                            Pension Benefits
(in millions)                                                                                                                           2003                2002
Accumulated benefit obligations:
  Funded plan                                                                                                                         $132.6              $107.9
  Unfunded plan                                                                                                                         18.0                16.0
    Total                                                                                                                             $150.6              $123.9

Vested benefit obligations:
  Funded plan                                                                                                                         $125.0              $101.9
  Unfunded plan                                                                                                                         18.0                16.0
     Total                                                                                                                            $143.0              $117.9




                                                                                                                                                   People’s Bank      79
Components of the net periodic benefit cost are as follows:

                                                                       Pension Benefits                                    Other Postretirement Benefits(1)
Years ended December 31 (in millions)                     2003               2002               2001               2003                2002                 2001
Service cost                                             $ 6.1              $     5.2           $ 4.4               $0.5              $ 0.2                 $ 0.2
Interest cost                                               9.3                   8.6              8.3               0.8                0.7                   0.7
Expected return on plan assets                            (11.7)                (11.0)           (10.7)               .–                 .–                    .–
Special termination benefits                                  .–                   0.3              0.3                .–                 .–                    .–
Amortization of unrecognized net
  transition obligation                                     .–                    .–               .–                0.4                0.4                   0.4
Recognized net actuarial loss (gain)                       2.5                   0.5              0.2                0.1                 .–                  (0.2)
Recognized prior service cost                              0.3                   0.3              0.5                 .–                 .–                    .–
      Net periodic benefit cost                           $ 6.5              $    3.9            $ 3.0               $1.8              $ 1.3                 $ 1.1

(1) People’s has elected to defer recognizing the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003. See Note 1.


The following assumptions were used in determining benefit obligations and net periodic benefit costs:

                                                                       Pension Benefits                                    Other Postretirement Benefits(1)
                                                          2003               2002               2001               2003                2002                 2001
Weighted-average assumptions used
 to determine benefit obligations
 at December 31:
  Discount rate                                           6.00%              6.75%              7.50%              6.00%               6.75%             7.50%
  Expected return on plan assets                          8.25               8.75               9.50                n/a                 n/a               n/a
  Rate of compensation increase                           4.00               4.00               4.25                n/a                 n/a               n/a

Weighted-average assumptions used to
 determine net periodic benefit cost
 for the years ended December 31:
  Discount rate                                           6.75%              7.50%              8.00%              6.75%               7.50%             8.00%
  Expected return on plan assets                          8.75               9.50               9.50                n/a                 n/a               n/a
  Rate of compensation increase                           4.00               4.25               4.90                n/a                 n/a               n/a

Assumed health care cost trend rates
 at December 31: (2)
  Health care cost trend rate
    assumed for next year                                  n/a                  n/a              n/a              13.00%               8.00%             6.50%
  Rate to which the cost trend rate is
    assumed to decline (the ultimate trend rate)           n/a                  n/a              n/a               5.00                5.00              5.25
  Year that the rate reaches the ultimate
    trend rate                                             n/a                  n/a              n/a              2013                2008              2005

n/a – not applicable
(1) People’s has elected to defer recognizing the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003. See Note 1.
(2) Changes in the periodic benefit cost and the benefit obligation from a one-percentage-point increase or decrease in this assumed trend rate would not be significant.


The following table summarizes the percentages of fair value for each major category of plan assets as of the
respective measurement dates.
                                                                                                                                              Plan Assets
At September 30                                                                                                                        2003                 2002
Equity securities                                                                                                                      75%                57%
Fixed income securities                                                                                                                25                 43
   Total                                                                                                                              100%               100%




80    2003 Annual Report
People’s retirement plan investment policy includes the following asset allocation guidelines:
                                                                                                                         Asset Class
                                                                                                               Policy Target % Policy Range %
Cash reserves                                                                                                        3              1–7
Equity securities                                                                                                   69            52 – 81
Fixed income securities                                                                                             28            22 – 34


    Equity securities may include convertible securities,             margin purchases and similar speculative transactions
and are required to be diversified among industries                    are prohibited.
and economic sectors. Limitations are placed on the
                                                                      E M P L O Y E E S AV I N G S P L A N S
overall allocation to any individual security at both
                                                                      People’s also sponsors an employee savings plan that
cost and market value. A limit of 25% of equity
                                                                      qualifies as a 401(k) plan under the Internal Revenue
holdings may be invested in international equities.
                                                                      Code. Under the current plan, employees may
Short sales, margin purchases and similar speculative
                                                                      contribute up to 15% of their pre-tax compensation,
transactions are prohibited.
                                                                      and People’s makes a matching contribution equal
    Fixed income securities are oriented toward risk-
                                                                      to 100% of a participant’s contributions up to 4%
averse, investment-grade securities rated “A” or higher.
                                                                      of pre-tax compensation. People’s may increase the
A limit of up to 25% of the fixed income holdings
                                                                      amount of its matching contribution to 5% of pre-tax
may be invested in issues rated below “BAA” by
                                                                      compensation if certain bankwide performance
Moody’s or “BBB” by Standard & Poor’s, if the higher
                                                                      objectives are met. Participants vest immediately in
investment risk is compensated for by the prospect
                                                                      their own contributions and after one year in People’s
of a positive incremental investment return. With the
                                                                      contributions. A supplemental savings plan has also
exception of U.S. Government securities, in which the
                                                                      been established for certain senior officers. Expense
plan may invest the entire fixed income allocation,
                                                                      recognized for the 401(k) and supplemental savings
fixed income securities require diversification among
                                                                      plans totaled $7.3 million, $6.0 million and $5.5
individual securities and sectors. There is no limit on
                                                                      million in 2003, 2002 and 2001, respectively.
the maximum maturity of securities held. Short sales,

N O T E 1 7 – S T O C K- B A S E D C O M P E N S AT I O N P L A N S

L O N G -T E R M I N C E N T I V E P L A N                                Non-statutory stock options have been granted
People’s 1998 Long-Term Incentive Plan, as amended                    under the Incentive Plan at exercise prices equal to
(the “Incentive Plan”), provides for awards to officers                the fair value of People’s common stock at the grant
and employees in the form of (i) incentive stock                      dates. Option expiration dates are fixed at the grant
options that may afford tax benefits to recipients,                    date, with a maximum term of ten years. Most
(ii) non-statutory stock options that do not afford tax               options granted since 1999 vest 50% after two years,
benefits to recipients but may provide tax benefits to                  75% after three years and 100% after four years.
People’s, and (iii) stock appreciation rights, restricted             Substantially all options granted prior to 1999 vest
stock and performance units. A total of 2,183,257                     50% after three years and 100% after four years.
shares of People’s common stock are reserved for                      All options become fully exercisable in the event of
issuance under the Incentive Plan. At December 31,                    a change of control, as defined in the Incentive Plan.
2003, a total of 275,754 reserved shares remained
available for future awards.




                                                                                                                             People’s Bank   81
The following is a summary of activity in stock options under the Incentive Plan and the predecessor 1988
Long-Term Incentive Plan:

                                                                                                                 Weighted
                                                                                                 Shares          Average
                                                                                                 Subject         Exercise
                                                                                                To Option         Price
Options outstanding    at December 31, 2000                                                     1,192,987        $ 22.15
Granted                                                                                           352,400          26.26
Forfeited                                                                                          (97,025)        28.21
Exercised                                                                                          (99,475)         4.40
Options outstanding    at December 31, 2001                                                     1,348,887          24.09
Granted                                                                                           133,400          22.69
Forfeited                                                                                          (62,287)        27.21
Exercised                                                                                        (188,362)          4.51
Options outstanding    at December 31, 2002                                                     1,231,638          26.78
Granted                                                                                           277,600          25.80
Forfeited                                                                                         (81,738)         27.52
Exercised                                                                                        (238,812)         26.38
Options outstanding    at December 31, 2003                                                     1,188,688        $ 26.59


Additional information concerning options outstanding and options exercisable at December 31, 2003 is
summarized as follows:

                                                               Options Outstanding                  Options Exercisable
                                                                        Weighted Average
                                                                   Remaining                                     Weighted
                                                                       Life          Exercise                    Average
Exercise Price Range                                 Number         (in years)        Price      Number        Exercise Price
$ 8.33 –   $20.78                                    28,113             5            $17.24      23,425            $16.59
 22.60 –    28.22                                   947,350             7             26.20     449,450             27.61
 28.50 –    30.00                                   141,425             2             28.56     140,325             28.56
 30.28 –    37.80                                    71,800             5             31.46      69,950             31.43


     All stock options are fixed options that have been        the effect on net income and earnings per common
granted at exercise prices equal to the fair value of         share if People’s had applied the fair value recognition
People’s common stock at the respective grant dates.          provisions of SFAS No. 123 using these assumptions.
Therefore, in accordance with APB Opinion No. 25,                 People’s has also granted restricted stock awards
compensation expense is not recognized with respect           under the Incentive Plan. Employees become fully
to these options. If People’s had adopted the alternative     vested in these shares after a two-year or three-year
fair-value-based method defined in SFAS No. 123, the           period, with no performance-based conditions to
grant-date fair value of options would be recognized          such vesting. The total number of restricted shares
as compensation expense over the vesting period. The          awarded in 2003, 2002 and 2001 was 68,325, 88,950
estimated per-share fair value of options granted in          and 128,400, respectively, with weighted average
2003, 2002 and 2001 was approximately $3.30,                  fair values at the grant dates of $25.48, $23.40 and
$4.00 and $6.50, respectively, using the Black-Scholes        $26.26, respectively. A total of 227,750 unvested
option-pricing model with assumptions as follows:             shares were outstanding at December 31, 2003, with
dividend yield of 5.3% in 2003, 5.7% in 2002 and              total unamortized compensation cost of $9.1 million,
5.6% in 2001; expected volatility rate of 25% in 2003,        including $9.7 million in additional paid-in capital.
30% in 2002 and 40% in 2001; risk-free interest rate          Amortization of these restricted stock grants resulted
of 2.8% in 2003, 4.3% in 2002 and 4.7% in 2001;               in compensation expense of $2.4 million, $1.6 million
and expected option life of 5 years. Note 1 discloses         and $1.8 million in 2003, 2002 and 2001, respectively.




82   2003 Annual Report
O T H E R E Q U I T Y C O M P E N S AT I O N                     are exercisable 50% after three years and 100% after
People’s has granted restricted stock awards to an               four years, and expire, if unexercised, after ten years.
executive officer that were not made under the                        In August 1998, People’s entered into agreements
Incentive Plan, but are generally subject to the same            with the holders of stock price appreciation units then
conditions and restrictions applicable to restricted             outstanding. A “Cap Price” of $28.50 (the fair value
stock awards under the Incentive Plan. The total                 of People’s common stock on the agreement date)
number of restricted shares awarded in 2002 and                  was established for units that had a base price below
2001 was 3,000 and 21,500, respectively (none in                 $28.50 (the “Capped Units”). Upon exercise, the
2003). These shares vest 50% after two years, 75%                holder of a Capped Unit will receive a cash payment
after three years and 100% after four years, with                from People’s equal to the excess of (i) the Cap Price
no performance-based conditions to such vesting.                 (or, if lower, the then-current fair value of People’s
S T O C K P R I C E A P P R E C I AT I O N U N I T P L A N
                                                                 common stock) over (ii) the base price. Each holder
People’s 1995 Stock Price Appreciation Unit Plan                 of Capped Units received an equal number of stock
(the “Unit Plan”) provides for grants of up to                   options under the Incentive Plan, which have an
2,550,000 stock price appreciation units to officers              exercise price equal to the Cap Price of $28.50.
and employees. Under the Unit Plan, participants are             These stock options must be exercised at the same
granted units that entitle the holder to receive a cash          time the Capped Units are exercised.
payment from People’s upon exercise equal to the                      At December 31, 2003, all outstanding units were
difference between (i) the fair value of People’s                exercisable. Compensation and benefits expense reflects
common stock at that time and (ii) the base price of             a charge (credit) of $0.7 million, $0.7 million and
such units. The base price equals the fair value of              $(0.9) million for the Unit Plan in 2003, 2002 and
People’s common stock at the grant date. The units               2001, respectively.

The following is a summary of activity in stock appreciation units under the Unit Plan:

                                                                                                                    Weighted
                                                                                                  Number             Average
                                                                                                  of Units          Base Price
Units outstanding   at December 31, 2000                                                          341,762           $15.46
Forfeited                                                                                            (4,125)         24.08
Exercised                                                                                          (62,150)           8.39
Units outstanding   at December 31, 2001                                                          275,487            16.93
Forfeited                                                                                            (6,262)         24.08
Exercised                                                                                          (23,975)          11.93
Units outstanding   at December 31, 2002                                                          245,250            17.24
Forfeited                                                                                           (4,575)          15.30
Exercised                                                                                        (105,950)           17.99
Units outstanding   at December 31, 2003                                                          134,725           $16.71


D I R E C T O R S ’ E Q U I T Y C O M P E N S AT I O N P L A N       A stock unit has an initial value equal to the fair
The People’s Bank Directors’ Equity Compensation                 market value of a share of People’s common stock
Plan (“Directors’ Equity Plan”) provides for an annual           on the grant date. Stock units attributable to annual
award of 1,000 shares of People’s common stock to                grants will be paid in cash as of the third anniversary
each non-employee director immediately following                 of the grant date or, if earlier, upon the director’s
each annual meeting of shareholders. In addition,                cessation of service. All payments are based on the
each recipient has the choice of receiving either an             fair market value of People’s common stock on the
additional 1,000 shares of People’s common stock                 last business day of the month preceding the day
or 1,000 stock units. The Directors’ Equity Plan was             the payment is made. Stock units attributable to the
adopted in 2000 as the successor plan to the People’s            amount converted from the former retirement plan
Bank Director’s Stock Unit Plan, which provided for              for directors were paid in the same manner in April
annual awards of stock units.                                    2002. As of December 31, 2003, there were no stock
                                                                 units outstanding.


                                                                                                               People’s Bank     83
    Shares of People’s common stock issued pursuant                                  48,250 shares available for issuance at December 31,
to this plan are not transferable until the third                                    2003. Expense of $0.5 million, $0.5 million and $0.2
anniversary of the grant date or, if earlier, upon the                               million was recognized in 2003, 2002 and 2001,
director’s cessation of service. A total of 100,000                                  respectively, for the Directors’ Equity Plan and the
shares of People’s common stock are reserved for                                     predecessor plan.
issuance under the Directors’ Equity Plan. There were

NOTE 18 – FINANCIAL INSTRUMENTS

In the normal course of business, People’s is a party                                Statements of Condition. The contractual amounts
to both on-balance-sheet and off-balance-sheet                                       of off-balance-sheet instruments reflect the extent
financial instruments involving, to varying degrees,                                  of People’s involvement in particular classes of
elements of credit risk and interest rate risk in addi-                              financial instruments.
tion to the amounts recognized in the Consolidated

A summary of the contractual or notional amounts of People’s financial instruments follows:

As of December 31 (in millions)                                                                                                        2003               2002
Lending-Related    Instruments: (1)
  Loan origination commitments and unadvanced lines of credit:
     Credit card (managed portfolio)                                                                                                $6,355.4           $7,502.0
     Other consumer                                                                                                                    722.9              507.7
     Commercial                                                                                                                        565.4              540.9
     Commercial real estate finance                                                                                                     392.5              337.0
     Residential mortgage                                                                                                              103.9              410.5
  Letters of credit                                                                                                                     33.9               29.8
Credit Card Securitizations and Sales: (2)
  Securitized credit card receivables sold                                                                                           1,150.0            1,232.0
Derivative Financial Instruments(2)
  Interest rate swaps                                                                                                                  432.6              629.5
  Interest rate corridors                                                                                                              435.0              435.0
  Forward commitments to sell residential mortgage loans                                                                                40.3              295.6
  Interest rate-lock commitments on residential mortgage loans                                                                          41.8                  –

(1) The contractual amounts of these financial instruments represent People’s maximum potential exposure to credit loss, assuming (i) the instruments are fully funded
    at a later date, (ii) the borrower does not meet contractual repayment obligations, and (iii) any collateral or other security proves to be worthless.
(2) The contractual or notional amounts of these financial instruments are substantially greater than People’s maximum potential exposure to credit loss.


L E N D I N G - R E L AT E D I N S T R U M E N T S                                   the performance of a customer to a third party. The
The contractual amounts of People’s lending-related                                  letter of credit is generally extended for an average
financial instruments do not necessarily represent                                    term of one year and secured similar to existing
future cash requirements since certain of these instru-                              extensions of credit. For each letter of credit issued,
ments may expire without being funded and others                                     if the customer fails to perform under the terms of
may not be fully drawn upon. These instruments are                                   the agreement, People’s would have to fulfill the terms
subject to People’s credit approval process, including                               of the letter of credit. People’s recorded a liability
an evaluation of the customer’s creditworthiness and                                 of $0.3 million as of December 31, 2003 for the fair
related collateral requirements. Commitments generally                               value of its obligations relating to $31.9 million of
have fixed expiration dates or other termination                                      stand-by letters of credit. The credit risk involved
clauses and may require the payment of a fee by the                                  in issuing stand-by letters of credit is essentially the
customer. The geographic distribution of People’s                                    same as that involved in extending loan facilities
lending-related financial instruments is similar to                                   to customers.
the distribution of its on-balance-sheet loan portfolio,                                  A commercial letter of credit is normally a short-
as described in Note 5.                                                              term instrument issued by a financial institution on
     People’s issues both stand-by and commercial                                    behalf of its customer. The letter of credit authorizes
letters of credit. Stand-by letters of credit are condi-                             a beneficiary to draw drafts on the financial institution
tional commitments issued by People’s to guarantee                                   or one of its correspondent banks, provided the terms

84    2003 Annual Report
and conditions of the letter of credit have been met.         exposure on its derivative contracts, representing those
In issuing a commercial letter of credit, the financial        contracts with net positive fair values including the
institution has substituted its credit standing for that      effect of bilateral netting agreements, amounted to
of its customer. After drafts are paid by the financial        $0.6 million at December 31, 2003 and $2.1 million
institution, the customer is charged or an obligation         at December 31, 2002.
is created under an existing reimbursement agreement.             People’s principal derivative positions outstanding
An advance under a reimbursement agreement is                 at year-end 2003 and 2002 were interest rate swaps
recorded as a loan by the financial institution and            and interest rate corridors accounted for as cash flow
is subject to terms and conditions similar to other           hedges. The ineffective portion of hedge results related
commercial obligations.                                       to cash flow hedges amounted to $0.1 million in
                                                              2002 (none in 2003) and is included in other non-
C R E D I T C A R D S E C U R I T I Z AT I O N S
                                                              interest expense. To a much lesser extent, People’s
Under the credit enhancement provisions of its credit
                                                              engaged in derivative transactions accounted for as
card securitizations, People’s exposure to losses on
                                                              fair value hedges. The ineffective portion of hedge
off-balance-sheet receivables is contractually limited
                                                              results related to fair value hedges totaled $0.1
to future excess spread revenue and to the amount of
                                                              million in 2003 (included in other non-interest income)
certain of its other retained interests (subordinated
                                                              and $0.1 million in 2002 (included in other non-
interests in securitized receivables, accrued interest
                                                              interest expense).
receivable and collateral accounts) that are available
                                                                  The following sections further discuss each class
to make payments to investors over the term of the
                                                              of derivative financial instrument used by People’s,
securitization. As discussed in Note 6, subordinated
                                                              including management’s principal objectives and risk
interests, accrued interest receivable, collateral accounts
                                                              management strategies:
and capitalized excess spread had total carrying
amounts of $177.2 million and $140.0 million at               I N T E R E S T R AT E S WA P S A N D C O R R I D O R S
December 31, 2003 and 2002, respectively. It has              Under interest rate swaps, People’s agrees with other
not been necessary for People’s to make payments              parties to exchange, at specified intervals, the differ-
under the credit enhancement provisions at any                ence between fixed rate and floating rate interest
time since inception of its credit card securitization        amounts calculated by reference to an agreed notional
program in 1993.                                              amount. People’s enters into these transactions to
                                                              match more closely the repricing of its assets and
D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S
                                                              liabilities, and to reduce its exposure to increases in
People’s uses derivative financial instruments for risk
                                                              interest rates and their effect on net interest income.
management purposes and not for trading or specu-
                                                              For example, certain fixed rate assets may be funded
lative purposes. People’s controls the credit risk of
                                                              with floating rate borrowings. People’s enters into
these instruments through collateral, credit approvals
                                                              interest rate swaps in which it pays a fixed rate and
and monitoring procedures. Master netting agreements
                                                              receives a floating rate, in order to effectively “match
are arranged and collateral is obtained, when appro-
                                                              fund” the asset and liability. People’s also enters into
priate, through physical delivery of securities or cash
                                                              interest rate swaps in which it pays a floating rate
to reduce People’s exposure to credit losses in the event
                                                              and receives a fixed rate in order to convert a portion
of non-performance by the counterparties to these
                                                              of the interest cost on time deposits to a variable
transactions. People’s also controls its counterparty
                                                              rate. Interest rate corridors offer protection against
risk by entering into agreements only with highly-rated
                                                              adverse changes in interest rates but still offer a
counterparties that are specifically approved by People’s
                                                              benefit from favorable interest rate changes.
up to a maximum credit exposure. People’s credit




                                                                                                                  People’s Bank   85
The following is a summary of certain information concerning People’s derivative financial instruments utilized
for risk management purposes:

As of December 31 (dollars in millions)                                                      2003           2002
Interest Rate Swaps:
   Notional principal amounts:
     Pay fixed rate/receive floating rate                                                       $362.6        $489.0
     Pay floating rate/receive fixed rate                                                         70.0         140.5
   Weighted average interest rates:
     Pay fixed (receive floating)                                                           5.40% (1.16%) 5.77% (1.37%)
     Pay floating (receive fixed)                                                           1.07% (3.57%) 1.43% (3.70%)
   Weighted average remaining term to maturity (in months)                                         46            46
   Fair value recognized as a liability                                                       $ 28.8        $ 40.1
Interest Rate Corridors:
   Notional principal amounts                                                                 $435.0        $435.0
   Weighted average strike rates:
     Long                                                                                       3.50%       3.50%
     Short                                                                                      5.75%       5.75%
   Weighted average remaining term to maturity (in months)                                        36            48
   Fair value recognized as an asset                                                          $ 4.7         $ 6.8


     People’s pay fixed/receive floating swaps are used        reflect People’s obligation to pay interest at fixed
to reduce the variability of cash flows associated with       rates that were higher than the floating market rates
upward interest rate repricings on a portion of its          it received at the respective year ends. Based
funding tied to overnight rates or the one-month             on the level of interest rates at December 31, 2003,
LIBOR index or commercial paper rate. The change             an estimated $14.6 million of the pre-tax charge to
in fair value of a derivative that is highly effective,      accumulated other comprehensive loss at December 31,
and is designated and qualifies as a cash flow hedge,          2003 would be reclassified to earnings during 2004
is recorded in accumulated other comprehensive               as interest rates reprice on the hedged items.
income or loss until earnings are affected by the                 Interest rate swaps outstanding at December 31,
variability in cash flows of the designated hedged            2003 mature as follows: $100 million in 2005;
item. People’s liability at December 31, 2003 and            $192 million in 2007; and $141 million thereafter.
2002 of $28.8 million and $40.1 million, respective-         Of the total swaps outstanding at December 31, 2003,
ly, and the corresponding charges to accumulated             $370 million are callable as follows: $300 million in
other comprehensive loss (after applicable taxes)            2004 (in a rising interest rate environment) and $70
represent the unrealized losses at those dates on its        million in 2004 (in a declining interest rate environ-
pay fixed/receive floating swap agreements account-            ment). These callable swaps have a remaining term
ed for as cash flow hedges. These unrealized losses           to contractual maturity of approximately four years.




86   2003 Annual Report
    Interest rate corridors grant a purchaser, for a        F O R WA R D C O M M I T M E N TS TO S E L L A N D
                                                            I N T E R E S T R AT E- L O C K C O M M I T M E N T S O N
premium, the right to exercise an interest rate option.     RESIDENTIAL MORTGAGE LOANS
These options will be exercised if the purchaser will       People’s enters into forward commitments to sell
realize an economic benefit by doing so. People’s            residential mortgage loans in order to reduce the
purchased interest rate corridors in 2002 for the           market risk associated with originating loans for
purpose of partially reducing its interest rate risk from   sale in the secondary market. In order to fulfill
adverse changes in short-term interest rates. The           a forward commitment, People’s delivers originated
interest rate corridors outstanding at December 31,         loans at prices or yields specified by the contract.
2003 mature as follows: $185 million in 2006 and            The risks associated with such contracts arise from
$250 million in 2007.                                       the possible inability of counterparties to meet the
    The fair value of interest rate corridors at            contract terms or People’s inability to originate the
December 31, 2003 and 2002 reflects the unamortized          necessary loans. Gains and losses realized on the for-
premiums and unrealized losses (with a corresponding        ward contracts are reported in the Consolidated
charge to accumulated other comprehensive loss, after       Statements of Income as a component of the net
applicable taxes) at these respective dates. The unre-      gains on sales of residential mortgage loans. In the
alized loss of $12.8 million at December 31, 2003           normal course of business, People’s will commit to
represents the difference between the market value          an interest rate on a mortgage loan application at a
and the unamortized premium, which reflects current          time after the application is approved by People’s.
interest rates that are substantially lower than at the     The risks associated with these interest rate-lock
time the corridors were purchased. Based on the level       commitments arise if market interest rates change
of interest rates at December 31, 2003, an estimated        prior to the closing of these loans. Both forward
$6.1 million of the pre-tax charge to accumulated           sales commitments and interest rate-lock commit-
other comprehensive loss at December 31, 2003 would         ments made to customers are accounted for as
be reclassified to earnings during 2004 as interest          derivatives and are reflected in the Consolidated
rates reprice on the hedged items.                          Statements of Condition at fair value at December 31,
    The net effect of interest rate swaps and corri-        2003. See Note 20.
dors was to decrease net interest income by $20.3
million in 2003, $23.8 million in 2002 and $11.6
million in 2001.

NOTE 19 – LEGAL PROCEEDINGS AND LEASE COMMITMENTS

LEGAL PROCEEDINGS                                           leases contain renewal options and provide for
In the normal course of business, People’s is subject       increased rentals based principally on increases in the
to various other legal proceedings. Management has          average consumer price index. The future minimum
discussed the nature of these legal proceedings with        rental commitments under operating leases in excess
legal counsel. In the opinion of management, People’s       of one year at December 31, 2003 were: $17.6 million
financial condition or results of operations will not       in 2004; $17.2 million in 2005; $16.3 million in
be affected materially as a result of the outcome of        2006; $14.6 million in 2007; $12.0 million in 2008;
such legal proceedings.                                     and an aggregate of $43.8 million in 2009 and later
LEASE COMMITMENTS
                                                            years. Rent expense under operating leases was $17.8
At December 31, 2003, People’s was obligated under          million, $16.6 million and $15.7 million for 2003,
various noncancelable operating leases for office space,     2002 and 2001, respectively.
which expire on various dates through 2027. Certain




                                                                                                                  People’s Bank   87
N O T E 2 0 – FA I R VA L U E S O F F I N A N C I A L I N S T R U M E N T S

The following is a summary of the carrying amounts and estimated fair values of People’s financial instruments:
                                                                                                            2003                                   2002
                                                                                                Carrying           Estimated           Carrying           Estimated
As of December 31 (in millions)                                                                 Amount             Fair Value          Amount             Fair Value
Financial assets:
   Cash and cash equivalents                                                                   $ 414.9             $ 414.9            $ 721.0             $ 721.0
   Securities (1)                                                                               2,556.0             2,556.0            3,336.0             3,336.0
   Loans, net                                                                                   8,121.8             8,378.2            7,336.2             7,423.9
   Accrued interest receivable                                                                     37.4                37.4               43.0                43.0
Financial liabilities:
   Time deposits                                                                                 2,456.3            2,479.2             2,781.5            2,797.6
   Other deposits                                                                                6,257.7            6,257.7             5,644.6            5,644.6
   FHLB advances                                                                                   964.3            1,026.4             1,595.9            1,684.1
   Federal funds purchased                                                                         348.9              348.9               565.9              565.9
   Repurchase agreements                                                                           203.0              209.4               275.5              283.4
   Subordinated notes                                                                              252.9              311.5               252.5              282.4
   Accrued interest payable                                                                         11.3               11.3                12.8               12.8
Derivative financial instruments: (2)
  Recognized as an asset:
     Interest rate corridors                                                                          4.7                4.7                6.8                 6.8
     Forward commitments to sell
        residential mortgage loans                                                                    0.4                0.4                   –                  –
  Recognized as a liability:
     Interest rate swaps                                                                            28.8                28.8               40.1               40.1
     Interest rate-lock commitments on
        residential mortgage loans                                                                    0.4                0.4                   –                  –
(1) Includes trading account securities of $18.1 million in 2003. No other financial instruments in this table were held for trading purposes.
(2) See Note 18 for a further discussion of derivative financial instruments. People’s has certain off-balance-sheet financial instruments, as described in Note 18, with
    carrying amounts that primarily consist of deferred fee income and other accruals. The estimated fair values of these other instruments approximated the carrying
    amounts, which were not significant.


    SFAS No. 107 requires disclosures about the                                       regarding significant matters such as the amount
fair values of financial instruments for which it is                                   and timing of future cash flows and the selection of
practicable to estimate fair value. Fair value is defined                              discount rates that appropriately reflect market and
in SFAS No. 107 as the amount at which a financial                                     credit risks. Changes in these judgments often have
instrument could be exchanged in a current transaction                                a material impact on the fair value estimates. In
between willing parties, other than in a forced sale                                  addition, since these estimates are made as of a
or liquidation. Quoted market prices are used to                                      specific point in time, they are susceptible to material
estimate fair values when those prices are available.                                 near-term changes. Fair values disclosed in accordance
However, active markets do not exist for many types                                   with SFAS No. 107 do not reflect any premium or
of financial instruments. Consequently, fair values for                                discount that could result from the sale of a large
these instruments must be estimated by management                                     volume of a particular financial instrument, nor do
using techniques such as discounted cash flow                                          they reflect possible tax ramifications or estimated
analysis and comparison to similar instruments. These                                 transaction costs.
estimates are highly subjective and require judgments

The following is a description of the principal valuation methods used by People’s to estimate the fair values
of its financial assets and liabilities:
SECURITIES                                                                            LOANS
The fair values of securities were based primarily                                    For valuation purposes, the loan portfolio was
upon market prices or dealer quotes. Certain fair                                     segregated into its significant categories, which are
values were estimated using pricing models or                                         residential mortgage, commercial real estate finance,
were based on comparisons to market prices of                                         commercial, credit card and other consumer. These
similar securities.                                                                   categories were further segregated, where appropriate,


88    2003 Annual Report
into components based on significant financial              B O R R O W I N G S A N D S U B O R D I N AT E D N O T E S

characteristics such as type of interest rate (fixed       The fair values of FHLB advances represent contractual
or adjustable) and payment status (performing or          repayments discounted using interest rates currently
non-performing). Fair values were estimated for           available on advances with similar characteristics and
each component using a valuation method selected          remaining maturities. The fair values of short-term
by management.                                            repurchase agreements approximate the carrying
    The fair values of performing residential mortgage,   amounts. For repurchase agreements with a remaining
commercial real estate finance, commercial and other       maturity greater than three months, the fair values
consumer loans were estimated by discounting the          represent contractual repayments discounted using
anticipated cash flows from the respective portfolios.     interest rates currently available on repurchase agree-
Estimates of the timing and amount of these cash flows     ment borrowings with similar characteristics and
considered factors such as future loan prepayments        remaining maturities. The fair values of subordinated
and credit losses. The discount rates reflected current    notes were based on dealer quotes.
market rates for loans with similar terms to borrowers    OTHER FINANCIAL ASSETS AND LIABILITIES
of similar credit quality. The fair values of non-        Cash and cash equivalents, accrued interest receivable
performing loans were based on recent collateral          (excluding those amounts classified as a retained
appraisals or management’s analysis of estimated cash     interest in credit card securitizations) and payable,
flows discounted at rates commensurate with the           and federal funds purchased have fair values that
credit risk involved.                                     approximate the respective carrying amounts because
    The fair values of credit card loans and home         the instruments are payable on demand or have short-
equity lines of credit were based on the outstanding      term maturities, and present relatively low credit risk
loan balances, as required by SFAS No. 107, and,          and interest rate risk.
therefore, do not reflect the value associated with
earnings from future loans to existing customers.         D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S

Management believes that the fair values of these         The carrying amounts for interest rate swaps and
customer relationships have a substantial intangible      interest rate corridors represent fair values. The
value separate from the loan balances currently           fair values of interest rate swaps and corridors are
outstanding.                                              estimated using a valuation model based on market
                                                          interest rates and other pricing terms prevailing for
DEPOSIT LIABILITIES
                                                          similar agreements at the valuation date. These fair
The fair values of time deposits represent contractual    values approximate the amounts that People’s would
cash flows discounted using interest rates currently       receive or pay to terminate the interest rate swaps
offered on time deposits with similar characteristics     and corridors at the valuation date. The fair values
and remaining maturities. In accordance with SFAS         of forward commitments to sell and interest rate-
No. 107, the fair values of other deposit liabilities     lock commitments on residential mortgage loans
(those with no stated maturity, such as checking and      were estimated based on current secondary market
savings accounts) are equal to the carrying amounts       prices for commitments with similar terms.
payable on demand. As required by SFAS No. 107,
deposit fair values do not include the intangible value   O F F- B A L A N C E- S H E E T F I N A N C I A L I N S T R U M E N T S

of core deposit relationships that comprise a signifi-     The estimated fair values of People’s off-balance-sheet
cant portion of People’s deposit base. Management         financial instruments approximate the respective
believes that People’s core deposit relationships         carrying amounts. These include commitments to
provide a relatively stable, low-cost funding source      extend credit and unadvanced lines of credit for
that has a substantial intangible value separate from     which fair values were estimated based on an analysis
the deposit balances.                                     of the interest rates and fees currently charged to enter
                                                          into similar transactions, considering the remaining
                                                          terms of the commitments and the creditworthiness
                                                          of the potential borrowers.




                                                                                                                      People’s Bank   89
N O T E 2 1 – B U S I N E S S S E G M E N T I N F O R M AT I O N       During 2002, People’s performed reviews of its
SFAS No. 131, “Disclosures about Segments of an                    methodologies for FTP and indirect cost allocations.
Enterprise and Related Information,” requires public               Segment information for 2003 reflects changes resulting
companies to report (i) certain financial and descriptive           from these reviews. Since prior year business segment
information about “reportable operating segments,”                 results have not been revised to conform to the current
as defined, and (ii) certain enterprise-wide financial               presentation, certain information presented for the
information about products and services, geographic                current year is not comparable to prior-year infor-
areas and major customers. Operating segment infor-                mation. While these changes in methodologies affected
mation is reported using a “management approach”                   the reported results of the individual business segments,
that is based on the way management organizes the                  they did not affect the consolidated financial position
segments for purposes of making operating decisions                or results of operation for People’s as a whole.
and assessing performance.                                             FTP is used in the calculation of the respective
    People’s reportable operating segments are                     operating segment’s net interest income, and measures
as follows:                                                        the value of funds used in and provided by an operating
    Commercial Banking consists principally of                     segment. Under this process, a money desk buys funds
commercial lending, commercial real estate finance                  from liability-generating business lines (such as con-
lending and commercial deposits. This segment also                 sumer deposits) and sells funds to asset-generating
includes cash management, correspondent banking,                   business lines (such as credit card). The price at which
municipal banking, and the equipment leasing and                   funds are bought and sold on any given day is set
financing operations of PCLC.                                       by People’s treasury department and is based on the
    Consumer Financial Services includes, as its                   wholesale cost to People’s of assets and liabilities with
principal business lines, residential mortgage lending             similar maturities. Liability-generating businesses sell
and consumer deposits. This segment also includes                  newly originated liabilities to the money desk and
brokerage and financial advisory services provided by               recognize a funding credit, while asset-generating
PSI, wealth management and trust services (including               businesses buy funding for newly originated assets
the operations of OMIA), and insurance services                    from the money desk and recognize a funding charge.
provided directly by People’s and through RC Knox.                 Once funding for an asset is purchased from or a
    Credit Card Services encompasses the managed                   liability is sold to the money desk, the price that is
credit card and consumer lending businesses. Managed               set by the treasury department will remain with that
credit card includes the owned portfolio and off-bal-              asset or liability until it matures or reprices, which
ance-sheet securitized and sold credit card receivables.           effectively transfers responsibility for managing
    Capital Markets encompasses the securities                     interest rate risk to the Capital Markets group. This
portfolio, short-term investments, wholesale funding               process results in a difference between total net
activities, such as borrowings, and the impact                     interest income for the reportable operating segments
of derivative financial instruments used for risk                   and the amount shown in the Consolidated Statements
management purposes.                                               of Income; this difference is reflected in “Other.”
    People’s business segment disclosure is based                  The FTP methodology has been updated to reflect
on information generated by an internal profitability               changes in the way People’s treasury department sets
reporting system, which generates information by                   rates for funds bought and sold.
operating segment, based on a series of management                     The provision for loan losses for Credit Card
estimates and allocations regarding funds transfer                 Services and PCLC is based on the respective actual
pricing (“FTP”), the provision for loan losses, non-               loan loss provision for the year. For the other operating
interest expense and income taxes. These estimates                 segments, the provision for loan losses is based on
and allocations, which are subjective in nature, are               a five-year rolling average loss rate for the respective
continually being reviewed and refined. Any changes                 operating segment (“Insurance Method”). People’s
in estimates and allocations that may affect the reported          allocates a majority of non-interest expenses to the
results of any business segment will not affect the                operating segments using a full-absorption costing
consolidated financial position or results of operation             process. Direct and indirect costs are analyzed and
of People’s as a whole.
90   2003 Annual Report
pooled by process and assigned to the appropriate                   Consolidated Financial Statements are presented on
operating segment. Corporate overhead costs are                     an owned basis, whereas Credit Card Services segment
assigned to operating segments using a standard                     results are presented on a managed basis. The category
allocation process. Income tax expense is allocated                 “Other” includes the residual financial impact from
to each operating segment using a constant rate,                    the allocation of revenues and expenses, reversal of
based on the consolidated effective income tax rate                 the FTE adjustment since net interest income for the
for the year.                                                       reportable segments is presented on a FTE basis, and
    The following table provides selected financial                  certain revenues and expenses not attributable to a
information for People’s reportable operating segments.             particular segment. Total assets at year end for each
Net interest income for each segment is presented on                reportable operating segment represent earning assets.
a FTE basis. The category “Impact of Securitization”                Non-earning assets such as cash, premises and
represents amounts related to off-balance-sheet                     equipment, and other assets are reflected in “Other.”
securitized and sold credit card receivables, since the

                                            Consumer      Credit                       Total
Year ended December 31, 2003   Commercial   Financial      Card         Capital      Reportable Impact of                             Total
(in millions)                   Banking      Services    Services       Markets      Segments Securitization           Other       Consolidated
Net interest income             $ 116.4     $ 167.9      $ 167.8       $    (4.2)    $   447.9     $    (90.1)     $    (37.4)      $   320.4
Provision for loan losses          11.8         1.8        126.1              .–         139.7          (82.4)           (8.7)           48.6
Non-interest income                22.1       136.8         76.8            (0.2)        235.5           10.0             5.5           251.0
Non-interest expense               55.5       247.7        125.2             4.7         433.1             .–             2.8           435.9
   Income (loss) before
     income taxes                   71.2         55.2         (6.7)         (9.1)        110.6            2.3           (26.0)            86.9
Income tax expense (benefit)         23.5         19.3         (2.2)         (3.0)         37.6            0.9           (15.4)            23.1
   Net income (loss)            $   47.7    $    35.9    $    (4.5)    $    (6.1)    $    73.0     $      1.4      $    (10.6)      $     63.8

Total assets at year end        $3,040.1    $3,243.2     $3,252.9      $2,601.4      $12,137.6     $(1,150.0)      $ 683.9          $11,671.5


                                            Consumer      Credit                       Total
Year ended December 31, 2002   Commercial    Financial    Card          Capital      Reportable    Impact of                           Total
(in millions)                   Banking      Services    Services       Markets      Segments     Securitization       Other        Consolidated
Net interest income             $ 122.6     $ 194.5      $ 188.5       $     3.4     $   509.0     $ (127.1)       $    (30.7)      $   351.2
Provision for loan losses           8.3         2.4        191.3              .–         202.0       (115.8)             (8.5)           77.7
Non-interest income                22.3       125.8         88.4            (3.0)        233.5          6.4               8.8           248.7
Non-interest expense               54.5       246.1        137.8             3.3         441.7           .–               0.1           441.8
   Income (loss) before
     income taxes                   82.1         71.8        (52.2)         (2.9)         98.8           (4.9)          (13.5)            80.4
Income tax expense (benefit)         28.6         26.2        (18.3)         (1.0)         35.5           (1.7)            (8.8)           25.0
   Net income (loss)            $   53.5    $    45.6    $   (33.9)    $    (1.9)    $    63.3     $     (3.2)     $      (4.7)     $     55.4

Total assets at year end        $2,837.2    $2,913.6     $2,969.3      $3,607.2      $12,327.3     $(1,232.0)      $1,165.3         $12,260.6


                                            Consumer      Credit                       Total
Year ended December 31, 2001   Commercial    Financial    Card          Capital      Reportable    Impact of                           Total
(in millions)                   Banking      Services    Services       Markets      Segments     Securitization       Other        Consolidated
Net interest income             $ 113.3     $ 192.0      $ 240.7       $    17.9     $   563.9     $ (168.2)       $    (41.7)      $   354.0
Provision for loan losses           7.2         2.4        259.8              .–         269.4       (170.4)              2.1           101.1
Non-interest income                16.6       121.8        187.2           (17.6)        308.0          (9.3)            23.1           321.8
Non-interest expense               53.2       239.4        151.8            20.8         465.2            .–             (6.8)          458.4
   Income (loss) before
     income taxes                   69.5         72.0        16.3          (20.5)        137.3           (7.1)          (13.9)          116.3
Income tax expense (benefit)         26.2         28.4         6.2            (7.1)        53.7           (2.5)          (10.7)           40.5
   Net income (loss)            $   43.3    $    43.6    $   10.1      $   (13.4)    $    83.6     $     (4.6)     $      (3.2)     $    75.8

Total assets at year end        $2,714.2    $2,794.2     $3,417.4      $3,395.4      $12,321.2     $(1,823.4)      $1,392.8         $11,890.6




                                                                                                                               People’s Bank     91
N O T E 2 2 - S E L E C T E D Q U A R T E R LY F I N A N C I A L D A T A ( U N A U D I T E D )

The following table presents People’s quarterly financial data for 2003 and 2002:

                                                                      2003                                                       2002
(in millions, except per share data)          First        Second            Third       Fourth          First        Second            Third     Fourth
Interest and dividend income                 $ 135.9        $ 131.9          $ 121.4     $ 125.5        $163.4        $ 149.3           $154.4    $147.1
Interest expense                                56.3           49.6             44.8        43.6          71.7           67.1             64.4      59.8
   Net interest income                          79.6           82.3             76.6        81.9          91.7           82.2             90.0      87.3
Provision for loan losses                       20.0            8.8              8.6        11.2          26.5           14.3             21.4      15.5
Net interest income after
  provision for loan losses                    59.6           73.5             68.0         70.7          65.2           67.9             68.6      71.8
Fee-based revenues                             61.5           53.0             53.0         58.7          56.6           56.1             57.7      62.2
Other non-interest income                       5.3            8.9              7.3          3.3           4.8            3.3              2.1       5.9
Non-interest expense                          112.0          112.3            105.6        106.0         110.0          109.3            108.2     114.3
   Income before income
     tax expense (benefit)                      14.4           23.1             22.7        26.7           16.6          18.0              20.2      25.6
Income tax expense (benefit)                    (1.6)           7.6              7.8         9.3            5.4           5.7               5.4       8.5
   Net income                                $ 16.0         $ 15.5           $ 14.9      $ 17.4         $ 11.2        $ 12.3            $ 14.8    $ 17.1

Basic and diluted earnings
 per common share                            $ 0.26         $ 0.25           $ 0.24      $ 0.28         $ 0.18        $ 0.20            $ 0.24    $ 0.28

Average common shares:
  Basic                                       61.76           61.82           61.85        61.97         61.55          61.65            61.71     61.73
  Diluted                                     61.78           61.86           61.93        62.11         61.66          61.73            61.75     61.76

Common stock price:
  High                                       $ 26.81        $ 29.88          $ 31.30     $ 34.00        $24.80        $28.05            $ 26.97   $26.09
  Low                                          24.25          25.13            27.51       29.73         20.66         24.30              21.11    21.14

Cash dividends paid (1)                          9.5           10.4            10.3         10.4            8.9            9.5              9.5      9.4

Cash dividends per common share (1)             0.36           0.39            0.39         0.39           0.34          0.36             0.36      0.36

Total dividend payout ratio (1)                 59.6%          66.6%           69.5%        59.8%          79.5%         77.0%            64.3%     55.3%

(1) Reflects the waiver of cash dividends on the substantial majority of the common shares owned by People’s Mutual Holdings. See Note 13.



NOTE 23 - SUBSEQUENT EVENT

On March 5, 2004, People’s completed the previously-                                 related to these borrowings, repurchase its subordi-
announced sale of its credit card business, which                                    nated notes, and for general corporate purposes.
included $2.0 billion of credit card receivables, as                                     People’s and RBS have entered into a long-term
well as the transfer of its related credit card opera-                               agency agreement whereby People’s will originate
tions and 420 employees, to The Royal Bank of                                        credit cards on behalf of RBS through People’s cus-
Scotland Group (“RBS”). Gross proceeds from the                                      tomer base. People’s and RBS have also entered into
sale, after the completion of normal post-closing                                    an interim servicing agreement under which People’s
adjustments, totaled $2.4 billion, including a gross                                 will continue to service the credit card portfolio and
premium of approximately $315 million. People’s                                      provide other support services for RBS for a period
expects to utilize proceeds from the sale to prepay                                  of up to 15 months.
long-term borrowings, unwind derivative positions




92   2003 Annual Report
STAT E M E N T O F M A N AG E M E N T ’S R E S P O N S I B I L I T Y


Management is responsible for the preparation, content and integrity of the consolidated financial statements and all other
information included in this annual report. The consolidated financial statements and related footnotes are prepared in
conformity with accounting principles generally accepted in the United States of America. Management is also responsible
for compliance with laws and regulations relating to safety and soundness as designated by the FDIC.
     Management maintains a system of internal control, including an internal audit function, which provides reasonable
assurance that assets are safeguarded against loss from unauthorized use or disposition, transactions are properly authorized,
and that accounting records are reliable for the preparation of financial statements. The foundation of internal control rests upon
careful selection and training of personnel, segregation of responsibilities, and application of formal policies and procedures
that are consistent with the highest standards of business conduct. People’s internal controls are being continually modified
and improved in response to changes in business conditions and operations.
     The Board of Directors has an Audit Committee composed of six outside directors. The Committee meets regularly with
the independent auditors, the internal auditors and management to ensure that internal controls are being properly administered
and that financial data is being properly reported. The Committee reviews the scope and timing of internal audits, including
recommendations made with respect to internal controls. The independent auditors and the internal auditors have free access
to the Committee.
     The consolidated financial statements as identified in the accompanying Independent Auditors’ Report have been audited
by KPMG LLP, independent certified public accountants. These audits were conducted in accordance with auditing standards
generally accepted in the United States of America, and included tests of the accounting records and other auditing procedures
considered necessary to formulate an opinion on the consolidated financial statements.




John A. Klein                                                    Philip R. Sherringham
Chairman, Chief Executive Officer                                 Executive Vice President
and President                                                    and Chief Financial Officer
March 5, 2004



I N D E P E N D E N T AU D I TO R S’ R E P O RT


The Board of Directors and Shareholders of People’s Bank:

We have audited the accompanying consolidated statements of condition of People’s Bank and subsidiaries (“People’s”) as of
December 31, 2003 and 2002, and the related consolidated statements of income, changes in stockholders’ equity, and cash
flows for each of the years in the three-year period ended December 31, 2003. These consolidated financial statements are the
responsibility of People’s management. Our responsibility is to express an opinion on these consolidated financial statements
based on our audits.
     We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
     In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of People’s Bank and subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their
cash flows for each of the years in the three-year period ended December 31, 2003, in conformity with accounting principles
generally accepted in the United States of America.
     As discussed in Note 1 to the consolidated financial statements, People’s adopted FASB Statement 142, “Goodwill and
Other Intangible Assets,” as of January 1, 2002.


Stamford, Connecticut
March 5, 2004
                                                                                                                 People’s Bank   93
G LO S SA RY O F T E R M S

Basic Earnings Per Common Share                Fully Taxable Equivalent                        Owned Portfolio
Net income divided by the weighted             (“FTE”) Basis                                   On-balance-sheet assets and liabilities.
average number of common shares                Method of presentation in which interest
outstanding during the period.                 on tax-exempt debt securities and divi-         Purchased Funds
                                               dends on equity securities eligible for the     The total of borrowings, municipal
Book Value Per Common Share                    dividends received deduction are adjusted       deposits and brokered certificates of
Total common stockholders’ equity divided      to present the earnings performance on a        deposit.
by the number of shares of common stock        basis equivalent to yields earned on fully
outstanding at period end.                     taxable securities.
                                                                                               Risk-Adjusted Total Assets
                                                                                               The sum of risk weighted on-balance-
Core Deposits                                  Funding Liabilities                             sheet assets and off-balance-sheet credit
The total of non-interest-bearing deposits;    The total of deposits, borrowings and           equivalent amounts calculated in accor-
interest-bearing checking, savings and         subordinated notes.                             dance with federal regulatory guidelines.
money market deposits; and time
deposits (excluding municipal deposits         Interest Rate Spread                            Statement of Financial Accounting
and brokered certificates of deposit).          The difference between the FTE yield            Standards (“SFAS”)
                                               on average earning assets and the cost          Statements of accounting principles
Cost of Funds                                  of funds.                                       issued by the Financial Accounting
Average rate paid on funding liabilities.                                                      Standards Board (“FASB”).
                                               LIBOR
Diluted Earnings Per Common Share              London Interbank Offered Rate on                Tier 1 Capital
Net income divided by the weighted average     Eurodollar deposits traded between banks.       The total of common stockholders’ equity
number of common shares outstanding                                                            adjusted for certain items included in
during the period, plus an incremental         Managed Portfolio                               accumulated other comprehensive income
number of common-equivalent shares for         Owned portfolio plus the off-balance-           (loss), less certain intangible assets and
items such as stock options.                   sheet securitized and sold credit card          other assets, calculated in accordance
                                               receivables and the related securities          with federal regulatory guidelines.
Dividend Payout Ratio                          sold to investors.
The ratio of total dividend payments                                                           Total Capital
on common stock to net income.                 Net Interest Income                             The total of tier 1 capital plus supple-
                                               The difference between interest and divi-       mentary or tier 2 capital, including
Earning Assets                                 dend income on earning assets and interest      qualifying subordinated notes, certain
The total of loans, securities and short-      expense on funding liabilities, including the   other financial instruments and a limited
term investments.                              effect of derivative financial instruments       amount of the allowance for loan losses,
                                               used for interest rate risk management.         calculated in accordance with federal
Efficiency Ratio                                                                                regulatory guidelines.
Represents the cost required to generate       Net Interest Margin
a dollar of revenue. For the owned port-       Net interest income on a FTE basis              Tier 1 and Total Risk-Based
folio, represents total non-interest expense   divided by average earning assets.              Capital Ratios
(less goodwill amortization and losses on                                                      Measures of capital adequacy established
real estate assets) divided by operating       Non-Performing Assets
                                                                                               by federal regulators, calculated by dividing
revenue. The efficiency ratio for the man-      Non-accrual loans, restructured loans
                                                                                               tier 1 capital or total capital by risk-adjusted
aged portfolio is the same calculation,        and real estate owned.
                                                                                               total assets.
except that operating revenue is adjusted
to exclude credit losses reflected in credit    Operating Revenue
                                                                                               Tier 1 Leverage Capital Ratio
card securitization income.                    The total of FTE net interest income and
                                                                                               Tier 1 capital divided by adjusted quarterly
                                               non-interest income, excluding gains and
                                                                                               average assets (less certain items excluded
                                               losses other than on sales of residential
                                                                                               from tier 1 capital).
                                               mortgage loans.




94   2003 Annual Report
SENIOR OFFICERS

William J. Abrahamsen         Sharon L. Craig                Sara M. Longobardi              Peter J. Scotch
First Vice President          First Vice President           Senior Vice President           Senior Vice President
Human Resources               Corporate Finance              Regional Banking                Consumer Deposit Services

Valerie J. Arch               Jonathan F. Crowley            Srihari N. Makkala              Parry E. Spahr
First Vice President          First Vice President           Senior Vice President           Senior Vice President
Commercial Services           Treasury                       Chief Technology Officer         Regional Banking

Deborah S. Asetta             John P. Curry                  Patricia A. Manion              Susan D. Stanley
First Vice President          First Vice President           Senior Vice President           First Vice President
Corporate Finance             Credit Card Services           Operations and eBusiness        Corporate Secretary

Cynthia P. Belak              Ellen P. Davis                 David S. Manzer                 Jan M. Stefanowicz
First Vice President          Senior Vice President          First Vice President            Senior Vice President
Marketing                     National Credits Lending       Credit Card Services            Credit Card Services

David P. Berey                Walter S. Dusza, Jr.           Susan A. Matlos                 Robert E. Trautmann
Senior Vice President         First Vice President           First Vice President            First Vice President
Commercial Lending            Auditing                       Financial Services              Corporate Counsel

Christina M. Bliven           Tina K. Gabriel                Robert F. Mihalcik, Jr.         Wayne C. Walker
First Vice President          First Vice President           First Vice President            Senior Vice President
Financial Analysis            Credit Card Services           Credit Card Services            Residential Lending

David A. Bodor                Thomas E. Hylinski             Thomas J. Pantello              Kenneth L. Weinstein
Senior Vice President         Senior Vice President          Senior Vice President           Senior Vice President
Chief Credit Administration   Treasurer                      Commercial Real                 Operational Risk
Officer                                                       Estate Finance                  Management
                              Barbara P. Johnson
Roger J. Brady                Senior Vice President          Roger L. Perry                  Kathleen D. Zembrzuski
First Vice President          Corporate Community            First Vice President            First Vice President
Credit Card Services          Relations                      Wealth Management & Trust       Residential Lending

Peter M. Brestovan            Walter W. Kaercher             Frances Ricci
First Vice President          First Vice President           First Vice President
Real Estate Services          Commercial Lending             Corporate Counsel

Vincent J. Calabrese          Ellen M. Kritemeyer            Vincent E. Santilli
Senior Vice President         First Vice President           First Vice President
Controller                    Residential Lending            Regional Banking




P EO P L E ’S S U B S I D I A R I E S

OLSON MOBECK                  P E O P L E ’ S C A P I TA L   PEOPLE’S                        R.C. KNOX AND
INVESTMENT                    A N D L E A S I N G C O R P.   SECURITIES, INC.                C O M P A N Y, I N C .
ADVISORS, INC.
                              Vincent R. Cianciolo           Robert V. Rodia                 John F. Byrnes
Carlos R. Mello               President                      President and Chief Executive   Chief Executive Officer
Managing Director                                            Officer
                                                                                             Harold A. Smullen, Jr.
Robert J. Mobeck                                             Michael E. Harkins              Chief Operating Officer
Principal                                                    First Vice President




                                                                                                            People’s Bank   95
E X EC U T I V E O F F I C E R G R O U P

Jacinta A. Coleman                        Bryan J. Huebner                          Henry R. Mandel
Chief Information Officer                  Consumer Financial Services               Organization Effectiveness

Robert R. D’Amore                         John A. Klein                             Philip R. Sherringham
Marketing and Regional Banking            Chairman, Chief Executive                 Chief Financial Officer
                                          Officer and President
Brian F. Dreyer                                                                     Mark K. Vitelli
Commercial Banking                        William T. Kosturko                       Credit Card Services
                                          General Counsel




P EO P L E ’S BA N K B OA R D O F D I R EC TO R S

Collin P. Baron                           Betty Ruth Hollander                      Jeremiah J. Lowney, Jr.
Fairfield, Connecticut                     Stamford, Connecticut                     Norwich, Connecticut
Director since 2001                       Director since 1982                       Director since 1998
Member, Pullman & Comley, LLC             Chairman and CEO,                         Orthodontist; Assistant Clinical
                                          Omega Technologies, Inc.                  Professor, University of Connecticut;
George P. Carter                                                                    Past President, Connecticut State Society
Fairfield, Connecticut                     Richard M. Hoyt                           of Orthodontists; Founder and President,
Director since 1976                       Easton, Connecticut                       Haitian Health Foundation.
President and CEO,                        Director since 2002
Connecticut Foods, Inc.;                  President and CEO, Chapin & Bangs Co.;    Jack E. McGregor
Vice Chairman, Bridgeport Hospital;       Chairman and CEO, Lindquist Steels,       Easton, Connecticut
Trustee, United Congregational Church.    Inc.; Director, Bridgeport Hospital;      Director since 1989
                                          Director, Yale-New Haven Health           Of Counsel, Cohen & Wolf, P.C.;
Jerry Franklin                            Services Corp.; Director, Greater         Principal, Westchester Baseball, LLC;
Farmington, Connecticut                   Bridgeport Area Foundation; Trustee,      Principal, Freeborn Investors, LLC;
Director since 1997                       Central Connecticut Coast YMCA.           Director, Aquarion Water Company
President and CEO, Connecticut                                                      of Connecticut; Director,
Public Television & Radio; Director,      John A. Klein                             CDG Technology, Inc.; Director,
Southside Institutions Neighborhood       Easton, Connecticut                       Bridgeport Regional Business Council.
Alliance; Director, Connecticut Woman’s   Director since 1999
Hall of Fame; Member, Board of            Chairman, CEO and President,              James A. Thomas
Trustees, Bay Path College; Trustee,      People’s Bank; Chairman, Bridgeport       New Haven, Connecticut
Long Wharf Theatre.                       Hospital; Chairman, Bridgeport            Director since 1997
                                          Economic Development Advisory             Associate Dean, Yale Law School;
Eunice S. Groark                          Council, Inc.; First Vice Chair, CBIA;    Director, Imagistics International Inc.;
Bloomfield, Connecticut                    Chairman, Connecticut Bankers             Director, Sea Research Foundation, Inc.;
Director since 1995                       Association; Director, Bridgeport         Director, UIL Holdings Corporation;
Attorney; Former Lieutenant Governor,     Regional Business Council; Director,      Director, Yale-New Haven Hospital.
State of Connecticut; Trustee of the      Greater Bridgeport Area Foundation;
Phoenix Edge Series Fund.                 Director, SACIA, the Business Council
                                          of Southwestern Connecticut; Co-Chair,
Janet M. Hansen                           Operation Respect CT; Board Member,
Trumbull, Connecticut                     Transportation Strategy Board; Trustee,
Director since 2004                       University of Connecticut Foundation.
Executive Vice President, Aquarion
Company; Chairman, Aquarion Water
Company; Director, Bridgeport
Hospital; Director, Greater Bridgeport
Area Foundation.


96   2003 Annual Report
    P EO P L E ’S M U T UA L H O L D I N G S B OA R D O F T R U ST E E S

    Jean A. Adnopoz                  Norwick R.G. Goodspeed          John F. Merchant
    Associate Clinical Professor,    Retired Chairman of the Board   Attorney
    Yale School of Medicine
                                     Janis M. Hadley                 John G. Phelan
    Collin P. Baron                  President, Housatonic           Retired Chief Executive Officer,
    Member, Pullman & Comley, LLC    Community College               Fletcher Thompson, Inc.

    Robert B. Bruner                 Betty Ruth Hollander            Glenda Copes Reed
    President, Mount Sinai           Chairman and CEO,               Retired Vice President,
    Hospital Foundation              Omega Technologies, Inc.        Aetna, Inc.

    George P. Carter                 Richard M. Hoyt                 Martin C. Shapiro
    President and CEO,               President and CEO,              Private Investor
    Connecticut Foods, Inc.          Chapin & Bangs Co.;
                                     Chairman and CEO,               James A. Thomas
    Joseph E. Clancy                 Lindquist Steels, Inc.          Chairman of the Board;
    Retired Chairman,                                                Associate Dean,
    Bridgeport Machines, Inc.        John A. Klein                   Yale Law School
                                     Chairman, CEO and President,
    Jerry Franklin                   People’s Bank                   Louis H. Ulizio, Jr.
    President and CEO, Connecticut                                   Retired Executive Vice President,
    Public Television & Radio                                        People’s Bank




2003 Annual Report                                                                             People’s Bank   97
STO C K H O L D E R I N FO R M AT I O N

STOCK LISTING

People’s Bank common stock is traded on the NASDAQ
National Market System under the trading symbol PBCT

2003 TOP TEN MARKET MAKERS
IN PBCT COMMON STOCK

Advest, Inc.
Bear, Stearns & Co. Inc.
Citigroup Global Markets Inc.
Goldman, Sachs & Co.
Keefe, Bruyette & Woods, Inc.
Knight Equity Markets, L.P.
Merrill Lynch, Pierce, Fenner
Morgan Stanley & Co., Inc.
National Stock Exchange
Ryan Beck & Co. Inc.


ANNUAL MEETING

The Annual Meeting of stockholders is
Thursday, April 15, 2004,
at 10 a.m., at Bridgeport Center,
850 Main Street,
Bridgeport, Connecticut

TRANSFER AGENT

Please direct address changes and inquiries regarding stock
transfer and registration to:

Mellon Investor Services, LLC
85 Challenger Road
Ridgefield Park, NJ 07660
www.mellon-investor.com
800-953-2592

P E O P L E ’ S B A N K I N V E S T O R R E L AT I O N S

Comprehensive investor information is available at
www.peoples.com

Press releases are also available on PR Newswire’s web site at
www.prnewswire.com

PLEASE DIRECT INVESTOR COMMENTS
AND QUESTIONS TO:

Vincent J. Calabrese
Senior Vice President and Controller
203-338-4114
Vincent.Calabrese@peoples.com




98   2003 Annual Report
People’s Bank
850 Main Street
Bridgeport, Connecticut 06604
peoples.com                     Member FDIC

				
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