March 18, Dear Shareholder:

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1 March 18, 2004 Dear Shareholder: On behalf of the Board of Directors, I cordially invite you to attend the 2004 Annual Meeting of People s Bank shareholders at Bridgeport Center, 850 Main Street, Bridgeport, Connecticut on Thursday, April 15, 2004 at 10:00 a.m. The accompanying Proxy Statement details the actions on which you are asked to vote at the Annual Meeting. Please read it carefully. I hope you will attend the Annual Meeting but if you cannot, I urge you to complete, sign and date the enclosed proxy card and return it promptly in the postage-paid envelope to ensure that your shares are represented. You may also choose to cast your vote by telephone or via the Internet, instead of by mail. If you have any questions about your proxy card, voting procedures or other matters in the Proxy Statement, please feel free to call our Investor Relations Department at (203) On behalf of our board, our management team and all of our employees, I want to thank you for your investment in People s and the continued opportunity to work for you. Sincerely, John A. Klein Chairman, Chief Executive Officer and President

2 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 15, 2004 NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the Annual Meeting ) of People s Bank ( People s ) will be held on Thursday, April 15, 2004, at 10:00 a.m. local time at Bridgeport Center, 850 Main Street, Bridgeport, Connecticut, for the following purposes: 1. To elect three directors who, with the seven directors whose terms of office do not expire at the Annual Meeting, will constitute the full Board of Directors of People s. 2. To consider and vote upon a proposal to amend the People s Bank 1998 Long-Term Incentive Plan. 3. To consider and vote upon a proposal to amend the Articles of Incorporation of People s Bank. 4. To act on any other proposal that may properly come before the Annual Meeting or any adjournment or postponement thereof. The Board of Directors has fixed the close of business on March 1, 2004 as the record date for determination of shareholders entitled to notice of and to vote at the Annual Meeting or at any adjournments or postponements thereof (the Record Date ). Record holders of People s Bank Common Stock as of the Record Date are entitled to vote at the Annual Meeting. A list of the holders of People s Common Stock entitled to vote at the Annual Meeting will be available for inspection on written request by any People s shareholder at People s headquarters, located at Bridgeport Center, 850 Main Street, Bridgeport, Connecticut , during normal business hours beginning two days after the date of this Notice and continuing through the date of the Annual Meeting.

3 EACH SHAREHOLDER IS URGED TO COMPLETE AND RETURN PROMPTLY THE ACCOMPANYING PROXY, WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE ANNUAL MEETING. YOU MAY CAST YOUR VOTE BY TELEPHONE OR VIA THE INTERNET INSTEAD IF YOU SO CHOOSE. IF YOU WERE A SHAREHOLDER OF RECORD ON THE RECORD DATE AND ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY OR TELEPHONE OR INTERNET VOTE AND VOTE IN PERSON. By Order of the Board of Directors Bridgeport, Connecticut March 18, 2004 Susan D. Stanley, Secretary

4 PROXY STATEMENT General This Proxy Statement is furnished to the shareholders of People s Bank ( People s or the Bank ) in connection with the solicitation of proxies by the People s Board of Directors for use at the 2004 Annual Meeting of Shareholders (including any adjournment or postponement thereof, the Annual Meeting ) to be held on Thursday, April 15, 2004 at 10:00 a.m. local time at Bridgeport Center, 850 Main Street, Bridgeport, Connecticut. At the Annual Meeting, holders of the common stock, no par value per share, of People s (the Common Stock ) will be asked to elect three directors; to consider and vote upon a proposal to amend the People s Bank 1998 Long-Term Incentive Plan (the LTIP ); to consider and vote upon a proposal to amend the Articles of Incorporation of People s Bank; and to act on any other proposal that may properly come before the Annual Meeting or any adjournment or postponement thereof. This Proxy Statement and the enclosed form of proxy are first being mailed to shareholders of People s on March 18, Proxies The accompanying form of proxy is for use at the Annual Meeting if a shareholder will be unable to attend in person or wishes to have his or her shares voted by proxy even if such shareholder does attend the meeting. In lieu of completing the accompanying form of proxy, a shareholder may cast a proxy vote by telephone or via the Internet, by following the telephone or Internet voting instructions printed on the proxy card. A vote cast by written proxy or by proxy authorized by telephone or via the Internet may be revoked by the shareholder, at any time before it is exercised, by submitting to the Corporate Secretary of People s written notice of revocation or a properly executed proxy bearing a later date, by casting a subsequent vote by telephone or via the Internet, or by attending the meeting and voting in person. However, attendance at the Annual Meeting will not in and of itself constitute revocation of a proxy or other previously cast vote. Written notices of revocation and other communications with respect to the revocation of proxies should be addressed to People s Bank, Bridgeport Center, 850 Main Street, Bridgeport, Connecticut , Attention: Corporate Secretary. In addition, any shareholder whose shares of Common Stock are not registered in his or her name will need additional documentation from the record holder(s) of such shares to vote in person at the Annual Meeting. All shares of Common Stock represented by properly executed or telephonically or electronically authorized proxies received pursuant to this solicitation, and not subsequently revoked, will be voted at the Annual Meeting in the manner specified therein. If no specification is made, the proxies will be voted FOR

5 the election of each of the nominees for director identified in this Proxy Statement; FOR the proposal to amend the LTIP; FOR the proposal to amend the Articles of Incorporation of the Bank; and, in the discretion of the proxy holders, as to any other matter that may properly come before the Annual Meeting. The entire cost of soliciting proxies will be borne by People s. In addition to the solicitation of proxies by mail, People s will request banks, brokers and other record holders to send proxies and proxy material to the beneficial owners of the stock and secure their voting instructions, if necessary. People s will reimburse such record holders for their reasonable expenses in doing so. If necessary, People s may also use its regular employees, who will not be specially compensated, to solicit proxies from shareholders, either personally or by telephone, telegram, facsimile, or special or express delivery letter. Record Date and Voting Rights The Board of Directors has fixed March 1, 2004 as the record date (the Record Date ) for determining People s shareholders entitled to notice of and to vote at the Annual Meeting. Accordingly, only holders of record of shares of Common Stock at the close of business on that date will be entitled to notice of and to vote at the Annual Meeting. On the Record Date, there were approximately 7,050 holders of record of the Bank s Common Stock and 62,342,892 shares of Common Stock outstanding. Shares representing a majority of the votes entitled to be cast at the Annual Meeting must be present in person or by proxy at the Annual Meeting in order for a quorum to be present. Shares of Common Stock present but not voting, and shares for which proxies have been received but with respect to which holders of such shares have abstained, will be counted as present for purposes of determining the presence or absence of a quorum for the transaction of business at the Annual Meeting. Furthermore, shares represented by proxies returned by a broker holding such shares in nominee or street name will be counted for purposes of determining whether a quorum exists, even if such shares are not voted in matters where discretionary voting by the broker is not allowed ( broker non-votes ). Abstentions from voting and broker non-votes will not be deemed to have been cast either for or against approval of the matters to be considered and voted upon at the Annual Meeting. Under Connecticut law and People s Articles of Incorporation, abstentions from voting and broker non-votes will have the practical effect of votes against the approval of all matters presented for shareholder action at the Annual Meeting. Each share of Common Stock entitles a holder of record on the Record Date to one vote on each matter to be presented at the Annual Meeting, and all such shares vote together as a single class. Directors will be elected by a plurality of the votes cast by the shares of Common Stock entitled to vote at the Annual Meeting, so long as the nominee also receives the affirmative vote of at least a majority of the shares of Common Stock outstanding and entitled to vote at the Annual Meeting. A plurality means that the nominees with the largest number of votes are elected as directors, up to the maximum number of directors to be elected at the Annual Meeting. All other matters presented to the shareholders for determination require the affirmative vote of a majority of the outstanding shares of Common Stock entitled to vote at the Annual Meeting. 2

6 Security Ownership of Certain Beneficial Owners As reflected in the following table, as of February 1, 2004, People s Mutual Holdings ( Holdings ) beneficially owned 36,450,000 shares of the Common Stock. Holdings is a mutual-form bank holding company governed by a 17-member Board of Trustees. Seven members of People s Board of Directors also serve as Trustees of Holdings. Holdings is the only person known to or believed by the Bank to be the beneficial owner of more than five percent of the Common Stock. Holdings has sole voting and investment power with respect to the shares owned by it. Title of Class Name and Address of Beneficial Owner Common People s Mutual Holdings... Bridgeport Center 850 Main Street Bridgeport, Connecticut Amount and Nature of Beneficial Ownership Percent of Class 36,450, % 3

7 Security Ownership of People s Management The following table sets forth, as of February 1, 2004, the beneficial ownership of Common Stock by each director, each nominee for election as a director, each Named Executive Officer (as defined below) who is not also a director, and by all directors and executive officers as a group. Except as indicated in the notes following the table, each person has sole voting and investment power with respect to the shares listed as being beneficially owned by such person. Common Stock Amount and Nature of Beneficial Ownership Directors and Nominees Collin P. Baron... 15,750(a) * George P. Carter... 14,611(a) * JerryFranklin... 6,824(a) * EuniceS.Groark... 7,800(a) * JanetM.Hansen... (b) * Betty Ruth Hollander ,680(a)(c) * RichardM.Hoyt... 8,500(a) * JohnA.Klein ,587(d) * JeremiahJ.Lowney,Jr.... 9,000(a) * Jack E. McGregor... 9,206(a)(e) * James A. Thomas... 6,011(a) * Percent of Class Named Executive Officers Robert R. D Amore... 63,667(d) * BrianF.Dreyer... 57,308(d)(f) * William T. Kosturko ,250(d) * Philip R. Sherringham... 3,700(d) * All Directors, Nominees and Executive Officers as a Group (19 persons)... 1,038,859(d) 1.66% * Denotes beneficial ownership of less than one percent of the outstanding shares of Common Stock. (a) Includes shares of Common Stock awarded under the People s Bank Directors Equity Compensation Plan (4,750 for Mr. Baron; 4,000 for Mr. Hoyt; 5,000 for all other non-employee directors except for Mrs. Hansen), which are subject to restrictions on transfer for a specified period of time. (b) Mrs. Hansen was not a director on February 1, 2004, the date as of which this table was prepared. (c) Includes 180,500 shares owned jointly by Mrs. Hollander and her spouse; 6,000 shares held for Mrs. Hollander s benefit in an individual retirement account; and 57,180 shares held in an individual retirement account for the benefit of Mrs. Hollander s spouse. Mrs. Hollander disclaims beneficial ownership of shares owned for the benefit of her spouse. 4

8 (d) Includes shares of Common Stock subject to restrictions, held indirectly through benefit plans, or subject to acquisition within 60 days, as follows: Shares listed in the following table are subject to forfeiture if certain conditions are not satisfied: Name Shares JohnA.Klein... 41,250 Robert R. D Amore... 11,925 Brian F. Dreyer (f)... 15,950 William T. Kosturko... 9,300 Philip R. Sherringham... 3,700 All Directors, Nominees and Executive Officers as a Group ,125 Shares listed in the following table are allocated under the Bank s 401(k) Employee Savings Plan (the Savings Plan ) to the participants listed below who have Savings Plan balances invested in the Bank Stock Fund: Name Shares JohnA.Klein... 34,786 Robert R. D Amore... 8,054 Brian F. Dreyer (f)... 4,258 William T. Kosturko... 9,385 Philip R. Sherringham... All Directors, Nominees and Executive Officers as a Group... 87,428 The persons listed in the following table have the right to acquire the listed number of shares within 60 days from February 1, 2004, whether upon the exercise of stock options or otherwise: Right to Name Acquire JohnA.Klein ,975 Robert R. D Amore... 34,388 Brian F. Dreyer (f)... 35,450 William T. Kosturko... 58,175 Philip R. Sherringham... All Directors, Nominees and Executive Officers as a Group ,888 (e) (f) Includes 2,106 shares held for the benefit of Mr. McGregor in an individual retirement account, and 1,100 shares held for the benefit of Mr. McGregor in an investment management account maintained with People s trust department. Includes shares of Common Stock held by Mr. Dreyer s spouse which are subject to restrictions (2,675 shares), held indirectly through benefit plans (2,460 shares), or subject to acquisition within 60 days (12,425 shares). 5

9 ITEM I. ELECTION OF DIRECTORS The Bank s Articles of Incorporation and Bylaws provide for the election of directors by the shareholders and for the division of the Board of Directors into three classes of directors as nearly equal in number as reasonably possible. The terms of office of the members of one class expire and a successor class is elected for a three-year term at each annual meeting of shareholders. The Bank s Bylaws provide that there will be between nine and sixteen members of the Board of Directors, as fixed by resolution of the Board of Directors. The Board of Directors has resolved that there will be ten members of the Board. The terms of Janet M. Hansen, Betty Ruth Hollander, Jeremiah J. Lowney, Jr., and Jack E. McGregor expire at the Annual Meeting. Mrs. Hansen, Dr. Lowney and Mr. McGregor have each been nominated for re-election for a three-year term expiring at the annual meeting of shareholders in Mrs. Hollander, a director of the Bank since 1982 and a member of the Board of Trustees of Holdings, will retire from the Board of Directors of the Bank at the expiration of her term at the Annual Meeting. She will remain on the Board of Trustees of Holdings until the expiration of her current term in July People s extends its sincere gratitude to Mrs. Hollander for her many years of dedicated service as a director. Directors elected at the Annual Meeting will serve until their respective successors have been elected and qualified. Each nominee has consented to being named in this Proxy Statement and to serve as a director of People s if elected. It is the intention of the persons named in the proxy to vote shares under the authority granted by the proxy for the election of all nominees named below. If any of the nominees should be unable to serve, the persons named in the form of proxy will use their discretion in voting the shares represented by such proxies. Certain information concerning the nominees and the directors continuing in office, including the business experience of each during the past five years, is set forth below. The Board of Directors recommends that shareholders vote FOR the election of each of the nominees listed below. NOMINEES TO THE BOARD OF DIRECTORS Janet M. Hansen is Executive Vice President of Aquarion Company ( Aquarion ), a diversified water management company, and Chairman of its principal operating subsidiary, Aquarion Water Company ( Aquarion Water ). Mrs. Hansen has served as Executive Vice President of Aquarion since 1995, and also served as its Chief Financial Officer from 1992 through She was President and Chief Executive Officer of Aquarion Water from 2000 to

10 Mrs. Hansen, who became a member of the Bank s Board of Directors in February 2004, is 61 years old. She is a member of the Audit and Trust Committees. She also serves on the Board of Directors of Bridgeport Hospital. Jeremiah J. Lowney, Jr., D.D.S. is an orthodontist whose practice has been based in the Norwich, Connecticut area for more than 30 years. Dr. Lowney has also served since 1982 as the President of the Haitian Health Foundation, a health care facility that provides humanitarian health services in Haiti. Dr. Lowney served as a director of Norwich Financial Corp. ( NFC ) and The Norwich Savings Society ( NSS ) until the merger of NFC and NSS into People s in February 1998, when he became a director of People s. Dr. Lowney is a member of the Audit, Investment and Operational Risk Committees. He is 67 years old. Jack E. McGregor is a managing member of the investment firms of Bridgeport Waterfront Investors, LLC and Freeborn Investors, LLC, and is of counsel to the law firm of Cohen and Wolf, P.C. Mr. McGregor was Chairman of the Board of Aquarion until October 1, Mr. McGregor served as Aquarion s President from 1987 to 1995 and Chief Executive Officer from 1990 to Mr. McGregor retired as a director of Aquarion on January 10, He continues to serve as a director of Aquarion Water (an indirect subsidiary of Kelda Group plc), and CDG Technology, Inc. Mr. McGregor has been a director of People s since He is Chairman of the Operational Risk Committee, and serves as a member of the Executive, Investment and Loan Review Committees. Mr. McGregor is 69 years old. INFORMATION CONCERNING DIRECTORS CONTINUING IN OFFICE Terms Expiring at the 2005 Annual Meeting Collin P. Baron is a member of the law firm of Pullman & Comley, LLC. He has been affiliated with the firm since Mr. Baron became a director of People s in 2001 and is a Trustee of Holdings. He is Chairman of the Investment Committee and serves as a member of the Executive and Loan Review Committees. Mr. Baron is 56 years old. Richard M. Hoyt is President and Chief Executive Officer of Chapin & Bangs Co., a steel service center, and is Chairman and Chief Executive Officer of Lindquist Steels, Inc., a distributor of tool steel. He has occupied each of these positions for more than five years. Mr. Hoyt also serves as Chairman of the Board of Bridgeport Hospital, and as a member of the board of Yale New Haven Health Services Corp. 7

11 Mr. Hoyt, who is also a Trustee of Holdings, was first elected as a director of People s in He is 61 years old. Mr. Hoyt is a member of the Audit, Investment, and Trust Committees. John A. Klein became President of People s on June 1, 1999, Chief Executive Officer on October 1, 1999 and Chairman of the Board of Directors on January 1, Mr. Klein has served in a variety of capacities since beginning his career at People s in 1971, most recently serving as Executive Vice President (Credit Card Services). Mr. Klein, who is 55, first became a member of People s Board in He is a member of the Executive, Investment, and Operational Risk Committees. Mr. Klein also serves as a Trustee of Holdings. Terms Expiring at the 2006 Annual Meeting George P. Carter is the President of Connecticut Foods, Inc., a corporation that owns two restaurants in Connecticut. Mr. Carter was first elected to the Board in 1976 and is a Trustee of Holdings. He is Vice Chairman of the Board and serves as Chairman of People s Audit and Executive Committees and as a member of People s Operational Risk, Human Resources and Loan Review Committees. Mr. Carter is 67 years old. Jerry Franklin is the President and Chief Executive Officer of Connecticut Public Broadcasting Inc., a position he has held since Mr. Franklin was elected to the Board of Directors in 1997 and is a member of People s Audit, Executive, and Human Resources Committees. Mr. Franklin also serves as Chairman of the Loan Review Committee. He is 56 years old and serves as a Trustee of Holdings. Eunice S. Groark, a self-employed attorney in Hartford, Connecticut, served as Lieutenant Governor of the State of Connecticut from 1991 until January She currently serves as a Trustee of the Phoenix Edge Series Fund. Mrs. Groark was first elected to the Board of Directors in She is Chairman of the Trust Committee and is a member of the Audit, Executive and Operational Risk Committees. She is 66 years old. James A. Thomas is Associate Dean at Yale Law School, a position he has held since 1969, and served as Master of Saybrook College of Yale University from 1990 to Mr. Thomas, who serves as Chairman of the Board of Trustees of Holdings, was elected to the Board of Directors of the Bank in He serves as Chairman of the Human Resources Committee, and is a member of the Executive, Loan Review and Trust Committees. 8

12 Mr. Thomas is also a director of Imagistics International Inc. and UIL Holdings Corporation, the holding company for the United Illuminating Company. Mr. Thomas is 64 years old. Except as set forth above, during the past five years no director or nominee has had a principal occupation or employment with People s, Holdings or any of their subsidiaries or other affiliates. No director or nominee is related by blood, marriage or adoption to an executive officer of People s or Holdings or any of their subsidiaries or other affiliates. With the exception of Messrs. Klein and Baron, each person nominated for reelection as a director at the Annual Meeting and each of the directors continuing in office is independent for purposes of the applicable listing standards of The Nasdaq Stock Market, Inc. People s has seven standing committees: the Audit Committee; the Human Resources Committee (which performs the functions of a nominating committee and a compensation committee); the Investment Committee; the Loan Review Committee; the Trust Committee; the Executive Committee; and the Operational Risk Committee. The Audit Committee met 17 times during The Audit Committee was established in accordance with Section 3(a)(58)(a) of the Securities Exchange Act of Each member of the Audit Committee is independent, as that term is defined in Rule 4200(a)(15) of the revised listing standards of The Nasdaq Stock Market, Inc. Each member of the Audit Committee also satisfies the more stringent definition of independence required for members of audit committees generally, as set forth in Rule 4350(d)(2)(A) of the revised listing standards of The Nasdaq Stock Market, Inc. The members of the Audit Committee are George P. Carter (Chairman), Jerry Franklin, Eunice S. Groark, Janet M. Hansen, Richard M. Hoyt, and Jeremiah J. Lowney, Jr. The Audit Committee is responsible for monitoring the accounting practices and internal controls of People s, including the supervision of an annual audit of People s financial statements by certified public accountants. People s Board of Directors has adopted a written charter for the Audit Committee, including provisions recognizing the specific audit committee responsibilities imposed by the Sarbanes-Oxley Act of 2002, Securities and Exchange Commission ( SEC ) rules implementing that Act, and recent changes to the listing standards of The Nasdaq Stock Market, Inc. A copy of the charter, as amended to date, is attached as Exhibit A to this Proxy Statement. The Human Resources Committee, which is comprised of James A. Thomas (Chairman), George P. Carter, and Jerry Franklin, met 12 times during Each member of the Committee is independent, as that term is defined in Rule 4200(a)(15) of the revised listing standards of The Nasdaq Stock Market, Inc. The Committee is responsible for making policy decisions concerning the compensation and benefit programs maintained by People s, and conducts periodic performance reviews of the senior and executive officers of People s. The Committee also recommends nominees for election as directors to the full Board of Directors. Detailed information about the director nomination process and the Committee s role in that process is set forth below under the heading Director Nomination Process. A current copy of the Human Resources 9

13 Committee charter is available on the Bank s website at The Bank s Investment Committee is responsible for approving policies and strategies for, and reviewing the investments and financial activities of, the Bank s Investments and Treasury group. The Investment Committee is also charged with reviewing and approving the Bank s asset/liability strategies, including wholesale funding, interest rate risk management and the Bank s asset securitization program. The Investment Committee met ten times during Collin P. Baron is the Chairman of the Investment Committee; its other members are Richard M. Hoyt, John A. Klein, Jeremiah J. Lowney, Jr. and Jack E. McGregor. The members of the Bank s Loan Review Committee are Jerry Franklin (Chairman), Collin P. Baron, George P. Carter, Betty Ruth Hollander, Jack E. McGregor, and James A. Thomas. The Loan Review Committee, which met 24 times during 2003, is charged with reviewing and approving strategies, planning and procedures concerning People s commercial, commercial real estate, consumer and community lending activities, reviewing lending activities of the Bank, and where appropriate, approving loans brought before the Committee for approval. Eunice S. Groark is the Chairman of the Bank s Trust Committee. Janet M. Hansen, Richard M. Hoyt and James A. Thomas are also members of the Trust Committee, which met four times during The Trust Committee is responsible for making policy for, and reviewing the financial and fiduciary status of, the Bank s Trust Department. The members of People s Executive Committee are George P. Carter (Chairman), Collin P. Baron, Jerry Franklin, Eunice S. Groark, John A. Klein, Jack E. McGregor and James A. Thomas. The Executive Committee may formulate and recommend to the Board of Directors for approval general policies regarding the management and affairs of People s, and may perform such other functions as are provided in the Bylaws of the Bank or as directed by the Board of Directors. The Executive Committee met three times during The Operational Risk Committee is responsible for formulating a bank-wide framework to manage operational risk as a distinct type of potential risk to the safety and soundness of the Bank. This committee will receive and evaluate information from both internal and external sources relating to perceived operational risks and to the Bank s ongoing efforts to manage such risks, and will make reports and recommendations to the full Board as appropriate with respect to operational risk issues. This committee, which is comprised of Jack E. McGregor (Chairman), George P. Carter, Eunice S. Groark, John A. Klein, and Jeremiah J. Lowney, Jr., met five times in The Board of Directors met 14 times during No director attended fewer than 75% of the aggregate of (a) the total number of meetings of the Board of Directors held while he or she was a director and (b) the total number of meetings held by all committees of the Board on which he or she served. The Board of Directors encourages all Board members to attend the Annual Meeting of Shareholders. All ten individuals serving as directors at the time of the 2003 Annual Meeting attended that meeting. 10

14 Communications with the Board Shareholders who wish to communicate with the Board of Directors or with individual members of the Board may address correspondence to the Board or to a director, c/o Corporate Secretary, People s Bank, 850 Main Street, Bridgeport, CT The Corporate Secretary will review all correspondence addressed to the Board or to a director, and will handle each item in accordance with procedures that have been approved by the independent directors. The policies described in this section do not apply to shareholder proposals made pursuant to SEC Rule 14a-8, or to communications relating to such proposals. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934 requires the Bank s directors and executive officers, and persons who own more than 10% of the Common Stock, to file initial reports of ownership and reports of changes in ownership of the Common Stock with the Federal Deposit Insurance Corporation (the FDIC ). Directors, executive officers and 10% shareholders are required by FDIC regulations to furnish the Bank with copies of all Section 16(a) reports filed. Based solely on a review of the reporting forms received by the Bank, and written representations that no other reports were required, People s believes that all Section 16(a) filing requirements were satisfied for fiscal year Compensation Committee Interlocks and Insider Participation The Human Resources Committee of the Bank s Board of Directors is composed solely of individuals who are neither officers nor employees of People s, Holdings or any of their respective subsidiaries. The members of the Human Resources Committee are James A. Thomas (Chairman), George P. Carter, and Jerry Franklin. Director Nomination Process The Human Resources Committee will consider qualified nominees recommended by shareholders of record. Shareholder nominations must be submitted in writing to People s Bank, Bridgeport Center, 850 Main Street, Bridgeport, Connecticut 06604, Attention: Corporate Secretary, no later than 120 days in advance of the next annual meeting at which directors will be elected or, with respect to an election to be held at a special meeting of shareholders for the election of directors, no later than the close of business on the seventh day following the earlier of (i) the date on which notice of such meeting was first given to shareholders, or (ii) the date on which a public announcement of such meeting was first made. Each shareholder nomination must include: the name and address of each shareholder of record who intends to appear in person or by proxy to 11

15 make the nomination; the name and address of each person being nominated; a description of all arrangements or understandings between the shareholder(s) submitting the nomination and the nominee(s) and any other person(s) (including the name of such person(s)) concerning the nomination (s) to be made by the shareholder(s); such other information regarding each nominee proposed by such shareholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the SEC; and the consent of each nominee to serve as a director of the Bank if elected. In evaluating the qualifications of proposed candidates for nomination to the board, including candidates recommended by shareholders, the Committee will consider the following factors: Minimum qualifications The Committee will not nominate any person for election to the Board of Directors if, in the opinion of the Committee: actual or apparent conflicts of interest exist that would substantially interfere with the ability of such person to fulfill his or her duties as a director; the person would not, or could not, effectively represent the best interests of the Bank and all of its shareholders; board service would be prohibited under any applicable law or regulation, including, but not limited to, the FDIC s rules prohibiting interlocking directorships; the nomination did not comply with the requirements of Section 7.3 of the Bank s Articles of Incorporation. Other Factors In addition to the minimum qualifications outlined above, in evaluating proposed nominees, the Committee will consider the following factors: whether, in the opinion of the Committee, the nominee exhibits personal qualities, including personal and professional integrity, judgment and collegiality, that will ensure that the nominee will work effectively with the rest of the Board in serving the long-term best interests of the Bank and its shareholders; the skills, personal attributes and professional qualifications of the nominee, in light of the total mix of skills, personal attributes and professional qualifications found within the Board as a whole; the extent to which the nominee would enhance the diversity of perspective and life experience among members of the Board; whether, in the opinion of the Committee, the nominee has demonstrated a commitment to the betterment of the communities that People s serves; whether the nominee would be considered independent for purpose of service on the Board or any of its committees. Lack of independence shall not, by itself, render a candidate unqualified for 12

16 Board service; however, it is the Board s intention that a substantial majority of Board members shall at all times qualify as independent under the listing standards of The Nasdaq Stock Market, Inc. and any other applicable laws or regulations. Audit Committee Report The Audit Committee has: (1) reviewed and discussed the Bank s audited consolidated financial statements for the year ended December 31, 2003 with management of People s; (2) discussed with KPMG LLP, independent auditors for People s, the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees); (3) received the written disclosures and the letter from KPMG LLP required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees); and (4) has discussed with KPMG LLP its independence. Based on the review and discussions referred to in the preceding paragraph, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements of the Bank for the fiscal year ended December 31, 2003 be included in People s Annual Report on Form 10-K for filing with the FDIC. People s Bank Audit Committee George P. Carter, Chairman Jerry Franklin Eunice S. Groark Janet M. Hansen Richard M. Hoyt Jeremiah J. Lowney, Jr. 13

17 EXECUTIVE COMPENSATION Human Resources Committee Report on Executive Compensation The Human Resources Committee of the Board of Directors is composed of three independent, nonemployee directors, and is generally responsible for oversight of the Bank s compensation and benefit policies. The Committee also reviews the performance and administers the compensation of the Bank s executive officers, including the Chief Executive Officer and the other Named Executive Officers (as defined below). For several years, the Committee has retained the services of an outside executive compensation consultant to assist it in discharging these responsibilities. Executive Officer Compensation The executive compensation program is designed to promote an alignment of shareholder and management interests in the long-term success of People s, as well as to assist the Bank in its efforts to attract, motivate and retain key executives. Overall Pay Positioning: People s positions its total direct compensation (aggregate base salary plus annual (short-term) and long-term incentive compensation) at levels which are competitive with comparable financial institutions and certain other businesses. Information concerning competitive compensation practices is based on data included in several nationwide and regional executive compensation surveys (the Comparison Surveys ). The Committee reviews analyses of published survey data from financial institutions with asset size comparable to People s. The Committee believes that this analysis is an appropriate and effective method for establishing suitable levels of compensation. Components of Compensation: There are three principal components to the Bank s executive compensation program: base salary, annual incentive compensation, and long-term incentive compensation. The Committee administers each component of executive compensation to be competitive with comparable positions at institutions included in the Comparison Surveys and to achieve specific Bank objectives, as described below. Base Salary: Base salary levels are reviewed annually by the Committee and are determined by evaluating (a) the individual executive s level of experience, on-going performance and the responsibilities associated with the particular position, and (b) levels and trends in base salary levels in selected financial and non-financial companies and in the banking industry in general. In 2003, the base salary of the Bank s executives (including the Named Executive Officers) increased on average by approximately 3.7%. Annual Incentives: Annual incentives are paid from a bonus pool that is funded at a level dependent on the Bank s performance. After the pool funding percentage has been determined, incentives earned by executives are based on executives individual attainment of key performance measures linked to the Bank s strategic business goals. The preliminary incentive award amount for a given executive may then 14

18 be adjusted to reflect the executive s demonstrated skill in nine key leadership competencies: know the business; drive results and change; be customer centric; demonstrate functional excellence; be accountable and committed;, develop yourself and others; foster teamwork; communicate effectively; and people management. The preliminary incentive award amount may be adjusted upwards or downwards to account for these factors. In 2003, the Bank s performance was measured against its ability to achieve a level of earnings per share established by the Committee. For 2003, annual incentive target awards were 70% of base salary for the President and Chief Executive Officer, and between 40% and 50% of base salary for all other executive officers. The annual incentive program in effect for 2003 could produce award amounts ranging from 0% to 150% of target awards. For 2003, the Bank s earnings per share were up 14 percent over 2002, resulting in funding for incentive target awards at 98% of the goal established by the Committee. Based on the funding available for payment of awards, the attainment of various percentages of key performance measures, and the application of behavior-based adjustments, payouts to all executive officers as a group (excluding the Chief Executive Officer) averaged 98% of target awards. Long-Term Incentives: Long-term incentives may be awarded through a combination of stock-price appreciation units, stock options, restricted stock grants (RSGs) and performance units. At the time of grant, the Committee determines the appropriate mix of these various types of awards to executives. This decision is based on an analysis of the practices of institutions included in the Comparison Surveys, input from outside consultants, and on the Committee s goal of targeting long-term awards at levels competitive with institutions included in the Comparison Surveys. Actual long-term incentive award values earned by executives are either entirely dependent on the price of People s Common Stock (for grants in the form of stock options, RSGs or stock price appreciation units) or, in the case of performance units, on the financial performance of the Bank for each year during the award cycle. Grants in 2003: In 2003, a total of 97,150 options and 17,600 RSGs were issued to the executive officers of the Bank excluding the CEO. 70,250 of the options were issued in February at an exercise price of $25.11, while the remaining 26,900 options were granted in April to Mr. Sherringham at an exercise price of $ as part of his executive offer of employment. All options and all RSGs issued to these executives in 2003 will vest 50% February 1, 2005, 25% on February 1, 2006, and 25% on February 1, In 2003, each executive also received an award of performance units, with each unit having a nominal target value equal to 1% of the recipient s base salary on the date of grant. Actual payouts for these performance units will be based on the Bank s performance during the three year performance period ending December 31, Payouts of Performance Units. Performance unit payouts made in 2003 to the executive officer group (excluding the CEO) totaled $335,286. Payouts for these units were based on the Bank s performance during the two-year performance cycle ended December 31,

19 Policy on Deductibility of Compensation. Section 162(m) of the Internal Revenue Code limits the deductibility for Federal income tax purposes by a company of compensation in excess of $1 million paid to its Chief Executive Officer and the four other most highly compensated executive officers, unless certain requirements for performance-based compensation are satisfied. The Committee has taken actions, to the extent it believes appropriate, to preserve the deductibility of annual and long term incentive awards. The Committee also believes that the Bank needs flexibility to meet its incentive and retention objectives, even if the Company may not deduct all of the compensation in excess of $1 million. The Committee intends to continue its policy of taking the deductibility of executive compensation into consideration in all compensation decisions. Chief Executive Officer Compensation The Chief Executive Officer of the Bank participates in the executive compensation program described above. In general, the measurements governing the compensation paid to the Chief Executive Officer are the same as those covering the other executive officers. The full Board of Directors approves Mr. Klein s compensation package. The Committee believes that the Bank is well on the path to achieving its strategic goals under Mr. Klein s stewardship. In 2003 the Bank continued to make significant progress in strengthening its balance sheet and improving its core financial performance. Specifically, the Bank grew earnings per share by 14 percent in 2003 as compared to the year This increase in earnings occurred in the face of increased interest rate margin compression, caused principally by an interest rate environment in which key interest rate indicators were at forty-year lows. In response to these factors, the Bank consciously reduced the size of its securities portfolio, electing to forego slightly higher net interest income in order to protect against the impact of significant swings in interest rates. In addition, the Committee was influenced by the progress made in expanding and solidifying the Bank s Connecticut franchise. Among the Bank s achievements were the continued growth of its distribution network through its relationship with Stop & Shop and the University of Connecticut. Similarly, the Bank was once again among the leading residential mortgage originators in Connecticut, closing over $3.0 billion in loans during the year. The Bank s total loan portfolio, on a managed basis, grew by $700 million in Commercial demand deposits grew by 6 percent and retail demand deposits by 14 percent in 2003, with total deposits increasing to $8.7 billion by year end. These accomplishments were achieved at the same time that the Bank managed to reduce non-interest expense by approximately $6 million on a year-to-year basis. Another fundamentally encouraging development was the improved performance of Credit Card Services during Managed net charge-offs decreased over the course of the year, and the level of managed credit card receivables increased by $300 million during These developments helped the Credit Card Services division to return to profitability in the last two quarters of

20 The final consideration affecting the Committee s review is the 29% increase in the price of the Bank s Common Stock from January 1, 2003 to December 31, This increase in share value, accompanied by the dividends paid by the Bank during 2003, represents a substantial accretion in total shareholder value over the course of the year. Base Salary: Based on the Committee s assessment of Mr. Klein s and the Bank s performance in 2002, Mr. Klein s base salary was increased in 2003 by 3% to $706,000. Mr. Klein s base salary remains competitive with salary levels for Chief Executive Officers in financial institutions of similar asset size. Annual Incentive Compensation: For 2003, the Committee granted Mr. Klein an annual incentive award of $634,316. This award was based on Mr. Klein s role in the Bank s progress towards achieving its strategic and operational goals, and consideration of Mr. Klein s leadership behaviors. Long-Term Incentive Compensation: Mr. Klein received a $288,984 payout in 2003 of performance units, based on the Bank s performance during the two-year performance period ended December 31, Information about long-term incentive compensation awards (options, RSGs and performance units) made to Mr. Klein in 2003, and amounts realized by Mr. Klein in 2003 on the exercise of options awarded in prior years, is set forth elsewhere in the Proxy Statement in which this Report appears. People s Bank Human Resources Committee James A. Thomas, Chairman George P. Carter Jerry Franklin 17

21 Compensation of Executive Officers The following table sets forth a summary for the last three fiscal years of the cash and non-cash compensation paid or awarded by People s to its Chief Executive Officer and to its four most highly compensated executive officers, other than the Chief Executive Officer, who were serving as executive officers at the end of the 2003 fiscal year (collectively, the Named Executive Officers ). SUMMARY COMPENSATION TABLE Annual Compensation Long-Term Compensation Awards Payouts Name and Principal Position Year Salary ($) Bonus ($) Other Annual Compensation ($) Restricted Stock Awards (a)(b) ($) Options (b) (#) LTIP Payouts ($) All Other Compensation(c) ($) John A. Klein , ,316 * 250,800 30, ,984 68,418 Chairman, President and , ,000 * 291,330 30, ,048 Chief Executive Officer ,923 0 * 842,625 72, ,979 Robert R. D Amore , ,164 * 58,311 12,600 61,887 22,065 Executive Vice President, , ,001 * 128,362 5, ,471 Marketing and Regional ,456 0 * 155,150 18, ,758 Banking Brian F. Dreyer , ,717 * 58,311 12,600 33,822 21,844 Executive Vice President, , ,961 * 186,610 7, ,138 Commercial Banking ,758 0 * 93,625 11, ,147 William T. Kosturko , ,799 * 50,160 10,850 61,993 24,563 Executive Vice President , ,466 * 85,195 4, ,820 and General Counsel ,137 0 * 123,050 14, ,023 Philip R. Sherringham(d) , ,155 * 95,534 26, ,096 Executive Vice President and Chief Financial Officer * The Bank s incremental cost with respect to perquisites and other personal benefits paid to the Named Executive Officers is not reported because the cost did not exceed the lesser of $50,000 or 10% of the sum of the Named Executive Officer s salary and bonus. (a) A total of 20,350 shares of the Bank s Common Stock were awarded to the Named Executive Officers as restricted stock grants in Of this amount, 16,650 shares were awarded on February 20, 2003 and the remaining 3,700 shares were awarded on April 10, 2003 to Mr. Sherringham. One-half of the shares will vest on February 1, 2005, with an additional 25% of such shares vesting on February 1, 2006 and 2007, respectively. Cash dividends paid with respect to shares of restricted stock are accumulated for the benefit of the grantee in a non-interest bearing account, and will be paid out to the grantee as soon as practicable after the end of the applicable restriction period. Values in this column are based on the closing price of the Common Stock on the applicable grant date. At December 31, 2003, the Named Executive Officers as a group held 79,450 shares of restricted stock having an aggregate value at that date of $2,586,

22 (b) Shares of restricted stock and stock options awarded to a Named Executive Officer are generally subject to forfeiture if the Named Executive Officer leaves the Bank s employment prior to the date such shares or options become vested. (c) Amounts in this column consist primarily of matching contributions by the Bank to the Savings Plan and matching credits under the Bank s Supplemental Savings Plan. For 2003, these amounts were as follows: Matching Contributions Name and Credits JohnA.Klein... 59,138 Robert R. D Amore... 18,860 BrianF.Dreyer... 19,248 William T. Kosturko... 20,417 Philip R. Sherringham... 10,096 In Mr. Sherringham s case, amounts in this column also include a signing bonus of $110,000. (d) Mr. Sherringham was not employed by the Bank prior to The following table sets forth information concerning stock options granted in 2003 to the Named Executive Officers under the 1998 Long-Term Incentive Plan. No stock price appreciation units were granted in 2003 pursuant to the Amended and Restated People s Bank 1995 Stock Price Appreciation Unit Plan. Options Granted in Last Fiscal Year Name Number of Options Granted (#) Potential Realizable Individual Grants (a) Value at Assumed Percent of Annual Rates Total of Increase in Granted to Stock Price for Employees Term of in Fiscal Exercise Expiration Options (b) Year (c) Price ($/Sh) Date 5% ($) 10% ($) JohnA.Klein... 30, % $ /20/ ,746 1,200,566 Robert R. D Amore... 12, % $ /20/ , ,238 BrianF.Dreyer... 12, % $ /20/ , ,238 William T. Kosturko... 10, % $ /20/ , ,205 Philip R. Sherringham... 26, % $ /10/ ,704 1,104,160 (a) Stock options will become exercisable 50% on February 1, 2005, with an additional 25% becoming exercisable on February 1, 2006 and February 1, Vesting of all options will be accelerated upon a Change in Control (as defined below under Employment and Change in Control Agreements ) of the Bank. (b) Potential realizable values are calculated in accordance with FDIC rules and are not intended to forecast possible future appreciation of the price of the Common Stock. (c) A total of 227,600 stock options were granted in