<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q

[X] FOR QUARTERLY REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934

          FOR THE TRANSITION PERIOD FROM          TO 
                                         ---------  --------


Commission file number                        0-7449
                                              ------


                            PEOPLE'S BANCSHARES, INC.
             (Exact name of registrant as specified in its charter)


MASSACHUSETTS                                        04-3272233
-------------                                        ----------
(State or other jurisdiction of                      (I.R.S. Employer
incorporation or organization)                       Identification No.)


545 PLEASANT STREET
NEW BEDFORD, MASSACHUSETTS                           02740
--------------------------                           -----
(Address of principal executive offices)             (Zip Code)


Registrant's telephone number, including area code   (508) 991-2601
                                                     --------------

                          -----------------------------


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes  X  No    .
                                       ---    ---

The number of shares of Registrant's Common Stock, $0.10 par value, outstanding
as of September 30, 1996 was 3,394,930.


                                       1
<PAGE>   2





                            PEOPLE'S BANCSHARES, INC.

                                    FORM 10-Q

                                QUARTERLY REPORT

                              --------------------

                                TABLE OF CONTENTS

Facing Page                                                                   1

Table of Contents                                                             2

PART I.  FINANCIAL INFORMATION (*)

         Item 1. Financial Statements:
                 Consolidated Balance Sheets                                  3
                 Consolidated Statements of Income                            4
                 Consolidated Statements of Changes in Stockholders' Equity   5
                 Consolidated Statements of Cash Flows                        6
                 Notes to Unaudited Consolidated Financial Statements         8

         Item 2. Management's Discussion and Analysis of Financial Condition
                  Results of Operations                                       9

PART II  OTHER INFORMATION                                                   14

SIGNATURES                                                                   15

EXHIBITS                                                                     16

(*)  The financial information at December 31, 1995 has been derived from the
     audited financial statements at that date and should be read in conjunction
     therewith. All other financial statements are unaudited.


                                       2

<PAGE>   3



                    PEOPLE'S BANCSHARES, INC. AND SUBSIDIARY
                    ----------------------------------------
<TABLE>

                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------
                             (Dollars in thousands)
                                   (Unaudited)
<CAPTION>

                                                                             September 30,  December 31,
                                                                                 1996          1995
                                                                             -------------  ------------
<S>                                                                            <C>           <C>     
                                ASSETS
                                ------

Cash and due from banks                                                        $ 13,980      $ 11,277
Short-term investments                                                            3,633            26
                                                                               --------      --------
   Total cash and cash equivalents                                               17,613        11,303
                                                                               --------      --------
Investment securities, available for sale                                       214,895       166,709
Loans held for sale                                                              10,475         5,272
Loans                                                                           254,855       133,591
   Less allowance for loan losses                                                (4,747)       (3,813)
                                                                               --------      --------
      Loans, net                                                                250,108       129,778
Other real estate owned, net                                                        323           571
Banking premises and equipment, net                                              12,893         3,578
Accrued interest receivable                                                       3,437         2,104
Deferred income taxes                                                             1,062         1,826
Intangible assets                                                                 1,446         1,508
Due from broker                                                                     253           938
Other assets                                                                        916           853
                                                                               --------      --------
         Total assets                                                          $513,421      $324,440
                                                                               ========      ========


                    LIABILITIES AND STOCKHOLDERS' EQUITY
                    ------------------------------------

Deposits                                                                       $339,112      $174,583
Borrowed funds                                                                  140,770       126,245
Mortgagors' escrow accounts                                                       1,227           494
Accrued interest payable                                                          1,208           843
Accrued expenses                                                                  1,303         1,653
Other liabilities                                                                   977           945
                                                                               --------      --------
         Total liabilities                                                      484,597       304,763
                                                                               --------      --------

Stockholders' equity:
   Serial preferred stock - par value $0.10 per share; authorized
      10,000,000 shares, none issued                                                  -             -
   Common stock - par value $0.10 per share; 20,000,000 shares authorized;
      issued and outstanding 3,394,930 and 2,324,007 shares                         339           232
   Additional paid-in capital                                                    21,956        14,015
   Retained earnings                                                              7,912         5,870
                                                                               --------      --------
                                                                                 30,207        20,117
   Net unrealized loss on securities available
      for sale, after tax effects                                                (1,383)         (440)
                                                                               --------      --------
         Total stockholders' equity                                              28,824        19,677
                                                                               --------      --------

         Total liabilities and stockholders' equity                            $513,421      $324,440
                                                                               ========      ========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                       3

<PAGE>   4




                    PEOPLE'S BANCSHARES, INC. AND SUBSIDIARY
                    ----------------------------------------

<TABLE>
                        CONSOLIDATED STATEMENTS OF INCOME
                        ---------------------------------
            (Dollars and shares in thousands, except per share data)
                                   (Unaudited)

<CAPTION>

                                                         Three Months Ended      Nine Months Ended
                                                            September 30,           September 30,
                                                         ------------------      -----------------
                                                          1996        1995       1996         1995
                                                          ----        ----       ----         ----
<S>                                                      <C>         <C>        <C>          <C>    
Interest and dividend income:
   Interest and fees on loans                            $5,564      $2,934     $14,374      $ 8,262
   Interest and dividends on investment securities        3,651       2,450      10,041        5,864
   Interest on short-term investments                        59          46         123          153
                                                         ------      ------     -------      -------
      Total interest and dividend income                  9,274       5,430      24,538       14,279
                                                         ------      ------     -------      -------

Interest expense:
   Interest on deposits                                   2,917       1,490       7,448        3,917
   Interest on borrowed funds                             2,180       1,569       6,236        4,043
                                                         ------      ------     -------      -------
      Total interest expense                              5,097       3,059      13,684        7,960
                                                         ------      ------     -------      -------

Net interest income                                       4,177       2,371      10,854        6,319
Provision for loan losses                                     -         150          75          450
                                                         ------      ------     -------      -------
Net interest income, after provision for loan losses      4,177       2,221      10,779        5,869
                                                         ------      ------     -------      -------

Other income:
   Customer service fees                                    360         267       1,077          702
   Gains (losses) on sales of securities, net                (4)          6         (28)          (4)
   Gains on sales of loans,  net                            424         282       1,530          364
   Gain on sale of banking premises and equipment             -           -         162            -
   Miscellaneous                                            112          30         330           89
                                                         ------      ------     -------      -------
      Total other income                                    892         585       3,071        1,151
                                                         ------      ------     -------      -------

Operating expenses:
   Salaries and employee benefits                         2,040         935       5,536        2,389
   Occupancy and equipment                                  400         190       1,088          512
   Data processing                                          319          66         634          181
   Professional fees                                        152         170         374          362
   Other real estate owned, net                              19          55          46           88
   Other general and administrative                         689         469       2,098        1,362
                                                         ------      ------     -------      -------
      Total operating expenses                            3,619       1,885       9,776        4,894
                                                         ------      ------     -------      -------

Income before income taxes                                1,450         921       4,074        2,126
Provision for income taxes                                  476         276       1,446          583
                                                         ------      ------     -------      -------
Net income                                               $  974      $  645     $ 2,628      $ 1,543
                                                         ======      ======     =======      =======

Income per share (primary and fully diluted)             $ 0.28      $ 0.26     $  0.81      $  0.64
                                                         ======      ======     =======      =======

Weighted average shares outstanding
     (primary and fully diluted)                          3,519       2,481       3,242        2,412
                                                         ======      ======     =======      =======


</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                       4

<PAGE>   5




                    PEOPLE'S BANCSHARES, INC. AND SUBSIDIARY
                    ----------------------------------------
<TABLE>

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
           ----------------------------------------------------------
                  Nine Months Ended September 30, 1996 and 1995
                  ---------------------------------------------
                             (Dollars in thousands)
                                   (Unaudited)

<CAPTION>
                                                                             Net Unrealized
                                                                                 Loss on
                                                       Additional               Securities
                                                Common   Paid-in    Retained    Available
                                                Stock    Capital    Earnings    for Sale       Total
                                                -----    -------    --------    --------       -----

<S>                                             <C>      <C>         <C>         <C>          <C>    
Balance at December 31, 1995                    $232     $14,015     $5,870      $  (440)     $19,677
Net income                                         -           -      2,628            -        2,628
Cash dividends paid                                -           -       (586)           -         (586)
Exercise of stock warrants                         8         448          -            -          456
Exercise of stock options                          2          53          -            -           55
Issuance of common stock                          97       7,440          -            -        7,537
Change in net unrealized loss on securities
   available for sale, after tax effects           -           -          -         (943)        (943)
                                                ----     -------     ------      -------      -------

Balance at September 30, 1996                   $339     $21,956     $7,912      $(1,383)     $28,824
                                                ====     =======     ======      =======      =======
Balance at December 31, 1994                    $230     $13,904     $3,769      $  (928)     $16,975

Net income                                         -           -      1,543            -        1,543
Exercise of stock warrants                         2          76          -            -           78
Exercise of stock options                          -          12          -            -           12
Change in net unrealized loss on securities
   available for sale, after tax effects           -           -          -          781          781
                                                ----     -------     ------      -------      -------

Balance at September 30, 1995                   $232     $13,992     $5,312      $  (147)     $19,389
                                                ====     =======     ======      =======      =======
</TABLE>

See accompanying notes to unaudited consolidated financial statements.



                                       5

<PAGE>   6



                    PEOPLE'S BANCSHARES, INC. AND SUBSIDIARY
                    ----------------------------------------
<TABLE>
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
                             (Dollars in thousands)
                                   (unaudited)

<CAPTION>
                                                                                          Nine Months Ended
                                                                                            September 30,
                                                                                      ------------------------
                                                                                        1996             1995
                                                                                        ----             ----

<S>                                                                                   <C>            <C>      
Cash flows from operating activities:
  Net income                                                                          $   2,628      $   1,543
   Adjustments to reconcile net income to net
     cash provided (used) by operating activities:
    Provision for loan losses                                                                75            450
    Depreciation and amortization                                                           737            150
    Gain on sale of banking premises and equipment                                         (162)             -
    Losses on sales of securities, net                                                       28              4
    Loans originated for sale                                                          (160,668)        (6,484)
    Principal balance of loans sold                                                     155,465          4,518
    Write-downs, provisions, and gain or loss on sales of other real estate owned           (97)          (134)
    Deferred tax provision                                                                1,319            583
    Change in other assets, net of other liabilities                                     (1,181)           149
                                                                                      ---------      ---------
             Net cash provided (used) by operating activities                            (1,856)           779
                                                                                      ---------      ---------

Cash flows from investing activities:
   Cash and cash equivalents received through acquisition                                20,664         24,054
   Proceeds from sales of investment securities available for sale                       41,809         40,270
   Proceeds from maturities of investment securities available for sale                   2,000              -
   Proceeds from amortization of mortgage-backed securities
      available for sale                                                                 30,917          6,327
   Proceeds from amortization of mortgage-backed securities held to maturity                  -          5,370
   Purchase of securities available for sale                                           (124,105)      (103,123)
   Purchase of securities held to maturity                                                    -           (411)
   Loan (originations and purchases) amortization and payoffs, net                       (4,617)        (4,524)
   Proceeds from sales of other real estate owned                                           594          1,449
   Disbursements for other real estate owned                                                  -            (15)
   Proceeds from sale of banking premises and equipment                                     424              -
   Additions to banking premises and equipment, net                                      (1,617)          (775)
                                                                                      ---------      ---------
          Net cash used in investing activities                                         (33,931)       (31,378)
                                                                                      ---------      ---------

Cash flows from financing activities:
   Net increase in deposits                                                              19,826          2,754
   Net increase (decrease) in borrowings with maturities of three months or less        (27,445)        26,391
   Proceeds from issuance of borrowings with maturities in excess of three months        68,920         23,000
   Repayment of borrowings with maturities in excess of three months                    (26,950)       (18,000)
   Increase in mortgagors' escrow accounts                                                  284            209
   Proceeds from exercise of stock warrants                                                 456             78
   Proceeds from issuance of common stock                                                 7,537              -
   Proceeds from exercise of stock options                                                   55             12
   Cash dividends                                                                          (586)             -
                                                                                      ---------      ---------
      Net cash provided by financing  activities                                         42,097         34,444
                                                                                      ---------      ---------
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                       6

<PAGE>   7


<TABLE>

<S>                                                                             <C>          <C>    
Net increase in cash and cash equivalents                                          6,310       3,845
  Cash and cash equivalents at beginning of period                                11,303       7,552
                                                                                --------     -------
  Cash and cash equivalents at end of period                                    $ 17,613     $11,397
                                                                                ========     =======

Supplementary information:
  Interest paid on deposit accounts                                             $  7,244     $ 3,797
  Interest paid on borrowed funds                                                  6,075       3,954
  Transfer from loans to other real estate owned, net                                249       1,039
  Transfers from other real estate owned to banking premises and equipment             -         150 
  Transfers from other real estate owned to loans                                      -       2,460
  Income taxes paid                                                                   33          24
  Decrease in due from brokers, net                                                  685           -
  Assets acquired in acquisition of branches                                     124,845      16,622
  Liabilities assumed in acquisition of branches                                 145,509      40,676

</TABLE>


See accompanying notes to unaudited consolidated financial statements.



                                       7

<PAGE>   8


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------

 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 ------------------------------------------

(1)  The Consolidated Balance Sheet as of September 30, 1996, and the
     Consolidated Statements of Income, Consolidated Statements of Changes in
     Stockholders' Equity, and Consolidated Statements of Cash Flows for the
     periods ended September 30, 1996 and 1995 of People's Bancshares, Inc. and
     Subsidiary (the "Company") furnished in this report are unaudited; however,
     these interim consolidated financial statements reflect all adjustments
     that are, in the opinion of management, necessary for a fair statement of
     the results for the interim periods presented. Interim results are not
     necessarily indicative of results to be expected for the year.

     People's Bancshares, Inc. (the "Company") is a Massachusetts business
     corporation formed at the direction of People's Savings Bank of Brockton
     (the "Bank") to serve as the holding company for the Bank. On February 8,
     1996, the Company and the Bank completed a reorganization (the
     "Reorganization") in which the Bank became a wholly owned subsidiary of the
     Company, and each issued and outstanding share of common stock of the Bank
     was converted into and exchanged for one share of common stock of the
     Company. As a result of the Reorganization, the Bank became a wholly owned
     subsidiary of the Company. The Company is a unitary bank holding company
     subject to the Bank Holding Company Act of 1956, as amended (the "BHC
     Act"), the principal business of which consists of the business of the
     Bank. The only significant asset of the Company is the common stock of the
     Bank. Although the Company is a legal entity separate from the Bank, the
     Company itself is not engaged in any business activities.

     The unaudited consolidated interim financial statements furnished in this
     report are intended to be read in conjunction with the consolidated
     financial statements of the Company presented in its Annual Report for the
     year ended December 31, 1995.

(2)  EARNINGS PER SHARE
     ------------------

     Earnings per share is computed using the weighted average number of shares
     and common stock equivalents outstanding during each period. Earnings per
     share computations include common stock equivalents attributable to
     outstanding stock options and warrants. Weighted average shares and
     equivalent shares outstanding for the quarters ended September 30, 1996 and
     1995 were approximately 3,519,000 and 2,481,000, respectively.



                                       8

<PAGE>   9

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                                       OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the
unaudited consolidated financial statements and related notes included in this
report.

Assets
------

The Company's total assets at September 30, 1996 were $513.4 million, an
increase of $189.0 million from December 31, 1995. The increase in assets,
liabilities, and stockholders' equity primarily reflects the consummation on
March 8, 1996 of the acquisition of five branches from subsidiaries of Fleet
Financial Group, Inc. with approximately $145.5 million in assets (the "Branch
Acquisition"), the issuance of common stock in a rights offering completed in
March 1996 (the "Offering"), and an increase of $48.2 million in investment
securities consisting primarily of mortgage-backed securities.

<TABLE>
Loans
-----
<CAPTION>

Total loans and loans held for sale increased $126.5 million primarily as a
result of the purchase of $113.7 million in loans from the Branch Acquisition.
Of the $113.7 million in acquired loans, $82.4 million represented 1-4 family
residential mortgages, $20.8 million represented commercial and commercial real
estate, and $10.5 million represented consumer loans. All acquired loans were
performing loans at the time of acquisition. At September 30, 1996, the
Company's loans and loans held for sale were as follows:

                                                  (in millions)
        <S>                                          <C>   
        Residential mortgage loans                   $157.7
        Commercial, commercial real estate
          and construction loans                       88.2
        Consumer loans, including home
          equity loans                                 19.4
                                                     ------
              Total                                  $265.3
                                                     ======
</TABLE>

Deposits
--------

Total deposits increased $164.5 million to $339.1 million at September 30, 1996
from $174.6 million at December 31, 1995 primarily as a result of the Branch
Acquisition. This deposit growth includes a $72.4 million increase in IRAs and
time certificates of deposit and a $92.1 million increase in core deposits.

Non-performing Assets and Allowance for Loan Losses
---------------------------------------------------

The allowance for loan losses has been established to absorb foreseeable losses
inherent in the loan portfolio. The provision for loan losses and the level of
the allowance are evaluated periodically by management and the Board of
Directors. These provisions are the results of the Company's internal loan
review, historical loan loss experience, trends in delinquent and non-


                                       9

<PAGE>   10

accrual loans, known and inherent risks in the nature and volume of the loan
portfolio, adverse situations that may affect the borrower's ability to repay,
collateral values, an estimate of potential loss exposure on significant
credits, concentrations of credit, and present and prospective economic
conditions based on facts then known.

Periodically, management reviews the portfolio, classifying each loan into
categories by assessing the degree of risk involved. Considering this review,
the Company establishes the adequacy of its allowance and necessary additions
are charged to operations through the provision for loan losses. Loan losses are
charged against the allowance when management believes the collectibility of the
loan balance is unlikely.

The allowance is an estimate. Ultimate losses may vary from current estimates
and future additions to the allowance may become necessary. In addition,
regulatory agencies, as an integral part of their examination process, review
the Company's allowance and may require the Company to provide additions to the
allowance based on their assessment, which may differ from management's.

At September 30, 1996, the Company's allowance for loan losses totaled $4.7
million or 1.79% of total loans and loans held for sale and 93.2% of
non-performing loans compared to $3.8 million or 2.75% of total loans and loans
held for sale and 79.8% of non-performing loans at December 31, 1995, and
compared to $3.9 million or 2.8% of total loans and loans held for sale and
81.5% of non-performing loans at September 30, 1995. Management recorded no
provision for loan losses for the three month period ended September 30, 1996
and $75,000 for the nine month period ended September 30, 1996, compared to
$150,000 and $450,000 for the same periods in 1995. The Company recorded a $1.7
million loan loss allowance in connection with the Branch Acquisition. Net
charge-offs were $175,000 and $793,000 for the three and nine month periods
ended September 30, 1996 compared to net charge-offs of $462,000 and $835,000
for the same periods in 1995.

Non-performing assets was $5.4 million or 1.04% of total assets at September 30,
1996 compared to $5.3 million or 1.65% of total assets at December 31, 1995 and
$5.3 million or 1.73% of total assets at September 30, 1995.

Equity
------

The Company completed the Offering of approximately 968,000 shares of its common
stock in March 1996 in which it raised $7.5 million of net proceeds. At
September 30, 1996, the Company had approximately 3,519,000 average equivalent
common shares outstanding.

RESULTS OF OPERATIONS
---------------------

Overview
--------

Comparisons of year to year operating results have been significantly affected
by four purchase transactions during the 18 months prior to September 30, 1996
that have resulted in the Company increasing its asset size from $243.3 million
at March 31, 1995 to $513.4 million at September 30, 1996. Operating results
have also been significantly affected by the formation of People's Mortgage
Corporation in the second quarter of 1995 which is reflected in gains on sales
of loans of $1.5 million in the first nine months of 1996 compared to $364,000
in the corresponding period of 1995. Quarterly comparisons have also been
significantly affected by the Company increasing 

                                       10


<PAGE>   11

its investment portfolio (primarily mortgage-backed securities) by $58.7 million
since September 30, 1995 funded by an increase of $31.8 million in borrowed
funds with the remainder funded by cash received from the Branch Acquisition and
the Offering. Finally, results have also been significantly affected by an
increase in the Company's effective tax rate to 35% in the first nine months of
1996 compared to 27% in the same period of 1995. Net income amounted to $974,000
and $2.6 million or $0.28 and $0.81 per share (primary and fully diluted) for
the three and nine months ended September 30, 1996 compared to net income of
$645,000 and $1.5 million or $0.26 and $0.64 per share (primary and fully
diluted) for the same periods in 1995.

Net Interest Income
-------------------

Net interest income increased $1.8 million and $4.5 million for the three and
nine months ended September 30, 1996 compared to the same periods in 1995. These
changes resulted mostly from increased average earning assets. For the first
nine months of 1996, average earning assets increased 78.7% compared to the same
period in 1995.

Interest and dividend income increased to $9.3 million and $24.5 million for the
three and nine months ended September 30, 1996 from $5.4 million and $14.3
million for the same period in 1995. The yield on average earning assets
decreased to 7.49% and 7.39% for the three and nine months ended September 30,
1996 from 7.76% and 7.67% for the same periods in 1995. Yields on loans
decreased to 8.42% and 8.29% for the three and nine months ended September 30,
1996 compared to 8.86% and 8.91% for the same periods in 1995. Yields on
investments decreased to 6.46% and 6.41% for the three and nine months ended
September 30, 1996 compared to 6.72% and 6.42% for the same periods in 1995.

Interest expense increased to $5.1 million and $13.7 million for the three and
nine months ended September 30, 1996 from $3.1 million and $8.0 million for the
same periods in 1995. This increase was due to a $611,000 and $2.2 million
increase in interest expense on borrowed funds and a $1.4 million and $3.5
million increase in interest expense on deposits for the three and nine months
ended September 30, 1996 compared to the same periods in 1995.

During the first nine months of 1996, average borrowed funds amounted to $150.1
million compared to $92.9 million during the same period of 1995. The Company
has increased its use of borrowed funds, primarily FHLB advances, to fund
purchases of mortgage-backed securities. Rates paid on average borrowed funds
were 5.54% for the three and nine months ended September 30, 1996 compared to
5.76% and 5.80% for the same periods in 1995.

The increase in deposit interest expense was due to an increase in the average
cost of deposits to 4.01% and 3.91% for the three and nine month period ended
September 30, 1996 from 3.97% and 3.83% for the same periods in 1995. Deposit
interest expense also increased due to an increase of average deposits to $254.2
million for the nine months ended September 30, 1996 compared to $136.4 million
for the same period in 1995.

Provision for Loan Losses
-------------------------

There was no provision for loan losses for the three months ended
September 30, 1996. The provision for loan losses amounted to $75,000 for the
nine months ended September 30, 1996 compared to $150,000 and $450,000 for the
three and nine month periods in 1995. The prior periods' provisions for loan
losses were deemed necessary due to the continued weakness of the local economy
and real estate market. If the local economy and





                                       11

<PAGE>   12

real estate market deteriorate, it may be necessary for the Company to make
additional provisions for loan losses.

Other Income
------------

Other income was $892,000 and $3.1 million for the three and nine months ended
September 30, 1996 compared to $585,000 and $1.2 million for the same periods in
1995. The quarterly increase is primarily attributable to a $142,000 increase in
gains from sales of loans, a $93,000 increase in customer service fees, and
$82,000 increase in miscellaneous income. The increase in loan sale gains
reflects the formation and growth of People's Mortgage Corporation since March
31, 1995 while the increase in customer service fees reflects the Company's
increased depositor base.

Operating Expenses
------------------

Total operating expenses amounted to $3.6 million and $9.8 million for the three
and nine months ended September 30, 1996 compared to $1.9 and $4.9 million for
the same periods in 1995. Operating expenses include an estimated $343,000 in
non-recurring expenses related to the Branch Acquisition of which $50,000 was
incurred in the third quarter of 1996.

Salaries and benefits expense increased $1.1 million and $3.1 million for the
three and nine months ended September 30, 1996 compared to the same periods in
1995. The increase in salaries and benefits reflects general salary increases,
added lending and mortgage banking staffing, the acquisition or opening of four
branches in 1995, operations of the five branches acquired in the Branch
Acquisition in 1996, and non-recurring expenses associated with the Branch
Acquisition.

Occupancy and equipment expense increased $210,000 and $576,000 for the three
and nine months ended September 30, 1996 compared to the same period in 1995
primarily due to additional costs associated with acquired branches and People's
Mortgage Corporation. Data processing expense increased $253,000 and $453,000
for the three and nine months ended September 30, 1996 compared to the same
period in 1995. Professional fees expense decreased $18,000 for the three months
ended September 30, 1996 and increased $12,000 for the nine months ended
September 30, 1996 compared to the same periods in 1995. Other real estate owned
expenses decreased $36,000 and $42,000 for the three and nine months ended
September 30, 1996 compared to the same period in 1995. Other general and
administrative expenses increased $220,000 and $736,000 for the three and nine
months ended September 30, 1996 compared to the same period in 1995 primarily
due to increased marketing costs.

Provision for Income Taxes
--------------------------

The Company recognized income tax expense of $476,000 and $1.4 million in the
three and nine months ended September 30, 1996 compared to income tax expense of
$276,000 and $583,000 for the same periods in 1995.

Liquidity and Capital Resources
-------------------------------

The Company's liquidity management focuses upon the Company's ability to provide
the cash reserves and cash equivalents necessary to honor contractual
liabilities and commitments, meet depositors' withdrawal demands, fund
operations and provide customers with adequate available credit. The Company's
primary sources of liquidity are customer deposits, principal and interest




                                       12

<PAGE>   13

payments on loans, interest and dividends on investments and proceeds from the
maturity or sale of investments. The Company also has the ability to borrow from
the Federal Home Loan Bank of Boston on a collateralized basis. The Company
believes that it has adequate liquidity to meet its needs.

At September 30, 1996, the Company's capital exceeded all regulatory
requirements. The Company's Tier 1 leverage capital ratio at September 30, 1996
was 5.56%, compared to 6.04% at December 31, 1995. The Company's book value per
share was $8.49 at September 30, 1996, $8.47 at December 31, 1995, and $8.36 at
September 30, 1995.

Other Information
-----------------

On May 10, 1995, the Company acquired the Bank of Taunton, a Co-operative Bank
("Taunton"). The acquisition was effected pursuant to an agreement with Taunton
dated January 24, 1995 in which Taunton converted from a mutual to stock form
bank in a supervisory conversion under regulations of the Massachusetts
Commissioner of Banks, the Company acquired all of the capital stock of Taunton
in the conversion, and Taunton was then merged with and into the Company.
Taunton's assets amounted to approximately $17.8 million at acquisition.

On November 29, 1994, the Company announced that it had entered into an
agreement with Haymarket Cooperative Bank to acquire the deposits from
Haymarket's Brockton branch. The Company completed the acquisition of $9.7
million in deposits from Haymarket on July 22, 1995.

On May 22, 1995, the Company announced that it had entered into an agreement
with the Bank of Boston to acquire the Bank of Boston's Mansfield, Massachusetts
branch. The Company completed the branch acquisition from the Bank of Boston on
September 23, 1995 receiving $13.0 million in deposits.

On September 30, 1995, the Company entered into an agreement with Fleet Bank of
Massachusetts, N.A. and Shawmut Bank of Massachusetts, N.A. to acquire certain
assets and liabilities of five branches that were required to be divested in
connection with the merger of Shawmut National Corporation with and into Fleet
Financial Group, Inc.

On March 8, 1996 the Company completed an offering of its common stock in order
to maintain its status as a "well-capitalized" institution as defined by the
FDIC upon the completion of the branch acquisition. The Company raised net
proceeds of $7.5 million upon completion of the offering.

On May 14, 1996, the Company held its Annual Meeting. During the meeting four
directors were reelected and Wolf & Company, P.C. was reappointed as the
independent certified public accountant of the Company. Both proposals carried
over 99% of voting shares. Additionally, the Company's 1996 Stock Option and
Incentive Plan was approved with 86% of the shares voted.

On October 29, 1996 the Company declared an $0.08 dividend to be paid on
December 16, 1996 to shareholders of record on November 29, 1996.


                                       13

<PAGE>   14


                          PART II - OTHER INFORMATION

ITEM 6    EXHIBITS AND REPORTS ON FORM 8-K
------

Exhibit   Description
-------   -----------

(a)       Exhibits

3.1       Restated Articles of Organization of the Company (Incorporated by
          reference to the Company's Annual Report on Form 10-K filed with the
          Commission on March 28, 1996, (the "Form 10-K")).

3.2       By-laws of the Company, as amended and restated (Incorporated by
          reference to the Company's Form 8-K filed with the Commission on
          February 8, 1996 (the "Form 8-K)).

4.1       Specimen certificate for shares of Common Stock of the Company
          (Incorporated by reference to the Form 8-K).

4.2       Articles IV and VI(I)-(K) of Restated Articles of Organization of the
          Company (see Exhibit 3.1).

4.3       Articles I and IV of By-laws of the Company (see Exhibit 3.2).

27        Financial Data Schedule (Filed herewith).





                                       14

<PAGE>   15




                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                       PEOPLE'S BANCSHARES, INC.



    11/14/96           By: /s/ John A. Williams
    --------               ---------------------------------------------------- 
    Date                   John A. Williams
                           President, Chief Executive
                           Officer and Director



    11/14/96           By: /s/ Colin C. Blair
    --------               ---------------------------------------------------- 
    Date                   Colin C. Blair
                           Vice President, Treasurer and Chief Financial Officer
                           (principal financial and accounting officer)





                                       15
<PAGE>   16





                                 EXHIBITS INDEX

Exhibit   Description
-------   -----------

(a)       Exhibits

3.1       Restated Articles of Organization of the Company (Incorporated by
          reference to the Company's Annual Report on Form 10-K filed with the
          Commission on March 28, 1996, (the "Form 10-K")).

3.2       By-laws of the Company, as amended and restated (Incorporated by
          reference to the Company's Form 8-K filed with the Commission on
          February 8, 1996 (the "Form 8-K)).

4.1       Specimen certificate for shares of Common Stock of the Company
          (Incorporated by reference to the Form 8-K).

4.2       Articles IV and VI(I)-(K) of Restated Articles of Organization of the
          Company (see Exhibit 3.1).

4.3       Articles I and IV of By-laws of the Company (see Exhibit 3.2).

27        Financial Data Schedule (Filed herewith).



                                       16