<PAGE>   1



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

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

    FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998

[ ] 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 March 31, 1998 was 3,308,702.


<PAGE>   2


                            PEOPLE'S BANCSHARES, INC.

                                    FORM 10-Q

                                QUARTERLY REPORT

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

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

<S>                                                                                       <C>
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                     7

         Item 2. Management's Discussion and Analysis of Financial Condition and
                   Results of Operations                                                  8

         Item 3  Quantitative and Qualitative Disclosures about Market Risk              12


PART II  OTHER INFORMATION                                                               13



SIGNATURES                                                                               14

EXHIBITS                                                                                 15
</TABLE>

(*)  The financial information at December 31, 1997 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 SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                   March 31,       December 31,
                                                                                     1998              1997
                                                                                   ---------       ------------
                                      ASSETS
                                      ------
<S>                                                                               <C>               <C>      
Cash and cash equivalents                                                         $  34,860         $  30,693
Investment securities                                                               311,026           304,713
Loans held for sale                                                                  46,094            24,735
Loans                                                                               453,335           386,698
   Less allowance for loan losses                                                    (4,316)           (4,291)
                                                                                  ---------         ---------
      Loans, net                                                                    449,019           382,407
Other real estate owned, net                                                            125               111
Banking premises and equipment, net                                                  13,084            12,940
Accrued interest receivable                                                           4,599             4,435
Intangible assets                                                                     1,089             1,148
Other assets                                                                          2,104             1,728
                                                                                  ---------         ---------
         Total assets                                                             $ 862,000         $ 762,910
                                                                                  =========         =========


                          LIABILITIES AND STOCKHOLDERS' EQUITY
                          ------------------------------------
Deposits                                                                          $ 386,199         $ 355,083
Borrowed funds                                                                      422,550           356,550
Mortgagors' escrow accounts                                                           1,297             1,114
Accrued expenses and other liabilities                                                6,529             6,227
Subordinated debentures                                                              13,800            13,800
                                                                                  ---------         ---------
   Total liabilities                                                                830,375           732,774
                                                                                  ---------         ---------

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; authorized 20,000,000 shares,
      issued and outstanding 3,663,702 and 3,643,686 shares                             366               364
   Additional paid-in capital                                                        23,589            23,400
   Retained earnings                                                                 13,298            12,253
                                                                                  ---------         ---------
                                                                                     37,253            36,017

   Treasury stock, at cost - 355,000 shares                                          (6,213)           (6,213)
   Net unrealized gain on securities available
      for sale, after tax effects                                                       585               332
                                                                                  ---------         ---------
         Total stockholders' equity                                                  31,625            30,136
                                                                                  ---------         ---------

         Total liabilities and stockholders' equity                               $ 862,000         $ 762,910
                                                                                  =========         =========
</TABLE>

     See accompanying notes to unaudited consolidated financial statements.


                                       3


<PAGE>   4



                   PEOPLE'S BANCSHARES, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
            (Dollars and shares in thousands, except per share data)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                    Three Months Ended
                                                                                        March 31,
                                                                                 ------------------------
                                                                                   1998             1997
                                                                                 --------         -------
<S>                                                                              <C>              <C>    
Interest and dividend income:                                                   
   Interest and fees on loans                                                    $  7,976         $ 5,599
   Interest and dividends on investment securities                                  5,649           4,091
   Interest on short-term investments                                                 108              39
                                                                                 --------         -------
      Total interest and dividend income                                           13,733           9,729
                                                                                 --------         -------

Interest expense:
   Interest on deposits                                                             3,328           2,836
   Interest on borrowed funds                                                       5,577           2,479
                                                                                 --------         -------
      Total interest expense                                                        8,905           5,315
                                                                                 --------         -------

Net interest income                                                                 4,828           4,414
Provision for loan losses                                                             150            --
                                                                                 --------         -------
Net interest income, after provision for loan losses                                4,678           4,414
                                                                                 --------         -------

Other income:
   Customer service fees                                                              350             345
   Losses on sales of securities and purchased loans, net                             (70)            (11)
   Gains on sales of loans,  net                                                    1,315             913
   Miscellaneous                                                                       92              35
                                                                                 --------         -------
      Total other income                                                            1,687           1,282
                                                                                 --------         -------

Operating expenses:
   Salaries and employee benefits                                                   2,272           2,059
   Occupancy and equipment                                                            514             409
   Data processing                                                                    316             305
   Professional fees                                                                  164             141
   Other real estate owned, net                                                       (34)             53
   Other general and administrative                                                   868             680
                                                                                 --------         -------
      Total operating expenses                                                      4,100           3,647
                                                                                 --------         -------

Income before income taxes                                                          2,265           2,049
Provision for income taxes                                                            825             741
                                                                                 --------         -------
Net income                                                                       $  1,440         $ 1,308
                                                                                 ========         =======

Net income per share:
   Diluted earnings per share                                                    $   0.43         $  0.36
   Basic earnings per share                                                          0.44            0.36

Weighted average shares outstanding - assuming dilution for stock options           3,377           3,646
Weighted average shares outstanding                                                 3,298           3,579
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                       4


<PAGE>   5


                   PEOPLE'S BANCSHARES, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                   THREE MONTHS ENDED MARCH 31, 1998 AND 1997
                             (Dollars in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                                          Accumulated
                                                                 Additional                                  Other
                                       Comprehensive   Common      Paid-in     Retained       Treasury    Comprehensive
                                           Income       Stock      Capital     Earnings         Stock        Income         Total
                                       -------------   ------    ----------    --------       --------    -------------     -----
<S>                                       <C>           <C>       <C>          <C>            <C>           <C>           <C>     
Balance at December 31, 1997                            $364      $23,400      $ 12,253       $(6,213)      $   332       $ 30,136

Comprehensive income:
Net income                                $ 1,440         --           --         1,440            --            --          1,440
Change in net unrealized gain (loss)
   on securities available for sale,
   after tax effects                          253         --           --            --            --           253            253
                                          -------
Comprehensive income                      $ 1,693
                                          =======
Cash dividends paid                                       --           --          (395)           --            --           (395)
Exercise of stock options                                  2          189            --            --            --            191
                                                        ----      -------      --------       -------       -------       --------

Balance at March 31, 1998                               $366      $23,589      $ 13,298       $(6,213)      $   585       $ 31,625
                                                        ====      =======      ========       =======       =======       ========


Balance at December 31, 1996                            $356      $22,967      $  8,562       $    --       $  (821)      $ 31,064

Comprehensive income:
Net income                                $ 1,308         --           --         1,308            --            --          1,308
Change in net unrealized gain (loss)
   on securities available for sale,
   after tax effects                       (1,414)        --           --            --            --        (1,414)        (1,414)
                                          -------
Comprehensive income                      $  (106)      
                                          =======
Cash dividends paid                                       --           --          (323)           --            --           (323)
Exercise of stock options                                  3          152            --            --            --            155
                                                        ----      -------      --------       -------       -------       --------

Balance at March 31, 1997                               $359      $23,119      $  9,547       $    --       $(2,235)      $ 30,790
                                                        ====      =======      ========       =======       =======       ========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                       5


<PAGE>   6


                   PEOPLE'S BANCSHARES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                                              Three Months Ended
                                                                                                   March 31,
                                                                                          ---------------------------
                                                                                            1998              1997
                                                                                          ---------         ---------
<S>                                                                                       <C>               <C>      
Cash flows from operating activities:
   Net income                                                                             $   1,440         $   1,308
   Adjustments to reconcile net income to net
     cash provided (used) by operating activities:
     Provision for loan losses                                                                  150                --
     Depreciation and amortization                                                               82               342
     Losses on sales of securities and purchased loans, net                                      70                11
     Loans originated for sale                                                             (120,563)          (54,412)
     Principal balance of loans sold                                                         99,204            63,929
     (Gain) loss on other real estate owned                                                     (56)                7
     Increase in other assets, net of other liabilities                                        (225)              (74)
                                                                                          ---------         ---------
              Net cash provided (used) by operating activities                              (19,898)           11,111
                                                                                          ---------         ---------

Cash flows from investing activities:
    Proceeds from sales of investment securities available for sale                          62,175            42,723
    Proceeds from maturities of securities available for sale                                13,900                --
    Proceeds from amortization of mortgage-backed securities                                 22,448             6,004
    Purchase of securities available for sale                                              (103,641)         (110,987)
    Proceeds from sales of purchased loans                                                    8,268                --
    Loan (originations and purchases) amortization and payoffs, net                         (75,896)              708
    Proceeds from sales of other real estate owned                                              102                66
    Additions to banking premises and equipment                                                (386)             (252)
                                                                                          ---------         ---------
           Net cash used in investing activities                                            (73,030)          (61,738)
                                                                                          ---------         ---------

Cash flows from financing activities:
    Net (decrease) increase in deposits                                                      31,116            (7,907)
    Net increase (decrease) in borrowings with maturities of three months or less            (7,000)            7,408
    Proceeds from issuance of borrowings with maturities in excess of three months          164,000            88,200
    Repayment of borrowings with maturities in excess of three months                       (91,000)          (35,170)
    Increase in mortgagors' escrow accounts                                                     183               280
    Proceeds from exercise of stock options                                                     191               155
    Cash dividends                                                                             (395)             (323)
                                                                                          ---------         ---------
       Net cash provided by financing  activities                                            97,095            52,643
                                                                                          ---------         ---------
Net increase in cash and cash equivalents                                                     4,167             2,016
Cash and cash equivalents at beginning of period                                             30,693            12,478
                                                                                          ---------         ---------
Cash and cash equivalents at end of period                                                $  34,860         $  14,494
                                                                                          =========         =========

Supplementary information:
   Interest paid                                                                          $   8,717         $   4,703
   Income taxes paid                                                                          1,337               247
   Transfer from loans to other real estate owned, net                                           60               426
   Change in due from brokers, net                                                              163               214
</TABLE>


See accompanying notes to unaudited consolidated financial statements.

                                       6


<PAGE>   7




              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The Consolidated Balance Sheet as of March 31, 1998, and the Consolidated
     Statements of Income, Consolidated Statements of Changes in Stockholders'
     Equity, and Consolidated Statements of Cash Flows for the periods ended
     March 31, 1998 and 1997 of People's Bancshares, Inc. and Subsidiaries (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.

     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, 1997.

(2)  SHAREHOLDERS' EQUITY AND EARNINGS PER SHARE

     In June 1997, FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
     effective for fiscal years beginning after December 15, 1997. Accounting
     principles generally require that recognized revenue, expenses, gains and
     losses be included in net income. Certain FASB statements, however, require
     entities to report specific changes in assets and liabilities, such as
     unrealized gains and losses on available-for-sale securities, as a separate
     component of the equity section of the balance sheet. Such items, along
     with net income, are components of comprehensive income. SFAS No. 130
     requires that all items of comprehensive income be reported in a financial
     statement that is displayed with the same prominence as other financial
     statements. Additionally, SFAS No. 130 requires that the accumulated
     balance of other comprehensive income be displayed separately from retained
     earnings and additional paid-in capital in the equity section of the
     balance sheet. The Company has adopted these disclosure requirements as of
     the quarter ended March 31, 1998.

     Basic earnings per share represents income available to common stock
     divided by the weighted-average number of common shares outstanding during
     the period. Diluted earnings per share reflects additional common shares
     that would have been outstanding if dilutive potential common shares had
     been issued, as well as any adjustment to income that would result from the
     assumed conversion. Potential common shares that may be issued by the
     Corporation relate solely to outstanding stock options, and are determined
     using the treasury stock method. The assumed conversion of outstanding
     dilutive stock options would increase the shares outstanding but would not
     require an adjustment to income as a result of the conversion.


                                       7


<PAGE>   8


                      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 March 31, 1998 were $862.0 million, an increase of
$99.1 million from December 31, 1997. This increase includes an increase of $6.3
million in investment securities consisting primarily of mortgage-backed
securities and an increase of $66.6 million in loans as a result of the purchase
of $108.1 million in 1-4 family residential mortgage loans. These transactions
were funded with a $66.0 million increase in borrowed funds and a $31.1 million
increase in deposits.

LOANS

Total loans and loans held for sale increased $88.0 million primarily as a
result of the purchase of residential mortgage loans, offset by a sale of a
purchased residential mortgage loan pool and principal paydowns on the purchased
residential loan portfolio. At March 31, 1998, the Company's loans and loans
held for sale were as follows:

                                                       (in millions)
         Residential mortgage loans, including
           home equity loans                            $ 413,579
         Commercial, commercial real estate
           and construction loans                          79,625
         Consumer loans                                     6,225
                                                        ---------
              Total                                     $ 499,429
                                                        =========

DEPOSITS

Total deposits increased $31.1 million to $386.2 million at March 31, 1998 from
$355.1 million at December 31, 1997. The increase in deposits reflects a $5.1
million increase in IRAs and time certificates of deposit, a $24.5 million
increase in municipal deposits and a $1.5 million increase in savings and demand
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-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.


                                       8


<PAGE>   9


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 March 31, 1998, the Company's allowance for loan losses totaled $4.3 million
or 0.95% of total loans and 124% of non-performing loans compared to $4.3
million or 1.11% of total loans and 110% of non-performing loans at December 31,
F1997, and compared to $4.4 million or 1.76% of total loans and 121% of
non-performing loans at March 31, 1997. Management recorded a provision for loan
losses of $150,000 for the three month period ended March 31, 1998 and no
provision for the same period in 1997. Net charge-offs were $125,000 for the
three month period ended March 31, 1998 compared to net charge-offs of $338,000
for the same period in 1997.

Non-performing assets were $3.6 million or 0.42% of total assets at March 31,
1998 compared to $4.0 million or 0.52% of total assets at December 31, 1997 and
$4.5 million or 0.81% of total assets at March 31, 1997.


RESULTS OF OPERATIONS

OVERVIEW

Comparisons of year to year operating results have been significantly affected
by the growth of the Bank and its mortgage banking subsidiary, People's Mortgage
Corporation ("PMC") that have resulted in the Company increasing its asset size
from $496.1 million at December 31, 1996 to $862.0 million at March 31, 1998.
Operating results have been significantly affected by the Company increasing its
average loans and average investments to $435.0 million and $311.7 million,
respectively, during the first quarter of 1998, compared to $269.1 million and
$237.0 million, respectively, during the first quarter of 1997. This growth in
earnings assets was funded by the Company increasing its average deposits and
average borrowings to $331.1 million and $382.4 million, respectively, in the
first quarter of 1998, compared to $293.1 million and $174.6 million,
respectively, in the first quarter of 1997. Operating results have also been
significantly affected by the growth of PMC which is reflected in gains on sales
of loans of $1.3 million, interest and other income of $510,000, PMC operating
expenses of $1.2 million, and income before income taxes of $595,000 from PMC
operations in the first three months of 1998 compared to $913,000, $494,000,
$1.1 million, and $289,000, respectively, in the corresponding period of 1997.

Finally, operating results have been affected by mortgage refinancings. These
refinancings have adversely affected the Company's net interest margin due to
the resulting write-offs of purchase premiums associated with mortgage-backed
securities and purchased residential mortgage loans. The amortization and
write-offs of such premiums amounted to a $0.19 charge against earnings in the
first quarter of 1998, compared to $0.02 for the first quarter of 1997.
Conversely, this heightened refinancing activity resulted in PMC increasing its
earnings per share contribution to $0.11 in the first quarter of 1998 from $0.04
in the first quarter of 1997.


                                       9


<PAGE>   10


Return on average assets was 0.75% and return on average equity was 18.89% for
the three month period ended March 31, 1998. Return on average assets was 0.98%
and return on average equity was 16.51% for the same period in 1997. Net income
amounted to $1.4 million or $0.43 per diluted share for the three months ended
March 31, 1998 compared to net income of $1.3 million or $0.36 per diluted share
for the same period in 1997. Basic earnings per share was $0.44 per share for
the three months ended March 31, 1998, compared to $0.36 per share for the same
period in 1997.

NET INTEREST INCOME

Net interest income increased $414,000 for the three months ended March 31, 1998
compared to the same period in 1997. This change resulted mostly from increased
average earning assets. For the first three months of 1998, average earning
assets increased 48% compared to the same period in 1997.

Interest and dividend income increased to $13.7 million for the three months
ended March 31, 1998 from $9.7 million for the same period in 1997. The yield on
average earning assets decreased to 7.28% for the three months ended March 31,
1998 from 7.62% for the same period in 1997. Yields on loans decreased from
8.32% for the three months ended March 31, 1997 to 7.33% for the same period in
1998. Yields on investments increased to 7.25% for the three months ended March
31, 1998 compared to 6.90% for the same period in 1997.

Interest expense increased to $8.9 million for the three months ended March 31,
1998 from $5.3 million for the same period in 1997. This increase was due to a
$3.1 million increase in interest expense on borrowed funds for the three months
ended March 31, 1998. Interest expense on deposits increased $492,000 for the
three months ended March 31, 1998, compared to the same period in 1997.

During the first three months of 1998, average borrowed funds amounted to $382.4
million compared to $174.6 million during the same period of 1997. The Company
has increased its use of borrowed funds to fund purchases of mortgage-backed
securities and loans. Rates paid on average borrowed funds were 5.83% for the
three months ended March 31, 1998 compared to 5.68% for the same period in 1997.

Deposit interest expense increased due to an increase in average deposits to
$331.1 million for the three months ended March 31, 1998 compared to $293.1
million for the same period in 1997. The increase in deposit interest expense
was due to the increase in average deposits and an increase in the average cost
of deposits to 4.02% for the three month period ended March 31, 1998 from 3.88%
for the same period in 1997.

PROVISION FOR LOAN LOSSES

A provision for loan losses of $150,000 was made for the three months ended
March 31, 1998. No provision for loan losses was made for the same period in
1997.

OTHER INCOME

Other income was $1.7 million for the three months ended March 31, 1998 compared
to $1.3 million for the same period in 1997. The year to date increase is
attributable to a $402,000 increase in gains from sales of loans. The increase
in loan sale gains reflects the growth of People's Mortgage Corporation.


                                       10


<PAGE>   11


OPERATING EXPENSES

Total operating expenses amounted to $4.1 million for the three months ended
March 31, 1998 compared to $3.6 million for the same period in 1997.

Salaries and benefits expense increased $213,000 for the three months ended
March 31, 1998 compared to the same period in 1997. The increase in salaries and
benefits reflects general salary increases and added lending and PMC staffing.

Occupancy and equipment expense increased $105,000 for the three months ended
March 31, 1998 compared to the same period in 1997. Other real estate owned
expenses decreased $87,000 for the three months ended March 31, 1998 compared to
the same period in 1997. Other general and administrative expenses increased
$188,000 for the three months ended March 31, 1998 compared to the same period
in 1997. All increases in operating expense, other than OREO related expenses,
are primarily due to additional costs associated with the growth of PMC.

PROVISION FOR INCOME TAXES

The Company recognized income tax expense of $825,000 in the three months ended
March 31, 1998 compared to income tax expense of $741,000 for the same period in
1997. The effective tax rate for the three months ended March 31, 1998 was 36.4%
compared to 36.2% for the same period in 1997.

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
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 current needs.

At March 31, 1998, the Company's capital exceeded all regulatory requirements.
The Company's Tier 1 leverage capital ratio at March 31, 1998 was 5.15%,
compared to 5.25% at December 31, 1997. Federal Reserve guidelines for the
calculation of the Tier 1 leverage capital ratio limit the amount of
subordinated debt included in Tier 1 capital to 25% of total Tier 1 capital. All
$13.8 million of the total proceeds of the Company's subordinated debentures is
included in total risk-based capital. At March 31, 1998, the Company's
risk-based capital ratio was 10.90%. The Company's book value per share was
$9.56 at March 31, 1998, $9.16 at December 31, 1997, and $8.57 at March 31,
1997.

OTHER INFORMATION

On April 15, 1998, the Company declared an $0.13 dividend to be paid on May 15,
1998 to shareholders of record on April 30, 1998.

On April 29, 1998, the Company received regulatory approval to close its East
Taunton, Massachusetts branch.


                                       11


<PAGE>   12


The Company is utilizing both internal and external resources to identify,
correct or reprogram and test the systems and software for Year 2000 compliance.
The Company has initiated formal communications with all of its significant
processing vendors to determine the extent to which the Company is vulnerable to
those third parties' failure to remediate their own Year 2000 Issue. It is
anticipated that all reprogramming efforts will be completed by December 31,
1998, allowing adequate time for testing. Management expects the cost of
achieving Year 2000 compliance to be immaterial, if as expected, the Company's
third party data service provider is able to achieve Year 2000 compliance.
Actual costs are charged to earnings as incurred. Such costs have not been
material to date.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For quantitative information about market risk, see Management's Discussion and
Analysis of Financial Condition and Results of Operations - Asset/Liability in
the Company's Annual Report.

There has been no material change in the quantitative and qualitative
disclosures about market risk as of March 31, 1998 from those presented in the
Company's Annual Report.



                                       12



<PAGE>   13


                           PART II - OTHER INFORMATION


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

    (a)        Exhibits

EXHIBIT        DESCRIPTION
-------        -----------

    3.1        Restated Articles of Organization of the Company (filed as
               Exhibit 3.1 to the Company's Annual Report on Form 10-K for the
               year ended December 31, 1995 and incorporated herein by
               reference)

    3.2        By-laws of the Company, as amended and restated (filed as Exhibit
               3.2 to the Company's Annual Report on Form 10-K for the year
               ended December 31, 1995 and incorporated herein by reference)

    4.1        Specimen certificate for shares of Common Stock of the Company
               (filed as Exhibit 4.1 to the Company's Annual Report on Form 10-K
               for the year ended December 31, 1995 and incorporated herein by
               reference)

    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).

    (b)        Reports on Form 8-K. No reports on Form 8-K were filed during the
               quarter ended March 31, 1998.


                                       13


<PAGE>   14



                                   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.


           5/15/98                 By: /s/ Richard S. Straczynski
         -------------------           -----------------------------------------
         Date                          Richard S. Straczynski
                                       President and Chief Executive Officer




          5/15/98                  By:  /s/ Colin C. Blair
         ------------------            -----------------------------------------
         Date                          Colin C. Blair
                                       Chief Financial Officer




                                       14


<PAGE>   15


                                  EXHIBIT INDEX


EXHIBIT        DESCRIPTION
-------        -----------

    3.1        Restated Articles of Organization of the Company (filed as
               Exhibit 3.1 to the Company's Annual Report on Form 10-K for the
               year ended December 31, 1995 and incorporated herein by
               reference)

    3.2        By-laws of the Company, as amended and restated (filed as Exhibit
               3.2 to the Company's Annual Report on Form 10-K for the year
               ended December 31, 1995 and incorporated herein by reference)


    4.1         Specimen certificate for shares of Common Stock of the Company
               (filed as Exhibit 4.1 to the Company's Annual Report on Form 10-K
               for the year ended December 31, 1995 and incorporated herein by
               reference)

    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).




                                       15