<PAGE>

                       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 September 30, 2001 or

[ ] 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, 2001 was 3,252,250.



<PAGE>

                            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                                                        11

             Item 3.       Quantitative and Qualitative Disclosures about Market Risk                     17


PART II      OTHER INFORMATION

             Item 5.       Other Information                                                              19

             Item 6.       Exhibits and Reports on Form 8-K

SIGNATURES                                                                                                20

EXHIBITS                                                                                                  21

(*)          The financial information at December 31, 2000 has been derived
             from the audited financial statements at that date and should be
             read in conjunction therewith. All other financial statements are
             unaudited.

</TABLE>


                                       2


<PAGE>


                   PEOPLE'S BANCSHARES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                              September 30,         December 31,
                                                                                                  2001                  2000
                                                                                              -------------         ------------
<S>                                                                                              <C>                 <C>
                                      ASSETS
Cash and due from banks                                                                          $ 15,659            $   16,406
Short-term investments                                                                            170,100                  --
                                                                                                 --------            ----------
   Total cash and cash equivalents                                                                185,759                16,406
Securities available for sale                                                                     253,412               488,128
Restricted equity securities, at cost                                                              19,869                19,869
Loans held for sale                                                                               100,726                40,546
Loans, net of allowance for loans losses of $4,074 in 2001
   and $4,182 in 2000                                                                             334,803               393,451
Other real estate owned, net                                                                          210                    50
Banking premises and equipment, net                                                                16,751                17,705
Accrued interest receivable                                                                         6,246                 7,402
Intangible assets                                                                                   1,277                 1,368
Deferred tax asset                                                                                  6,982                14,813
Other assets                                                                                        2,457                 3,697
                                                                                                 --------            ----------
         Total assets                                                                            $928,492            $1,003,435
                                                                                                 ========            ==========


                          LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits                                                                                         $576,220            $  624,561
Short-term borrowings                                                                                 941                49,110
Securities sold under agreement to repurchase                                                      83,500                83,500
Other long-term debt                                                                              198,000               198,000
Mortgagors' escrow accounts                                                                         1,225                   984
Accrued expenses and other liabilities                                                              6,799                 5,723
Subordinated debentures                                                                            23,800                23,800
                                                                                                 --------            ----------
   Total liabilities                                                                              890,485               985,678
                                                                                                 --------            ----------

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 3,725,250 and 3,696,734 shares                                                   373                   370
   Additional paid-in capital                                                                      24,113                23,853
   Retained earnings                                                                               33,359                30,165
   Treasury stock, at cost - 473,000 shares                                                        (8,364)               (8,364)
   Accumulated other comprehensive loss                                                           (11,474)              (28,267)
                                                                                                 --------            ----------
         Total stockholders' equity                                                                38,007                17,757
                                                                                                 --------            ----------

         Total liabilities and stockholders' equity                                              $928,492            $1,003,435
                                                                                                 ========            ==========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

                                       3

<PAGE>

                   PEOPLE'S BANCSHARES, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                      (In thousands, except per share data)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                           Three Months Ended                  Nine Months Ended
                                                                              September 30,                       September 30,
                                                                        -------------------------         -------------------------
                                                                            2001           2000              2001            2000
                                                                         --------        --------          --------        --------
<S>                                                                      <C>             <C>               <C>             <C>
Interest and dividend income:
   Interest and fees on loans                                            $  8,889        $  9,268          $ 28,099        $ 26,714
   Interest and dividends on securities                                     4,847          11,619            20,396          34,098
   Interest on short-term investments                                       1,667              30             2,561             204
                                                                         --------        --------          --------        --------
      Total interest and dividend income                                   15,403          20,917            51,056          61,016
                                                                         --------        --------          --------        --------
Interest expense:
   Deposits                                                                 4,606           7,368            16,711          20,226
   Short-term borrowings                                                        5           1,128                22           3,550
   Long-term debt and subordinated debentures                               4,897           5,059            15,607          15,335
                                                                         --------        --------          --------        --------
      Total interest expense                                                9,508          13,555            32,340          39,111
                                                                         --------        --------          --------        --------
Net interest income                                                         5,895           7,362            18,716          21,905

Other income:
   Customer service fees                                                      347             323             1,051             959
   Losses on sales of securities available for sale, net                     (583)           --              (2,586)           --
   Gain on sales of loans, net                                              3,809           2,409            10,314           6,362
   Miscellaneous                                                               38              49               216             166
                                                                         --------        --------          --------        --------
      Total other income                                                    3,611           2,781             8,995           7,487
                                                                         --------        --------          --------        --------

Operating expenses:
   Salaries and employee benefits                                           4,468           3,426            12,425          10,381
   Occupancy and equipment                                                    898             898             2,782           2,818
   Data processing                                                            477             341             1,330           1,016
   Professional fees                                                          462             466             1,194           1,099
   Other real estate owned, net                                               100               2               103             (12)
   Other general and administrative                                         1,649           1,342             4,707           3,581
                                                                         --------        --------          --------        --------
      Total operating expenses                                              8,054           6,475            22,541          18,883
                                                                         --------        --------          --------        --------

Income before income taxes                                                  1,452           3,668             5,170          10,509
Provision for income taxes                                                    562           1,191             1,976           3,411
                                                                         --------        --------          --------        --------
Net income                                                               $    890        $  2,477          $  3,194        $  7,098
                                                                         ========        ========          ========        ========

Net income per share:
   Diluted earnings per share                                            $   0.27        $   0.76          $   0.98        $   2.16
   Basic earnings per share                                                  0.27            0.77              0.98            2.19
Weighted average shares outstanding -
   assuming dilution for stock options                                      3,278           3,270             3,275           3,293
Weighted average shares outstanding                                         3,252           3,222             3,247           3,245
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

                                       4

<PAGE>

                   PEOPLE'S BANCSHARES, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                      NINE MONTHS ENDED SEPTEMBER 30, 2001
                             (Dollars in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                           Accumulated
                                                                 Additional                                  Other
                                                     Common       Paid-in       Retained     Treasury     Comprehensive
                                                      Stock       Capital       Earnings       Stock          Loss           Total
                                                   ----------    ----------     --------     ---------    -------------     --------

<S>                                                 <C>           <C>           <C>           <C>            <C>            <C>
Balance at December 31, 2000                        $    370      $ 23,853      $ 30,165      $ (8,364)      $(28,267)      $ 17,757

Comprehensive income:
Net income                                              --            --           3,194          --             --            3,194
Change in net unrealized gain/loss
  on securities available for sale,
  net of tax                                            --            --            --            --           16,793         16,793
Exercise of stock options                                  3           260          --            --             --              263
                                                    --------      --------      --------      --------       --------       --------

Balance at September 30, 2001                       $    373      $ 24,113      $ 33,359      $ (8,364)      $(11,474)      $ 38,007
                                                    ========      ========      ========      ========       ========       ========
</TABLE>


See accompanying notes to unaudited consolidated financial statements.

                                       5

<PAGE>



                   PEOPLE'S BANCSHARES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                           Nine Months Ended
                                                                                                              September 30,
                                                                                                        --------------------------
                                                                                                          2001              2000
                                                                                                        --------         ---------
<S>                                                                                                     <C>              <C>
Cash flows from operating activities:
   Net income                                                                                           $  3,194         $   7,098
   Adjustments to reconcile net income to net cash used by
     operating activities:
   Depreciation and amortization                                                                           1,430             1,422
   Net accretion on securities and purchased loans                                                        (2,221)           (6,022)
   Losses on sales of securities available for sale, net                                                   2,586              --
   Losses on sales of portfolio loans                                                                        143              --
   Losses (gains) on other real estate owned                                                                 103               (12)
   Net change in:
     Loans held for sale                                                                                 (60,180)          (16,896)
     Other assets, net of other liabilities                                                                3,343            (1,469)
                                                                                                        --------         ---------
         Net cash used by operating activities                                                           (51,602)          (15,879)
                                                                                                        --------         ---------

Cash flows from investing activities:
  Activity in securities available for sale:
      Purchases                                                                                          (60,271)           (9,849)
      Sales                                                                                              277,502              --
      Maturities, prepayments and calls                                                                    7,017             5,841
      Amortization of mortgage-backed securities                                                          35,466             4,085
    Activity in securities held to maturity:
       Purchase                                                                                             --             (31,544)
       Maturities, prepayments and calls                                                                    --              15,774
       Amortization of mortgage-backed securities                                                           --              23,042
    Redemption of restricted equity securities                                                              --               1,832
    Loan (originations and purchases), net of amortization, payoffs, and sales                            57,800            15,772
    Proceeds from sales of other real estate owned                                                            88               297
    Additions to banking premises and equipment                                                             (641)           (1,661)
                                                                                                        --------         ---------
          Net cash provided by investing activities                                                      316,961            23,589
                                                                                                        --------         ---------

Cash flows from financing activities:
    Net (decrease) increase in deposits                                                                  (48,341)           58,791
    Net (decrease) increase in short-term borrowings                                                     (48,169)            4,757
    Proceeds from issuance of borrowings with maturities in excess of three months                          --             135,000
    Repayment of borrowings with maturities in excess of three months                                       --            (204,700)
    Increase (decrease) in mortgagors' escrow accounts                                                       241                25
    Proceeds from exercise of stock options                                                                  263                58
    Proceeds from issuance of subordinated debentures                                                       --               9,638
    Payment to acquire treasury stock                                                                       --              (2,095)
    Cash dividends                                                                                          --              (2,042)
                                                                                                        --------         ---------
       Net cash used by financing activities                                                             (96,006)             (568)
                                                                                                        --------         ---------
Net change in cash and cash equivalents                                                                  169,353             7,142
Cash and cash equivalents at beginning of period                                                          16,406            11,875
                                                                                                        --------         ---------
Cash and cash equivalents at end of period                                                              $185,759         $  19,017
                                                                                                        ========         =========

Supplementary information:
   Interest paid                                                                                        $ 33,063         $  38,907
   Income taxes paid                                                                                       2,642             4,017
   Transfer from loans and fixed assets to other real estate owned, net                                      348                50
</TABLE>


See accompanying notes to unaudited consolidated financial statements.

                                       6

<PAGE>
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accompanying consolidated financial statements of People's Bancshares,
     Inc. and its subsidiaries (the "Company") furnished in this report are
     unaudited. In the opinion of management, the information presented includes
     all adjustments, which consist of normal recurring accruals 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 should be read in conjunction with the consolidated financial
     statements of the Company presented in its Annual Report on Form 10-K for
     the year ended December 31, 2000.

(2)  EARNINGS PER SHARE

     Basic earnings per share is computed by dividing income available to common
     stock by the weighted-average number of common shares outstanding during
     the period. Diluted earnings per share reflect additional common shares
     issuable from the exercise of stock options calculated using the treasury
     stock method. The Company has 144,900 stock options outstanding that were
     excluded from the calculation of diluted earnings per share since they were
     anti-dilutive.

(3)  COMPREHENSIVE INCOME/LOSS

     Accounting principles generally require that recognized revenue, expenses,
     gains and losses be included in net income. Although certain changes in
     assets and liabilities, such as unrealized gains and losses on
     available-for-sale securities, are reported as a separate component of the
     equity section of the balance sheet, such items, along with net income, are
     components of comprehensive income/loss.

     The components of other comprehensive income (loss) are as follows:

<TABLE>
<CAPTION>
                                                                     NINE MONTHS ENDED SEPTEMBER 30,
                                                                     -------------------------------
                                                                           2001             2000
                                                                        ---------          ------
<S>                                                                      <C>               <C>
     Net income                                                          $  3,194          $7,098
     Change in net unrealized gain (loss) on securities
       available-for-sale                                                  27,085            (390)
     Tax effect                                                           (10,292)            125
                                                                        ---------          ------
         Net of tax amount                                                 16,793            (265)
                                                                        ---------          ------
     Total comprehensive income                                          $ 19,987          $6,833
                                                                        =========          ======
</TABLE>



(4)  ACCOUNTING PRONOUNCEMENTS

     The Financial Accounting Standards Board ("FASB") issued Statement of
     Financial Accounting Standards ("SFAS") No., 133, "Accounting for
     Derivative Instruments and Hedging Activities," which, as amended by SFAS
     No. 137, was effective for fiscal years beginning after June 15, 2000. This
     Statement establishes accounting and reporting standards for derivative
     instruments and hedging activities, including certain derivative
     instruments embedded in other contracts, and requires that an entity
     recognize all derivatives as assets or liabilities in the balance sheet and
     measure them at fair value. The Company adopted this statement on January
     1, 2001 with no material impact on the consolidated financial statements.


                                       7

<PAGE>
     In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
     and Servicing of Financial Assets and Extinguishment of Liabilities - a
     Replacement of FASB Statement No. 125", SFAS No. 140 replaces SFAS No. 125.
     Certain disclosure provisions required by SFAS No. 140 were effective
     immediately. Additional requirements related to SFAS No. 140 became
     effective beginning March 31, 2001. These additional requirements had no
     effect on the Company's consolidated financial position or results of
     operations.

     In June 2001, the FASB issued SFAS No. 141, "Business Combinations." SFAS
     No. 141 requires all business combinations initiated after June 30, 2001,
     to be accounted for using the purchase method. This statement had no effect
     on the Company's consolidated financial position or results of operation.

     In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
     Intangibles" effective for fiscal years beginning January 1, 2002. With the
     adoption of SFAS No. 142, goodwill will no longer be subject to
     amortization over its estimated useful life, but will be subject to annual
     assessment for impairment by applying a fair-value-based test. Recognized
     intangible assets, such as core deposit intangibles, will be amortized over
     their useful lives. The Company anticipates no material impact on the
     Company's consolidated financial position or results of operation upon the
     adoption of SFAS No. 142.

     In July 2001, the Securities and Exchange Commission ("SEC"), issued Staff
     Accounting Bulletin No. 102 ("SAB No. 102"), "Selected Loan Loss
     Methodology and Documentation Issues." SAB No. 102 provides detailed
     guidance on the development, documentation and application of a systematic
     methodology in determining an allowance for loan losses. The additional
     documentation requirements will not have any effect on the Company's
     financial statements.

     In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset
     Retirement Obligations." SFAS No. 143 requires the Company to recognize
     material asset retirement obligations. The Company has not yet determined
     the impact of this statement on the Company's results of operation or
     financial condition.

     In October 2001, the FASB issued SFAS No. 144, "Accounting for the
     Impairment or Disposal of Long-Lived Assets." SFAS No. 144 requires that
     long-lived assets be measured at the lower of carrying amount or fair value
     less the cost to sell and broadens the reporting of discontinued
     operations. This statement had no effect on the Company's consolidated
     financial position or results of operations.


(5)  SEGMENT INFORMATION

     The Company has two reportable segments, the Bank and People's Mortgage
     Corporation ("PMC"). The Bank segment attracts deposits from individuals,
     businesses and governments, and invests those funds in residential and
     commercial mortgages and consumer, commercial and construction loans. PMC
     originates 1-4 family residential loans primarily for sale in the secondary
     market.

     The accounting policies of the segments are the same as those described in
     the summary of significant accounting policies. The Company evaluates
     performance based on profit or loss from operations before income taxes
     excluding nonrecurring gains or losses.



                                       8

<PAGE>
     The Company's reportable segments are strategic business units that offer
     different products and services. They are managed separately because each
     segment appeals to different markets and, accordingly, requires different
     technology and marketing strategies.

     The Company derives a significant portion of its revenues from interest
     income and interest expense is the most significant expense. Management
     analyzes the segments based on pre-tax income and therefore the segments
     are reported below using pre-tax income for the nine months ended September
     30, 2001 and 2000. The Company does not allocate income taxes to the
     segments.

     The parent company operations are combined with the Bank. Its sources of
     income are dividends from subsidiaries and interest on short-term
     investments. Its expenses include interest on $23.8 million outstanding
     capital trust securities and direct expenses including professional fees
     and other operating costs.

<TABLE>
<CAPTION>
                                                                       BANK                PMC               TOTAL
                                                                     -------             -------             -------
       <S>                                                           <C>                 <C>                 <C>
      SEPTEMBER 30, 2001
      Net interest income                                           $14,307             $ 4,409             $18,716
      Other income (loss)                                            (1,465)             10,460               8,995
      Operating expense                                              12,838               9,703              22,541
                                                                    -------             -------             -------
      Income before income taxes                                    $     4             $ 5,166             $ 5,170
                                                                    =======             =======             =======

      SEPTEMBER 30, 2000
      Net interest income, after credit for loan losses             $20,126             $ 1,779             $21,905
      Other income                                                    1,123               6,364               7,487
      Operating expense                                              10,620               8,263              18,883
                                                                    -------             -------             -------
      Income (loss) before income taxes                             $10,629             $  (120)            $10,509
                                                                     =======             =======             =======
  </TABLE>


(6)  MERGER AGREEMENT

     As previously announced on October 1, 2001, the Company and FirstFed
     America Bancorp, Inc. entered into a definitive merger agreement whereby
     FirstFed will acquire People's Bancshares, Inc. for approximately $72
     million in cash and stock subject to receipt of regulatory and shareholder
     approvals and satisfaction of other conditions. The merger is expected to
     be completed in the first quarter of 2002. Upon consummation of the merger,
     former shareholders of People's will own approximately 23% of FirstFed's
     outstanding shares and one member of People's Board of Directors will be
     added to the Board of Directors of FirstFed and First Federal Savings Bank
     of America.

     Under the terms of the merger agreement, People's stockholders can elect to
     receive either 1.2644 shares of FirstFed common stock (and cash in lieu of
     any fractional share) or $22.00 in cash for each share of People's common
     stock they own. The elections of People's stockholders will be subject to
     the requirement that 55% of People's shares be exchanged for cash and 45%
     be exchanged for FirstFed common stock.

     People's can terminate the merger agreement should FirstFed common stock
     decline in value by more than certain percentages during a specified
     measurement period, provided that FirstFed can require People's to proceed
     with the transaction by increasing the exchange ratio to a specified level.
     Should the value of FirstFed common stock increase by more than 20%, the
     value of FirstFed shares to be exchanged for each People's share would be
     capped at $26.40.


                                       9

<PAGE>
     The merger is subject to certain conditions, including without limitation
     the approval of the stockholders and regulators of both companies, absence
     of injunctions, and receipt of third party consents. Among other
     conditions, FIRSTFED will not be required to consummate the merger if the
     fair market value of the Company's and its subsidiaries' portfolio of trust
     preferred securities, subordinated debt securities, corporate debt
     securities and zero coupon debt instruments (including proceeds from sales
     of such securities), as of a date within ten days prior to the effective
     date of the merger, has declined by greater than 7% from its value on
     August 31, 2001. The value of such portfolio as of September 30, 2001 had
     increased in value by 4.25% from its value on August 31, 2001.

     On October 16, 2001, as required under the Merger Agreement, for
     transactions other than in ordinary course of business, People's requested
     and FirstFed consented to a program allowing People's Savings Bank to
     accelerate the sale of trust preferred securities in excess of its $7
     million quarterly commitment to bank regulators. The program, which was
     also approved by People's Executive Committee, contemplates the sale of
     approximately $60 to $70 million of trust preferred securities and the
     remaining $21 million of zero coupon bonds held by People's Savings Bank at
     September 30, 2001. Realized losses from this program are projected to
     approximate $6 million to $7 million and will reduce concentrations of
     trust preferred securities from $111 million at September 30, 2001 to
     between $40 million and $50 million, or less than 75% of People's Savings
     resulting Tier 1 leverage capital as of that date. Upon completion of the
     program, assuming the realization of up to $7 million in losses, the
     resulting consolidated Tier 1 leverage capital ratio of the Company will
     approximate 6.3% and the Tier 1 leverage capital ratio of People's Savings
     Bank will approximate 7.1%, thereby maintaining Tier 1 leverage ratios well
     in excess of levels required under the various regulatory agreements.

     Through November 8, 2001, the $21 million of zero coupon agency bonds held
     by People's Savings Bank have been sold along with approximately $49.6
     million of trust preferred securities at an aggregate loss of $4.3 million.
     The total concentration in trust preferred securities has been reduced to
     $61.6 million or an estimated 91% of Tier 1 capital as of September 30,
     2001, adjusted to reflect realized securities losses.







                                       10

<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                                       OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


     PRELIMINARY NOTE IN REGARD TO FORWARD-LOOKING STATEMENTS

     This quarterly report contains "forward-looking statements" within the
     meaning of the Private Securities Litigation Reform Act of 1995. For this
     purpose, any statements contained herein that are not statements of
     historical fact may be deemed to be forward-looking statements. Without
     limiting the foregoing, the words "believes," "anticipates," "intends,"
     "will," "plans," "expects," "estimate," "assume," "should," and similar
     expressions which predict or indicate future events and trends and which do
     not relate to historical matters are intended to identify forward-looking
     statements. In addition, information concerning specific future business
     developments discussed herein are forward looking statements. This
     quarterly report also includes forward-looking statements about the
     consummation, anticipated timing, impact of and the actual exchange ratio
     of the pending merger with FIRSTFED America Bancorp, Inc. Forward-looking
     statements should not be relied on, because they involve known and unknown
     risks, uncertainties and other factors, some of which are beyond the
     control of the Company. These expressed or implied important risks,
     uncertainties and other factors may cause the Company's actual results,
     performance or achievements to differ materially from those expressed or
     implied by such forward-looking statements. These factors include, without
     limitation, those set forth below under the caption "Certain Factors That
     May Affect Future Results."

     CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

     The following important factors, among others, could cause actual results
     to differ materially from those expressed or implied by forward-looking
     statements made in this quarterly report or presented elsewhere by
     management from time to time. A number of uncertainties exist that could
     affect the Company's future operating results, including, without
     limitation, the Bank's continued ability to originate loans, fluctuation of
     interest rates, real estate market conditions in the Bank's lending areas,
     general and local economic conditions, the Bank's continued ability to
     attract and retain deposits, the Company's ability to control costs,
     possible changes in the loan loss provision, the timing and proceeds from
     the sale of certain securities, (including the potential deterioration in
     value of investment securities as discussed in Item 5 below) accounting
     matters and possible changes related to regulatory matters, new accounting
     pronouncements, changing regulatory requirements and new tax or other state
     and national legislation. In addition, the closing of the pending merger
     with FIRSTFED America Bancorp, Inc. is subject to the satisfaction or
     waiver of conditions that may not be satisfied or waived. These
     forward-looking statements were based upon information, plans and estimates
     at the date of this report, and we do not promise to update any
     forward-looking statements to reflect changes in underlying assumptions or
     factors, new information, future events or other changes.

     The following analysis of the Company's consolidated results of operations
     and financial condition should be read in conjunction with the consolidated
     financial statements and accompanying notes of the Company presented in its
     Annual Report for the year ended December 31, 2000.


                                       11

<PAGE>

     OVERVIEW

     Net income for the three months ended September 30, 2001 was $890 thousand
     or $0.27 per diluted share, compared to $2.3 million or $0.76 per diluted
     share for the corresponding period in 2000. Basic earnings per share was
     $0.27 for the three months ended September 30, 2001, compared to $0.77 for
     the same period in 2000. Income before income taxes for the three months
     ended September 30, 2001 was $1.5 million, compared with $3.4 million for
     the three months ended September 30, 2000. Return on average assets and
     return on average equity was 0.38% and 9.83%, respectively, for the three
     months ended September 30, 2001, compared to 0.91% and 23.18%, respectively
     for the same period in 2000.

     Through the sale of securities, the Company continues to address regulatory
     issues and reduce exposure to higher risk earnings assets. The results of
     operations for the nine months ended September 30, 2001 include before tax
     losses of $2.6 million on sales of approximately $294 million of securities
     and portfolio loans. There were no sales of securities or portfolio loans
     during the nine months ended September 30, 2000. The net interest margin
     and income has decreased compared with the comparable period in 2000 due to
     the lower volume of securities and lower yields on short-term investments,
     partially offset by an increase in loan income resulting from increased
     loan originations at People's Mortgage Corporation ("PMC"). The Company's
     net interest margin was 2.71% for the nine months ended September 30, 2001,
     compared to 2.83% in the nine months ended September 30, 2000.

     FINANCIAL CONDITION

     Total assets decreased $74.9 million or 7.47% to $928.5 million at
     September 30, 2001 from $1,003.4 million at December 31, 2000. This
     reflects a net decrease in securities available-for-sale of $234.7 million
     and a decrease in loans of $58.8 million, offset by an increase in
     short-term investments of $170.1 million and an increase of $60.2 million
     in loans held for sale.

     Securities available for sale decreased $234.7 million to $253.4 million at
     September 30, 2001 from $488.1 million at December 31, 2000. This decrease
     was the result of sales of $294 million of higher risk securities, which
     include approximately $34.9 million in corporate bonds and trust preferred
     securities, offset by an $24.7 million improvement in unrealized losses on
     securities.

     Loans decreased $58.8 million to $334.8 million at September 30, 2001 from
     $393.5 million at December 31, 2000. The decrease reflects the sale of
     $13.8 million in purchased second mortgages and increased loan amortization
     due to the low interest rate environment. The low mortgage interest rate
     environment has accelerated refinancing and home buying activity resulting
     in increased mortgage loan originations at PMC. This is reflected in the
     $60.2 million increase in loans held for sale to $100.7 million at
     September 30, 2001 from $40.5 million at December 31, 2000.

     Proceeds from the sale of investments were used to fund the outflow of
     deposits, pay off short-term borrowings, increase short-term investments
     and fund the growth in loans held for sale. Deposits decreased $48.3
     million or 7.74% to $576.2 million at September 30, 2001 from $624.6
     million at December 31, 2000. This decrease is primarily a result of a
     reduction in higher cost municipal certificate products and retail
     certificate products, partially offset by an increase in core retail
     accounts. Short-term borrowings decreased $48.2 million.

     Stockholders' equity was $38.0 million at September 30, 2001, as compared
     to $17.8 million at December 31, 2000. The increase in stockholders' equity
     is primarily due to a $16.8 million improvement in unrealized securities
     losses, net of taxes, and growth in retained earnings.



                                       12

<PAGE>
     RESULTS OF OPERATIONS


     NET INTEREST INCOME

     Net interest income decreased $1.4 million and $3.9 million for the three
     and nine months ended September 30, 2001, compared to the same periods in
     2000. This change reflects a decrease in average earning assets (primarily
     securities) and a lower net interest margin resulting from lower available
     yields, partially offset by decreased deposits and borrowings. For the
     three and nine months ended September 30, 2001 average earning assets
     decreased by $150.8 million and $113.1 million from the same periods of
     2000. Net interest margin was 2.71% for the nine months ended September 30,
     2001, compared to 2.83% for the same period in 2000.

     Interest and dividend income decreased to $15.4 million and $51.1 million
     for the three and nine months ended September 30, 2001 from $20.9 million
     and $61.0 million for the comparable 2000 periods. The yield on average
     earning assets decreased to 6.85% and 7.40% for the three and nine months
     ended September 30, 2001 from 7.96% and 7.88% for the three and nine months
     ended September 30, 2000. Yields on loans was 8.20% and 8.29% for the three
     and nine months ended September 30, 2001, compared to 8.24% and 8.13% for
     the 2000 periods. Yields on investments decreased to 7.04% and 7.20% for
     the three and nine months ended September 30, 2001, compared to 7.75% and
     7.70% for the comparable 2000 periods.

     Interest expense was $9.5 million and $32.3 million for the three and nine
     months ended September 30, 2001 compared to $13.6 million and $39.1 million
     for the same periods in 2000. Deposit interest expense decreased $2.8
     million and $6.8 million for the three and nine months, compared to the
     same periods in 2000. Interest expense on borrowings decreased $1.4 million
     and $3.9 million for the three and nine months ended September 30, 2001
     compared to the same periods in 2000.

     During the first nine months of 2001, average Borrowed Funds were $325.6
     million compared to $417.4 million during the comparable period in 2000.
     Average Borrowed Funds have decreased as the Company has paid down
     short-term borrowings. The average rate paid on Borrowed Funds was 5.99%
     and 5.63% for the three and nine months ended September 30, 2001 compared
     to 5.89% and 5.65% for the same periods in 2000.

     Interest expense on subordinated debentures increased over the three and
     nine month periods of 2000 due to the average balances increasing from
     $13.8 million to $23.8 million. The average rate paid on subordinated
     debentures was 10.69% and 10.80% for the three and nine months ended
     September 30, 2001 compared to 10.49% and 10.28% for the same periods in
     2000.

     Interest expense on deposits decreased due to a more favorable mix and a
     decrease in the volume of average deposits to $544.9 million for the nine
     months ended September 30, 2001, from the $572.3 million for the same
     period in 2000. The average cost of deposits decreased to 3.45% and 4.10%
     for the three and nine months ended September 30, 2001 from 4.91% and 4.72%
     for the same periods in 2000.

     OTHER INCOME

     Other income was $3.6 million and $9.0 million for the three and nine
     months ended September 30, 2001, compared to $2.8 million and $7.5 million
     for the same periods in 2000. The increase reflects $2.6 million in
     realized losses on securities, offset by a $4.0 million increase in gains
     on loan sales for the nine months ended September 30, 2001.




                                       13

<PAGE>
     OPERATING EXPENSES

     Total operating expenses were $8.1 million and $22.5 million for the three
     and nine months ended September 30, 2001, compared to $6.5 million and
     $18.9 million for the same periods in 2000. These increases in operating
     expenses were primarily due to an increase in professional fees for legal
     and consulting services and an increase in other operating expenses
     directly related to the increased volume of loan originations at PMC and an
     increase in deposit insurance.

     Salaries and benefits expense increased $1.0 million and $2.0 million for
     the three and nine months ended September 30, 2001, compared to the same
     period in 2000 reflecting increased expenses at PMC, consistent with volume
     increases.

     Professional fees increased $95,000 for the nine months ended September 30,
     2001 compared to the same period in 2000. This increase primarily reflects
     costs associated with shareholder and regulatory matters. Professional fees
     decreased $4,000 for the three months ended September 30, 2001 compared
     with the comparable September 2000 period. Other general and administrative
     expenses increased $307,000 and $1.1 million for the three and nine months
     ended September 30, 2001, compared to the same periods in 2000 due to
     expenses associated with the increased volume of loan originations at PMC
     and an increase in deposit insurance expense.

     The efficiency ratio for the Company for the three and nine months ended
     September 30, 2001 was 74.11% and 69.33% as compared with a ratio of 57.34%
     and 59.79% for the same periods in 2000. The efficiency ratio for the
     Company, excluding PMC, was 87.82% and 76.69% for the three and nine months
     ended June 30, 2001, as compared with a ratio of 45.83% and 44.70% for the
     same periods in 2000. The increased efficiency ratios reflect the decreased
     net interest margin and increased operating expenses.

     PROVISION FOR INCOME TAXES

     The Company recognized income tax expense of $562,000 and $2.0 million in
     the three and nine months ended September 30, 2001, compared to income tax
     expense of $1.2 million and $3.4 million for the same periods in 2000. The
     effective tax rate for the three and nine months ended September 30, 2001
     was 38% and the effective tax rate was 32% for the corresponding period of
     2000. The higher rate during the three and six months ended September 30,
     2001 was the result of the elimination of certain subsidiaries formed to
     hold securities which were taxed at lower rates.

     NON-PERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES

     The allowance for loan losses has been established to absorb estimated
     losses in the loan portfolio. The provision (credit) for loan losses and
     the level of the allowance are evaluated periodically by management and the
     Board of Directors. These provisions (credits) 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
     economic conditions based on facts then known.

     Periodically, management reviews the loan portfolio, classifying each loan
     into categories by assessing the degree of risk involved. Based upon this
     review, and other factors, the Company evaluates the adequacy of its
     allowance for loans losses. Necessary adjustments are charged (credited) to
     operations through the provision for loan losses. Loan losses are charged
     against the allowance management believes the collectibility of the loan
     balance is unlikely.



                                       14

<PAGE>

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

     At September 30, 2001, the Company's allowance for loan losses totaled $4.1
     million, or 0.93% of total loans and loans held for sale and 428% of
     non-performing loans, compared to $4.2 million, or 0.95% of total loans and
     loans held for sale and 1,121% of non-performing loans, at December 31,
     2000, and compared to $4.2 million, or 0.94% of total loans and loans held
     for sale and 1,180% of non-performing loans, at September 30, 2000. Net
     charge-offs for the nine months ended September 30, 2001 were $108,000,
     compared to net recoveries of $8,000 and $58,000 for the corresponding
     periods in 2000.

     Non-performing assets, including loans of $950,000, OREO of $210,000 and
     securities of $4.6 million, were $5.8 million or 0.62% of total assets at
     September 30, 2001. At December 31, 2000, non-performing assets were $1.4
     million, or 0.14% of total assets, including loans of $373,000, OREO of
     $50,000 and securities of $992,000. At September 30, 2000, non-performing
     assets were $402,000 or 0.04% of total assets, including loans and OREO.


     LIQUIDITY AND CAPITAL RESOURCES

     The Company's liquidity management strategy 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 September 30, 2001, the Company's capital exceeded all applicable
     regulatory requirements imposed by statute or regulations.

<TABLE>
<CAPTION>
                                                           Amount                                       Percent
                                         -----------------------------------------      ---------------------------------------
                                                        Adequately         Well                       Adequately       Well
                                                        Capitalized     Capitalized                  Capitalized    Capitalized
                                            Actual       Minimums        Minimums         Actual       Minimums       Minimums
                                           -------      -----------     -----------       ------     ------------   -----------
<S>                                        <C>            <C>            <C>               <C>           <C>           <C>
People's Bancshares, Inc.
     Tier 1 leverage capital               $64,697        $37,314          n/a              6.94%          4.00%         n/a
     Tier 1 capital                         64,697         20,913          n/a             12.37%          4.00%         n/a
     Total capital                          76,077         41,825          n/a             14.55%          8.00%         n/a

People's Savings Bank of Brockton
     Tier 1 leverage capital               $70,532        $37,265        $46,581            7.57%          4.00%        5.00%
     Tier 1 capital                         70,532         20,861         31,292           13.52%          4.00%        6.00%
     Total capital                          74,606         41,722         52,153           14.31%          8.00%       10.00%

</TABLE>




                                       15


<PAGE>
     As discussed below under "OTHER INFORMATION" both the Company and People's
     Savings Bank of Brockton have agreed to maintain minimum Tier 1 leverage
     capital ratios greater than the "Adequately Capitalized Minimums" shown in
     the foregoing table.


     PART II

     ITEM 5. OTHER INFORMATION

     The Company suspended its common stock dividend in the first quarter of
     2001 and terminated its stock repurchase program in the third quarter of
     2000. These actions are intended to accelerate capital growth and maintain
     compliance with targeted regulatory capital levels.

     On December 5, 2000, the Company entered into a formal agreement with the
     Federal Reserve Bank of Boston (the "Reserve Bank") pursuant to which the
     Company has agreed, among other matters, to obtain written approval from
     the Reserve Bank and the Director of the Division of Banking Supervision
     and Regulation of the Board of Governors (the "Director") prior to
     declaring or paying any dividends or making any distributions of interest,
     principal, or other sums on its subordinated debentures. The Company is
     also required to maintain a minimum consolidated Tier 1 leverage capital
     ratio of not less than 5%. At September 30, 2001, the Company's
     consolidated Tier 1 leverage capital ratio was 6.94%. This agreement also
     requires the Company receive written approval from the Reserve Bank to
     increase borrowings or renew any existing debt. Although there are no
     assurances that the Company will receive regulatory approval in the future,
     the Company has received the necessary approvals to make all scheduled
     payments on the subordinated debt since the Company entered into the
     agreement.

     On June 27, 2000, the Bank entered into an informal agreement with its
     regulators, the FDIC and the Massachusetts Commissioner of Banks, pursuant
     to which the Bank has agreed, among other matters, to develop plans to
     reduce over time the level of its investment in trust preferred securities
     to less than 100% of its Tier 1 leverage capital. In addition, the Bank has
     agreed to achieve and subsequently maintain a Tier 1 leverage capital ratio
     of not less than 6.5% of total assets. At September 30, 2001, the Bank's
     Tier 1 leverage capital ratio was 7.57%. Additional provisions of this
     agreement require the Bank to assess the Bank's management and staffing
     needs, develop revised strategic and capital plans, improve the quality of
     the investment portfolio and investment administration, improve liquidity
     and the management thereof, develop a plan for reducing interest rate risk
     exposure and address other operational issues. All required plans have been
     submitted as of September 30, 2001.

     Management is currently evaluating a number of initiatives to improve and
     maintain the financial soundness of the Company and the Bank. The Company
     is continuing to restructure its consolidated balance sheet to reduce
     interest rate risk while improving liquidity and balance sheet
     fundamentals. These actions will enhance the mix of earning assets and
     liabilities through the divestiture of higher risk earning assets while
     reducing dependence on higher cost volatile liabilities and improving asset
     quality.

     On July 2, 2001, the Company announced it had engaged the firm of Arthur
     Andersen LLP as its independent auditors.



                                       16

<PAGE>
     People's maintains twelve banking locations in Southeastern Massachusetts
     and 12 loan production offices in Massachusetts, Rhode Island, Connecticut,
     Maryland and Virginia. The Company trades under the symbol "PBKB" and is
     quoted on the NASDAQ National Market System.


     ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The objective of the Bank's asset/liability management process is to
     monitor and control the variation in repricing intervals between assets and
     liabilities. The Company quantifies and measures interest rate exposures
     using a model to dynamically simulate net-interest income under various
     interest rate scenarios over 12 month periods. Simulated scenarios include
     deliberately extreme interest rate "shocks" and more gradual interest rate
     "ramps". Key assumptions in these simulation analyses relate to behavior of
     interest rates and spreads, the growth or shrinkage of product balances and
     the behavior of the Company's deposit and loan customers. The most material
     assumption relates to the prepayment of mortgage assets (including mortgage
     loans and securities). The risk of prepayment tends to increase when
     interest rates fall. Since future prepayment behavior of loan customers is
     uncertain, the resultant interest rate sensitivity of loan assets cannot be
     determined exactly. Complicating management's efforts to measure interest
     rate risk is the uncertainty of the maturity, repricing and/or runoff of
     some of the Company's assets and liabilities.

     The Board's limits on interest rate risk specify that if interest rates
     rise or fall by 200 basis points, estimated net interest income for the
     subsequent 12 months should decline by less than 10% and for the next 12
     months should decline by less than 20%. Based upon the Bank's current
     methodology, the Company was not in compliance with this limit at
     September 30, 2001.


                        200 Basis Point           200 Basis Point
                           Increase                   Decrease
                        ---------------           ---------------
     Year 1                (0.79)%                      (0.59)%
     Year 2                18.56                       (36.67)

     The matching of the repricing characteristics of assets and liabilities may
     be analyzed by examining the extent to which such assets and liabilities
     are interest rate sensitive and by monitoring the interest rate sensitivity
     gap. The following table, referred to as the "Gap Table," sets forth the
     amount of interest-earning assets and interest-bearing liabilities
     outstanding at September 30, 2001, that are expected to reprice or mature
     in each of the future time periods shown. The Gap Table does not
     necessarily indicate the impact of general interest rate movements on net
     interest income because actual repricing dates of various assets and
     liabilities are subject to customer discretion, competitive and other
     pressures. The actual duration of mortgage loans and mortgage-backed
     securities can be significantly impacted by changes in mortgage
     prepayments. Mortgage prepayment rates will vary due to a number of
     factors, including the regional economy in the area where the underlying
     mortgages were originated, seasonal factors, demographic variables and the
     assumability of the underlying mortgages. However, the primary factors
     affecting prepayment rates are prevailing interest rates and related
     mortgage refinancing opportunities. In addition, callable features of
     certain assets and liabilities may cause actual experience to vary from
     that indicated. Included in this table


                                       17

<PAGE>
     are $20 million of callable securities at fair value, classified according
     to their maturity dates, which are within the over five years category.
     Also, included in this table are $264 million of callable borrowings,
     classified according to their maturity dates, which are within the over
     five years category. Of such borrowings, $78 million is callable within one
     year and at various times thereafter. There can be no assurances that these
     borrowings will not be called in the future, particularly in a rising
     interest rate environment.


Interest Rate Sensitivity Analysis

<TABLE>
<CAPTION>

(Dollars in thousands)                                        At September 30, 2001
                            ---------------------------------------------------------------------------------------------
                            One Year       1-2               2-3           3-4         4-5           Over 5
                            or Less       Years             Years         Years       Years           Years       Total
                            --------     --------          --------      --------    --------        --------    --------
<S>                           <C>                           <C>            <C>         <C>           <C>          <C>
INTEREST SENSITIVE ASSETS:
Fed Funds Sold              $170,100     $      -          $      -      $      -    $      -        $      -    $170,100
  Average interest rate            3%                                                                                   3%
Securities                    57,588       16,815            13,784        11,678       9,904         163,512     273,281
  Average interest rate         5.70%        6.12%             6.17%         6.17%       6.17%           7.41%       6.80%
Adjustable-rate loans        208,752       53,497            27,706        13,215       3,448           1,621     308,239
  Average interest rate         7.23%        7.30%             8.08%         7.94%       8.39%           6.90%       7.36%
Fixed-rate loans              29,806       25,316            17,359        12,772      14,165          31,946     131,364
  Average interest rate         7.86%        7.86%             7.70%         7.69%       7.70%           7.31%       7.67%
                            --------     --------          --------      --------    --------        --------    --------
 Total                       466,246       95,628            58,849        37,665      27,517         197,079     882,984
                            ========     ========          ========      ========    ========        ========    ========

INTEREST SENSITIVE LIABILITIES:
NOW                                -           -                  -             -           -          59,419      59,419
  Average interest rate                                                                                   .50%        .50%
Savings                            -           -                  -             -           -          77,205      77,205
  Average interest rate                                                                                  1.62%       1.62%
Money market                  37,416           -                  -             -           -               -      37,416
  Average interest rate         2.59%                                                                                2.59%
Term deposits                241,062       20,774             6,933         1,698       1,224             801     272,492
  Average interest rate         4.26%        4.94%             5.73%         5.98%       6.09%           2.33%       4.36%
Borrowed funds                   941           -                  -        18,000           -         263,500     282,441
  Average interest rate          2.0%                                        5.89%                       5.92%       5.90%
Subordinated debentures            -           -                  -             -           -          23,800      23,800
  Average interest rate            -           -                  -             -           -           10.72%      10.72%
                            --------     --------          --------      --------    --------        --------    -------
Total                       $279,419     $ 20,774          $  6,933        19,698       1,224         424,725     752,773
                            ========     ========          ========      ========    ========        ========    ========

Interest rate sensitivity
   gap                      $186,827     $ 74,854          $ 51,916      $ 17,967    $ 26,293       $(227,646)   $130,211
Cumulative interest rate
   sensitivity gap                        261,681           313,597       331,564     357,857         130,211

</TABLE>

                                       18

<PAGE>
                           PART II - OTHER INFORMATION



ITEM 6  EXHIBITS AND REPORTS ON FORM 8-K

  (a)      Exhibits

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

  (b)      The Company filed a Report on Form 8-K on October 1, 2001.















                                       19

<PAGE>
                                   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.


      11/14/2001                      By:  /s/ Richard S. Straczynski
      ---------------------               ----------------------------------
      Date                                Richard S. Straczynski
                                          President and Chief Executive Officer




      11/14/2001                      By: /s/ James K. Hunt
      ---------------------               ----------------------------------
      Date                                James K. Hunt
                                          Executive Vice President/Finance &
                                          Administration and Chief Financial
                                          Officer













                                       20


<PAGE>
                                  EXHIBIT INDEX


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

  (b)       The Company filed a Report on Form 8-K on October 1, 2001.
















                                       21