<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, 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 March 31, 2001 was 3,252,250.
<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                     14


PART II      OTHER INFORMATION

             Item 5.       Other Information                                                              12

             Item 6.       Exhibits and Reports on Form 8-K

SIGNATURES                                                                                                16

EXHIBITS                                                                                                  17
</TABLE>

(*)      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.



                                       2
<PAGE>   3
                   PEOPLE'S BANCSHARES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                        March 31,              December 31,
                                                                                          2001                     2000
                                                                                         --------              ------------
<S>                                                                                   <C>                      <C>
                                      ASSETS
                                      ------

Cash and due from banks                                                               $    18,933                 $  16,406
Short-term investments                                                                     68,100                         -
                                                                                      -----------                 ---------
   Total cash and cash equivalents                                                         87,033                    16,406
Securities available for sale                                                             314,608                   488,128
Restricted equities securities, at cost                                                    19,368                    19,869
Loans held for sale                                                                       116,600                    40,546
Loans, net of allowance for loans losses of $4,139 in 2001
   and $4,182 in 2000                                                                     366,081                   393,451
Other real estate owned, net                                                                   88                        50
Banking premises and equipment, net                                                        17,427                    17,705
Accrued interest receivable                                                                 6,959                     7,402
Intangible assets                                                                           1,337                     1,368
Deferred tax asset                                                                          8,917                    14,813
Other assets                                                                                2,929                     3,697
                                                                                      -----------               -----------
         Total assets                                                                 $   941,347               $ 1,003,435
                                                                                      ===========               ===========


                          LIABILITIES AND STOCKHOLDERS' EQUITY
                          ------------------------------------
Deposits                                                                              $   595,983               $   624,561
Short-term borrowings                                                                         939                    49,110
Securities sold under agreement to repurchase                                              83,500                    83,500
Other long-term debt                                                                      198,000                   198,000
Mortgagors' escrow accounts                                                                 1,183                       984
Accrued expenses and other liabilities                                                      5,558                     5,723
Subordinated debentures                                                                    23,800                    23,800
                                                                                      -----------               -----------
   Total liabilities                                                                      908,963                   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                                                              24,115                    23,853
   Retained earnings                                                                       31,334                    30,165
   Treasury stock, at cost - 473,000 shares                                                (8,364)                   (8,364)
   Accumulated other comprehensive loss                                                   (15,074)                  (28,267)
                                                                                      -------------             -----------
         Total stockholders' equity                                                        32,384                    17,757
                                                                                      -----------               -----------

         Total liabilities and stockholders' equity                                   $   941,347                $1,003,435
                                                                                      ===========                ==========
</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,
                                                                                      -----------------------------
                                                                                          2001              2000
                                                                                      ------------       ----------
<S>                                                                                    <C>                <C>
Interest and dividend income:
  Interest and fees on loans                                                           $  9,374           $  8,526
  Interest and dividends on securities                                                    9,447             11,130
  Interest on short-term investments                                                         60                 69
                                                                                       --------           --------
      Total interest and dividend income                                                 18,881             19,725
                                                                                       --------           --------
Interest expense:
   Deposits                                                                               6,649              5,977
   Short-term borrowings                                                                      9              1,357
   Long-term debt and subordinated debentures                                             5,860              5,211
                                                                                       --------           --------
      Total interest expense                                                             12,518             12,545
                                                                                       --------           --------
Net interest income                                                                       6,363              7,180
                                                                                       --------           --------

Other income:
   Customer service fees                                                                    342                310
   Losses on sales of securities available for sale, net                                   (861)                --
   Gains on sales of loans, net                                                           2,435              1,798
   Miscellaneous                                                                            109                 76
                                                                                       --------           --------
      Total other income                                                                  2,025              2,184
                                                                                       --------           --------

Operating expenses:
   Salaries and employee benefits                                                         3,379              3,409
   Occupancy and equipment                                                                  923                988
   Data processing                                                                          384                328
   Professional fees                                                                        422                231
   Other real estate owned, net                                                               2                (14)
   Other general and administrative                                                       1,392              1,100
                                                                                       --------           --------
      Total operating expenses                                                            6,502              6,042
                                                                                       --------           --------

Income before income taxes                                                                1,886              3,322
Provision for income taxes                                                                  717              1,100
                                                                                       --------           --------
Net income                                                                             $  1,169           $  2,222
                                                                                       ========           ========

Net income per share:
   Diluted earnings per share                                                          $   0.36           $   0.67
   Basic earnings per share                                                                0.36               0.68
Weighted average shares outstanding - assuming dilution for stock options                 3,267              3,326
Weighted average shares outstanding                                                       3,236              3,280
</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, 2001 and 2000
                             (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                                      -            -             1,169             -           -            1,169
Change in net unrealized gain/loss
   on securities available for sale,
   net of reclassification adjustment
   and tax effects                              -            -                 -             -      13,193           13,193
                                                                                                                   --------
Comprehensive income                                                                                                 14,362
                                                                                                                   --------
Exercise of stock options                       3          262                 -             -            -             265
                                        ---------    ---------         ---------      --------    ---------        --------

Balance at March 31, 2001               $     373    $  24,115         $  31,334      $ (8,364)   $(15,074)        $ 32,384
                                        =========    =========         =========      ========    ========         ========

Balance at December 31, 1999            $     369     $ 23,776         $  24,617       $(6,269)   $  (1,629)       $ 40,864
                                                                                                                   --------

Comprehensive income:
Net income                                      -            -             2,222             -           -            2,222
Change in net unrealized gain/loss
   on securities available for sale, net of
   tax effects                                  -            -                 -             -        (234)            (234)
                                                                                                                   --------
Comprehensive income                                                                                                  1,988
                                                                                                                   --------
Purchase of treasury stock                      -            -                 -        (1,297)          -           (1,297)
Cash dividends paid                             -            -              (701)            -           -             (701)
Exercise of stock options                       -           58                 -             -           -               58
                                        ---------    ---------         ---------      --------    --------         --------
Balance at March 31, 2000               $     369    $  23,834         $  26,138      $ (7,566)   $ (1,863)       $  40,912
                                        =========    =========         =========      ========    ========        =========
</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,
                                                                                        ---------------------------
                                                                                             2001            2000
                                                                                        ---------        -----------
<S>                                                                                     <C>              <C>
Cash flows from operating activities:
   Net income                                                                           $   1,169         $   2,222
   Adjustments to reconcile net income to net cash used by
     operating activities:
   Depreciation and amortization                                                              464               483
   Net accretion on securities and purchased loans                                         (1,596)           (1,708)
   Losses on sales of securities available for sale, net                                      861                 -
   Losses on sales of portfolio loans                                                         143                 -
   Gain on other real estate owned                                                              -               (15)
   Net change in:
     Loans held for sale                                                                  (76,054)             (619)
     Other assets, net of other liabilities                                                 1,217            (1,934)
                                                                                        ---------        -----------
        Net cash used by operating activities                                            (73,796)            (1,571)
                                                                                        ----------       ------------

Cash flows from investing activities:
    Activity in securities available for sale:
      Sales                                                                               179,128                 -
      Maturities, prepayments and calls                                                     2,258             1,350
      Amortization of mortgage-backed securities                                           11,937             1,079
    Activity in securities held to maturity:
       Amortization of mortgage-backed securities                                               -             7,973
    Redemption of restricted equity securities                                                501             2,333
    Loan (originations and purchases), net of amortization and payoffs                     13,462              (166)
    Proceeds from portfolio loan sales                                                     13,613                 -
    Proceeds from sales of other real estate owned                                              -                50
    Additions to banking premises and equipment                                              (191)             (901)
                                                                                        -----------      -----------
           Net cash provided by investing activities                                      220,708            11,718
                                                                                        ---------        ----------

Cash flows from financing activities:
    Net (decrease) increase in deposits                                                   (28,578)           34,630
    Net decrease in short-term borrowings                                                 (48,171)          (17,321)
    Proceeds from issuance of borrowings with maturities in excess of three months              -            60,000
    Repayment of borrowings with maturities in excess of three months                           -           (82,000)
    Increase in mortgagors' escrow accounts                                                   199                37
    Proceeds from exercise of stock options                                                   265                58
    Payment to acquire treasury stock                                                           -            (1,297)
    Cash dividends                                                                              -              (701)
                                                                                        ---------        ------------
       Net cash used by financing activities                                              (76,285)           (6,594)
                                                                                        ----------       ------------
Net change in cash and cash equivalents                                                    70,627             3,553
Cash and cash equivalents at beginning of period                                           16,406            11,875
                                                                                        ---------        ----------
Cash and cash equivalents at end of period                                              $  87,033        $   15,428
                                                                                        =========        ==========

Supplementary information:
   Interest paid                                                                        $  12,491        $   12,439
   Income taxes paid                                                                          768             2,174
   Transfer from loans to other real estate owned, net                                         38                 -
</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 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 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.




                                       7
<PAGE>   8
                      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. 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, accounting matters and possible
changes related to regulatory matters, new accounting pronouncements, changing
regulatory requirements and new tax or other state and national legislation.
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.

General
-------

People's Bancshares, Inc. (the "Company") is a unitary bank holding company
subject to the Bank Holding Company Act ("BHC"). The Company's principal
business is conducted through its principal subsidiary, People's Savings Bank
of Brockton (the "Bank"). The only significant assets of the Company are the
capital stock of the Bank and the Company's equity interest in People's
Bancshares Capital Trust ("Trust I") and People's Bancshares Capital Trust II
("Trust II", together with Trust I, the "Trusts"), business trusts formed in
1997 and 2000, respectively. Although the Company is a legal entity separate
from the Bank and the Trusts, the Company itself is not engaged in any business
activities.

Overview
--------

Net income for the three months ended March 31, 2001 was $1.2 million or $0.36
per diluted share, compared to $2.2 million or $0.67 per diluted share for the
corresponding period in 2000. Basic earnings per share was $0.36 for the three
months ended March 31, 2001, compared to $0.68 for the same period in 2000.
Income before income taxes for the three months ended March 31, 2001 was $1.9
million compared with $3.3 million for the three months ended March 31, 2000.
Return on average assets and return on average equity was 0.48% and 20.28%,
respectively, for the three months ended March 31, 2001, compared to 0.84% and
22.05%, respectively for the same period in 2000.

                                       8
<PAGE>   9
Through the sale of securities, the Company has addressed regulatory issues and
reduced exposure to higher risk earnings assets and volatile funding sources.
The results of operations for the three months ended March 31, 2001 include
before tax losses of $1.0 million on sales of approximately $193 million of
securities and portfolio loans. There were no sales of securities or portfolio
loans during the three months ended March 31, 2000. The net interest margin has
decreased compared with the comparable period in 2000 due to the lower volume of
securities, partially offset by an increase in loan income due to increased loan
originations at People's Mortgage Corporation ("PMC"). The Company's net
interest margin was 2.63% for the three months ended March 31, 2001 compared to
2.80% in the three months ended March 31, 2000.

Financial Condition
-------------------

Total assets decreased $62.1 million or 6.19% to $941.3 million at March 31,
2001 from $1,003.4 million at December 31, 2000. This reflects a decrease in
securities available for sale of $173.5 million and a decrease in loans of $27.4
million, offset by an increase in short-term investments of $68.1 million and an
increase of $76.1 million in loans held for sale.

Securities available for sale decreased $173.5 million to $314.6 million at
March 31, 2001 from $488.1 million at December 31, 2000. This decrease was the
result of the sales of $179.1 million of higher risk securities, which include
approximately $18 million in corporate bonds and trust preferred securities,
offset by an $18.9 million improvement in unrealized losses on securities.

Loans and loans held for sale increased $48.7 million, or 11.22%, to $482.7
million at March 31, 2001 from $434.0 million at December 31, 2000. This
increase reflects a $76.1 million or a 187.57% increase in loans held for sale
to $116.6 million at March 31, 2001 from $40.5 million at December 31, 2000.
This was offset by the sale of $13.6 million in purchased second mortgages.
Declining mortgage interest rates accelerated refinancing and home buying
activity resulting in increased mortgage loan originations at PMC.

Proceeds from the sale of investments were used to fund the outflow of deposits
and to pay off short-term borrowings. Deposits decreased $28.6 million or 4.58%
to $596.0 million at March 31, 2001 from $624.6 million at December 31, 2000.
This decrease is primarily a result of a decrease 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 $32.4 million at March 31, 2001, as compared to $17.8
million at December 31, 2000. The increase in stockholders' equity is primarily
due to a $13.2 million improvement in unrealized securities losses, net of
taxes.

Results Of Operations
---------------------


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

Net interest income decreased $0.8 million for the three months ended March 31,
2001, compared to the same period in 2000. This change reflects a decrease in
securities and a lower net interest margin, partially offset by decreased
borrowings. For the three months ended March 31, 2001 average earning assets
decreased by $49.5 million for the same period of 2000. Net interest margin was
2.63% for the three months ended March 31, 2001,

                                       9
<PAGE>   10
compared to 2.80% for the same period in 2000.

Interest and dividend income decreased to $18.9 million for the three months
ended March 31, 2001 from $19.7 million for the comparable 2000 period. The
yield on average earning assets increased to 7.81% for the three months ended
March 31, 2001 from 7.69% for the three months ended March 31, 2000. Yields on
loans were 8.37% for the three months ended March 31, 2001, compared to 7.91%
for the 2000 period. Yields on investments decreased to 7.37% for the three
months ended March 31, 2001, compared to 7.54% for the comparable 2000 period.

Interest expense was $12.5 million for the three months ended March 31, 2001 and
2000. Deposit interest increased $672,000 for the three month period, compared
to the same period in 2000. Interest expense on borrowings decreased $699,000
for the three months ended March 31, 2001.

During the first three months of 2001, average borrowed funds were $364.4
million compared to $446.3 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 6.53% for the three
months ended March 31, 2001 compared to 5.90% for the same period in 2000.

Interest expense on deposits increased due to an increase in the volume of
average deposits to $566.5 million for the three months ended March 31, 2001
compared to $537.0 million for the same period in 2000. The average cost of
deposits increased to 4.76% for the three months ended March 31, 2001 from 4.46%
for the same period in 2000.

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

Other income was $2.0 million for the three months ended March 31, 2001,
compared to $2.2 million for the same period in 2000. The decrease reflects
$861,000 in losses on securities, offset by a $637,000 increase in gains on loan
sales.

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

Total operating expenses were $6.5 million for the three months ended March 31,
2001, compared to $6.0 million for the same period 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.

Salaries and benefits expense decreased $30,000 for the three months ended March
31, 2001, compared to the same period in 2000. The decrease in salaries and
benefits for the three months reflects staff reductions at PMC, partially offset
by regular salary increases.

Occupancy and equipment expense decreased $65,000 for the three months ended
March 31, 2001, compared to the same period in 2000 due to consolidations of
leased properties of PMC. Professional fees increased $191,000 for the three
months ended March 31, 2001, compared to the same period in 2000. This increase
primarily reflects costs associated with regulatory matters. Other general and
administrative expenses increased $292,000 for the three months ended March 31,
2001, compared to the same period in 2000 due to expenses associated with the
increased volume of loan originations at PMC.

The efficiency ratio for the Company for the three months ended March 31, 2001
was 64.97% as compared with a ratio of 62.38% for the same period in 2000. The
efficiency ratio for the Company, excluding PMC, was


                                       10
<PAGE>   11
65.96% for the three months ended March 31, 2001, as compared with a ratio of
42.88% for the same period 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 $717,000 in the three months ended
March 31, 2001, compared to income tax expense of $1.1 million for the same
period in 2000. The effective tax rate for the three months ended March 31, 2001
was 38% and the effective tax rate was 33% for the corresponding period of 2000.
The higher rate during the three months ended March 31, 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.

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 March 31, 2001, the Company's allowance for loan losses totaled $4.1 million,
or 0.85% of total loans and loans held for sale and 1,183% 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 $4.1
million, or 0.99% of total loans and loans held for sale and 478% of
non-performing loans at March 31, 2000. Net charge-offs for the three months
ended March 31, 2001 were $43,000, compared to net recoveries of $28,000 for the
corresponding period in 2000.

Non-performing assets, including loans of $350,000, other real estate owned
("OREO") of $88,000 and securities of $992,000, were $1.4 million or 0.15% of
total assets at March 31, 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 March 31, 2000, non-performing assets
were $1.1 million, or 0.10% of total assets including loans and OREO.



                                       11
<PAGE>   12
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 March 31, 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             $  61,939      $  51,049         n/a           6.07%         5.00%        n/a
     Tier 1 capital                         61,939         20,881         n/a          11.87%         4.00%        n/a
     Total capital                          74,059         41,761         n/a          14.87%         8.00%        n/a

People's Savings Bank of Brockton
     Tier 1 leverage capital             $  68,638      $  66,285       $50,988         6.73%         6.50%        5.00%
     Tier 1 capital                         68,638         20,831        31,246        13.18%         4.00%        6.00%
     Total capital                          72,777         41,662        52,077        13.97%         8.00%       10.00%
</TABLE>


PART II

ITEM 5.  OTHER INFORMATION
         -----------------

The Company elected to suspend 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 subordinated debentures. The Company is also required to maintain
a minimum consolidated Tier 1 leverage capital ratio of not less than 5%. At
March 31, 2001, the Company's consolidated Tier 1 leverage capital ratio was
6.07%. 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.

                                       12
<PAGE>   13
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 March 31, 2001, the Bank's Tier 1 leverage capital ratio was
6.73%. 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.

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 April 19, 2001 the Company and a group of its stockholders led by Vincent A.
Smyth (the "Smyth Group") entered into an agreement, which resolves various
issues arising out of a proxy contest recently commenced by the Smyth Group. The
Smyth Group had sought to elect three representatives to the Company's Board of
Directors at the Company's upcoming Annual Meeting of Stockholders, scheduled
for June 12, 2001 (the "Annual Meeting"). The agreement terminates the proxy
contest and provides that, immediately following its Annual Meeting, the Company
will increase the size of its Board of Directors from 10 to 13 members. The
agreement further provides that, subject to the receipt of required nonobjection
letters from bank regulators, the Company will add Mr. Smyth and two individuals
designated by Mr. Smyth to its Board of Directors and to the Board of the
Company's principal subsidiary, People's Savings Bank of Brockton. The two
additional directors designated by Mr. Smyth are Thomas F. Gillen and William G.
Foster, Jr. In addition, pursuant to the terms of the agreement, the Smyth Group
has agreed they will vote for the nominees for director recommended by the
Company's Board of Directors; and will vote in accordance with the
recommendation of the Company's Board with respect to each matter that is
presented to the Company's stockholders at the Annual Meeting.

During the quarter ended March 31, 2001, the Company announced that it had
retained the firm of Fox-Pitt, Kelton Inc. to provide financial advisory
services relating to strategic alternatives available to the Company as well as
general investment banking services. In April 2001, the Board of Directors
determined to reactivate its Merger and Acquisition Committee (the "Committee")
to act as liaison between Fox-Pitt, Kelton Inc. and the full Board of Directors
in any matters involving possible strategic partnerships with other companies.
The Committee consists of Directors Richard D. Matthews, Scott W. Ramsay and
Stanley D. Siskind. In addition, Thomas F. Gillen, representing the Smyth Group,
will be invited to attend all meetings of the Committee prior to Mr. Gillen's
election to the Company's Board of Directors. Subject to the Company's receipt
of a letter of nonobjection from the Board of Governors of the Federal Reserve
System, and subsequent to the Company's Annual Meeting, Mr. Gillen will become a
member of the Committee.

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




                                       13
<PAGE>   14
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 a 12 month period. 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%. Based upon the Bank's current
methodology, the Company was in compliance with this limit at March 31, 2001.
<TABLE>
<CAPTION>
                                    2.0% Rate               2.0% Rate
                                    Increase                 Decrease
                                    --------                 --------
<S>                                  <C>                    <C>
Year 1                                  6.72                   (2.30)
Year 2                                  8.75                  (10.87)
</TABLE>

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 March
31, 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 major 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 are $61.2 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
$263.5 million of callable borrowings, classified according to their maturity
dates, which are within the over five years category. Of such borrowings, $77.5
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.


                                       14
<PAGE>   15
Interest Rate Sensitivity Analysis
<TABLE>
<CAPTION>

(Dollars in thousands)                                                     At  March 31, 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>           <C>
INTEREST SENSITIVE ASSETS:
Fed Funds Sold                     $    68,100     $       --     $     --     $     --     $     --    $      --     $ 68,100
  Average interest rate                   5.00%                                                                           5.00%
Securities                              47,341         21,400       21,196       11,353        4,811      208,507      314,608
  Average interest rate                   7.00%          7.23%        7.25%        7.19%        7.17%        8.53%        8.06%
Adjustable-rate loans                  226,035         50,489       27,849       20,268        8,426       11,538      344,605
  Average interest rate                   7.78%          7.37%        7.70%        8.10%        8.42%        6.54%        7.71%
Fixed-rate loans                        32,211         22,107       17,726       12,685        9,975       47,511       142,215
  Average interest rate                   7.96%          8.25%        7.98%        7.92%        7.90%        7.46%        7.83%
                                   -----------     ----------     --------     --------     --------    ---------     --------
 Total                                 373,687         93,996       66,771       44,306       23,212      267,556      869,528
                                   ===========     ==========     ========     ========     ========    =========     ========

INTEREST SENSITIVE LIABILITIES:
NOW                                         --             --           --           --           --       61,399       61,399
  Average interest rate                                                                                     .55%           .55%
Savings                                     --             --           --           --           --       99,169       99,169
  Average interest rate                                                                                      2.44%        2.44%
Money market                            77,238             --           --           --           --           --       77,238
  Average interest rate                   4.53%                                                                           4.53%
Term deposits                          271,212         26,388        3,088        6,398        1,593          774      309,453
  Average interest rate                   5.49%          6.09%        5.71%        5.87%        6.24%        2.42%        5.55%
Borrowed funds                             939             --           --           --       18,000      263,500      282,439
  Average interest rate                   4.00%                                                  5.89%       5.92%        5.91%
Subordinated debentures                     --             --           --           --           --       23,800       23,800
  Average interest rate                     --             --           --           --           --        10.72%       10.72%
                                   -----------     ----------     --------     --------     --------    ---------     --------
Total                              $   349,389     $   26,388     $  3,088        6,398       19,593      448,642      853,498
                                   ===========     ==========     ========     ========     ========    =========     ========

Interest rate sensitivity
   gap                             $    24,298     $   67,608     $ 63,683     $ 37,908     $  3,619    $(181,086)    $ 16,030
Cumulative interest rate
   sensitivity gap                      24,298          91,906      155,589      193,497      197,116       16,030
</TABLE>





                                       15
<PAGE>   16
                           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 April 25, 2001.




                                       16
<PAGE>   17
                                   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.


            5/14/2001                     By: /s/ Richard S. Straczynski
            --------------------             -----------------------------------
            Date                            Richard S. Straczynski
                                            President and Chief Executive
                                            Officer



            5/14/2001                     By: /s/ James K. Hunt
            --------------------            ------------------------------------
            Date                            James K. Hunt
                                            Executive Vice President/Finance &
                                            Administration and Chief Financial
                                            Officer





                                       17