The headquarters of People's Bank dominates a city that almost went bankrupt a decade ago-and both the bank and the city have success stories to tell.

People's is no mere local savings bank. With a credit card business that ranks among the top 20 and operations as diverse as leasing, asset management, and brokerage, the thrift is a force to be reckoned with by such regional banking powerhouses as First Union Corp., Fleet Financial Group, and Chase Manhattan Corp.

While People's was rising to those heights-symbolized by its 16-story headquarters building designed by Richard Meyer, architect of the Church of the New Millennium at the Vatican-Bridgeport was recovering from near bankruptcy and 11% unemployment to post budget surpluses and open a minor league baseball stadium downtown.

"We had a business plan that worked," said People's chairman and chief executive officer David E.A. Carson, in words that could apply to either the bank or the city. "When you have a structure that works, things start to happen."

Like the city, People's has needed fast footwork to stay afloat. It almost ran aground-and into the possession of regulators-when a real estate recession hit New England in the late 1980s.

Mr. Carson, who came aboard in 1983 from Middlesex Mutual Assurance, acted quickly after the real estate bubble burst. People's sold $200 million of credit card receivables to Banc One Corp. and plowed most of the money into a nationwide campaign to promote a low-interest credit card.

"One-third of the sale price went into our capital accounts to keep the regulators off us," Mr. Carson said. "We dropped the rate on the credit card by 100 basis points and started a national marketing campaign. We rebuilt the $200 million in 13 months."

The card operation has grown to $4 billion of receivables, benefiting from targeted mailings that produce double the average response rate. Delinquencies are well controlled, and because the thrift's entry into the business coincided with electronic data entry, it avoided a costly conversion from old-fashioned paper systems.

Last year, People's took the business abroad to the United Kingdom, where it found demographics similar to what it knew in the United States.

"You have to be patient with a low-rate credit card," said Mr. Carson, who pitched the product himself on BBC Radio. "You don't lower your credit standards."

While Mr. Carson was orchestrating a turnaround at People's, raising annual profit to $92 million last year and achieving a 1.01% return on $10 billion of assets, Bridgeport's other hometown banks were hemorrhaging.

The city, population 137,000, "lost five different banks in 1990 and 1991," said Michael Freimuth, Bridgeport's director of planning and economic development. "People's became the only really local bank. And their influence is large."

Mr. Carson was chairman of a charter revision committee that recommended a strong mayor-City Council form of government for the city.

The bank's executives are active on the boards of philanthropies and educational institutions in the city and state. The thrift helped a community college relocate to a failed urban mall downtown. Its directors became investors in the stadium, home to the independent league Bluefish, who broke minor league attendance records in 1998, their first year.

"There are ways that People's steps up and takes an interest in various community projects and does deals that other bankers won't touch," Mr. Freimuth said. They are "deals that are necessary to make things happen locally but carry a higher-level risk."

Its public profile and quasi-mutual ownership have endeared People's to local people, but the thrift is not viewed with the same affection on Wall Street. Securities analysts who follow the company say they are impressed with its management quality but see the ownership structure-a thrift controlled by a mutual holding company-as a double-edged sword.

"It is not well understood in the equity markets," said Michael Hodes of Goldman, Sachs & Co. "It actually makes comparability more challenging that it would be otherwise."

"To me, it doesn't seem to be a true public company," said Chad Yonker of Fox-Pitt, Kelton. "Your officers and your board of directors are not really answerable to shareholders because of the mutual company that they control. Plus, the management gets to participate in stock options. I don't think it's the best thing for the shareholders."

However, many concede that the People's portfolio of businesses lets it look forward to strong earnings with enough diversification to weather an economic downturn.

Though it is the largest mortgage originator in Connecticut, People's is not as dependent as most thrifts on home loans, said James Ackor of Tucker Anthony. "They are concentrating on credit cards and commercial lending in Connecticut," he said. "They are a low-cost provider and have been able to create a niche. I tend to view them more as a commercial bank."

Some analysts are concerned about expenses, which grew from $233 million in 1995 to $368 million last year and are expected to top $400 million in 1999, according to Mr. Yonker.

The spending went in part to the U.K. credit card business, but it was also needed to cover an expansion in supermarket branching, which accounts for nearly one-third of the thrift's 121 Connecticut branches.

In 1995, when People's decided to launch its in-store strategy with the Stop 'n Shop chain, the resources of the entire bank were focused on the project, said retail banking chief Michael J. Leone.

The idea was to attract grocery shoppers, initiate a relationship with a savings account, then cross-sell all sorts of other products.

Mr. Leone conceded that where customers shop is still not a major determinant of where they are most likely to bank. The choice more closely correlates with where they live or work-and People's is now opening branches in office complexes.

Meanwhile, competition in Connecticut has gotten particularly intense in the last 10 years. Megabanks from outside the state have scooped up small, weak, or failing institutions. Locally rooted banking companies such as Webster Financial Corp. of Waterbury are also tough competition, said Mr. Leone. But the superregionals have spawned fierce rivalries for small- business and middle-market commercial customers.

"We've seen enormous growth in Bridgeport, especially in small-business lending," said Richard Jones, Chase Manhattan's regional executive for retail in New York's Westchester County, New Jersey, and Connecticut. "It's very important for us to be there."

"Webster and People's have been able to take advantage" of the arrival of out-of-towners, observed Matthew Robison, director of consumer banking for BankBoston Corp.'s western region. "Webster has moved up through acquisition. People's has used a supermarket strategy. That has made it more competitive for us."

The influx of larger institutions does not seem to daunt Mr. Carson. At age 64, he is thinking about retirement.

He had planned to step down at the end of 1999 but had his contract extended to the end of 2000 after president and heir apparent James Biggs decided late last year to get off the CEO track. Now retired, Mr. Biggs, a former U.S. Open competitor, is indulging his enthusiasm for tennis; he now plays on the senior circuit.

The company has begun a search for a successor to Mr. Carson that is scheduled to end by June 30. With the help of Korn Ferry International, People's is in the market for someone with a very broad view of financial services, according to Mr. Carson.

Some on Wall Street are convinced that chief financial officer George Morriss will get the nod. But Mr. Carson, who has a property and casualty insurance background, is not wedded to the idea of selecting a banker.

Whoever takes the reins will have to be committed to maintaining People's as an independent company based in Bridgeport, Mr. Carson said.

"The urge to sell your bank is like the buffalo going over the cliff," he said. "There is no future in it. You just end up dead at the bottom of the cliff."

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