UNITED
 STATESSECURITIES AND EXCHANGE COMMISSIONWashington,
 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 June 30, 2010.
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------

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: 001-32007

NEWALLIANCE BANCSHARES, INC.(Exact name
 of registrant as specified in its charter)

|                                                                |  |                                      
|--------------------------------------------------------------- |  | -------------------------------------
|DELAWARE                                                        |  | 52-2407114                           
|                                                                |  |                                      
|(State or
 other jurisdiction of incorporation or organization) |  | (I.R.S. Employer
 Identification No.)
|                                                                |  |                                      
|195 Church
 Street, New Haven, Connecticut                      |  | 06510                                
|                                                                |  |                                      
|(Address of
 principal executive offices)                       |  | (Zip Code)                           

(203) 789-2767





(Registrants telephone number, including area code)





(Former name, former address and former
 fiscal year, if changed since last report)


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.[ X ] Yes  [     ] No

Indicate by check mark whether the registrant has submitted electronically and posted
 on its corporate Web site, if any, every Interactive Data File required to be submitted
 and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
 the preceding 12 months (or for such shorter period that the registrant was required
 to submit and post such files).[     ] Yes  [     ] No

Indicate by check mark
 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated
 filer, or a smaller reporting company. See definition of large accelerated
 filer, accelerated filer and smaller reporting company
 in Rule 12b-2 of the Exchange Act.

| | Large accelerated
 filer |  | X |  | Accelerated
 filer         |  | 
| | ------------------------ |  | - |  | -------------------------- |  | 
| |                          |  |   |  |                            |  | 
| |                          |  |   |  |                            |  | 
| | Non-accelerated
 filer   |  |   |  | Smaller reporting
 company |  | 
| |                          |  |   |  |                            |  | 

|Indicate by
 check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
 the Exchange Act). |  | [    ] |  | Yes |  | [ X] |  | No
|------------------------------------------------------------------------------------------------------------------ |  | ------ |  | --- |  | ---- |  | --

Indicate the number of shares outstanding
 of each of the issuers classes of common stock, as of the latest practicable
 date.

| | Common Stock
 (par value $.01) |  | 105,079,540                   
| | ------------------------------ |  | ------------------------------
| |                                |  |                               
| | Class                          |  | Outstanding
 at August 4, 2010




TABLE OF CONTENTSPart I  FINANCIAL
 INFORMATION

|                            |  |                                                                                                    | Page No.
|--------------------------- |  | -------------------------------------------------------------------------------------------------- | --------
|                            |  |                                                                                                    |         
|Item 1.                     |  | Financial Statements (Unaudited)                                                                   |         
|                            |  |                                                                                                    |         
|                            |  | Consolidated
 Balance Sheets at June 30, 2010 and December 31, 2009                                |         
|                            |  |                                                                                                    |         
|                            |  | Consolidated
 Statements of Income for the three and six months ended June 30, 2010 and 2009       |         
|                            |  |                                                                                                    |         
|                            |  | Consolidated
 Statement of Changes in Stockholders Equity for the six months ended June
 30, 2010 |         
|                            |  |                                                                                                    |         
|                            |  | Consolidated
 Statements of Cash Flows for the six months ended June 30, 2010 and 2009             |         
|                            |  |                                                                                                    |         
|                            |  | Notes to Unaudited
 Consolidated Financial Statements                                              |         
|                            |  |                                                                                                    |         
|Item 2.                     |  | Managements Discussion and Analysis of Financial Condition and Results of Operations              |         
|                            |  |                                                                                                    |         
|Item 3.                     |  | Quantitative
 and Qualitative Disclosures about Market Risk                                        |         
|                            |  |                                                                                                    |         
|Item 4.                     |  | Controls and
 Procedures                                                                           |         
|                            |  |                                                                                                    |         
|Item 4T.                    |  | Controls and
 Procedures                                                                           |         
|                            |  |                                                                                                    |         
|Part II  OTHER INFORMATION
|                            |  |                                                                                                    |         
|Item 1.                     |  | Legal Proceedings                                                                                  |         
|                            |  |                                                                                                    |         
|Item 1A.                    |  | Risk Factors                                                                                       |         
|                            |  |                                                                                                    |         
|Item 2.                     |  | Unregistered
 Sales of Equity Securities and Use of Proceeds                                       |         
|                            |  |                                                                                                    |         
|Item 3.                     |  | Defaults Upon
 Senior Securities                                                                   |         
|                            |  |                                                                                                    |         
|Item 4.                     |  | (Removed and
 Reserved)                                                                            |         
|                            |  |                                                                                                    |         
|Item 5.                     |  | Other Information                                                                                  |         
|                            |  |                                                                                                    |         
|Item 6.                     |  | Exhibits                                                                                           |         
|                            |  |                                                                                                    |         
|SIGNATURES                 

2




NewAlliance Bancshares, Inc.Consolidated
 Balance Sheets

|                                                                  |  |               |           |   |      | December 31, |          
|----------------------------------------------------------------- |  | ------------- | --------- | - | ---- | ------------ | ---------
|(In thousands,
 except per share data) (Unaudited)                |  | June 30, 2010 |           |   | 2009 |             
|                                                                 
|Assets                                                            |  |               |           |   |      |              |          
|Cash
 and due from banks                                          |  | $             | 97,693    |   |      | $            | 96,927   
|Short
 term investments                                           |  |               | 20,000    |   |      |              | 50,000   
|                                                                 
|Cash
 and cash equivalents                                        |  |               | 117,693   |   |      |              | 146,927  
|Investment
 securities available for sale, at fair value (note 3) |  |               | 2,403,317 |   |      |              | 2,327,855
|Investment
 securities held to maturity (note 3)                  |  |               | 323,255   |   |      |              | 240,766  
|Loans
 held for sale (includes $11,744 at June 30, 2010 and       |  |               |           |   |      |              |          
|$12,908
 at December 31, 2009 measured at fair value)             |  |               | 13,362    |   |      |              | 14,659   
|Loans,
 net (note 4)                                              |  |               | 4,873,426 |   |      |              | 4,709,582
|Federal
 Home Loan Bank of Boston stock                           |  |               | 120,821   |   |      |              | 120,821  
|Premises
 and equipment, net                                      |  |               | 58,651    |   |      |              | 57,083   
|Cash
 surrender value of bank owned life insurance                |  |               | 135,054   |   |      |              | 140,153  
|Goodwill
 (note 5)                                                |  |               | 527,167   |   |      |              | 527,167  
|Identifiable
 intangible assets (note 5)                          |  |               | 31,454    |   |      |              | 35,359   
|Other
 assets (note 6)                                            |  |               | 107,897   |   |      |              | 113,941  
|                                                                 
|Total
 assets                                                     |  | $             | 8,712,097 |   |      | $            | 8,434,313
|                                                                 
|                                                                  |  |               |           |   |      |              |          
|Liabilities                                                       |  |               |           |   |      |              |          
|Deposits
 (note 7)                                                |  |               |           |   |      |              |          
|Non-interest
 bearing                                             |  | $             | 568,414   |   |      | $            | 534,180  
|Savings,
 interest-bearing checking and money market              |  |               | 3,120,460 |   |      |              | 3,008,416
|Time                                                              |  |               | 1,447,872 |   |      |              | 1,481,446
|                                                                 
|Total
 deposits                                                   |  |               | 5,136,746 |   |      |              | 5,024,042
|Borrowings
 (note 8)                                              |  |               | 2,023,732 |   |      |              | 1,889,928
|Other
 liabilities                                                |  |               | 87,448    |   |      |              | 85,390   
|                                                                 
|Total
 liabilities                                                |  |               | 7,247,926 |   |      |              | 6,999,360
|                                                                  |  |               |           |   |      |              |          
|Commitments
 and contingencies (note 12)                          |  |               |           |   |      |              |          
|                                                                  |  |               |           |   |      |              |          
|Stockholders Equity                                              |  |               |           |   |      |              |          
|Preferred
 stock, $0.01 par value; authorized 38,000 shares;      |  |               | -         |   |      |              | -        
|none
 issued                                                      |  |               |           |   |      |              |          
|Common
 stock, $0.01 par value; authorized 190,000 shares;        |  |               |           |   |      |              |          
|issued
 121,486 shares at June 30, 2010 and December 31, 2009     |  |               | 1,215     |   |      |              | 1,215    
|Additional
 paid-in capital                                       |  |               | 1,245,532 |   |      |              | 1,245,489
|Unallocated
 common stock held by ESOP                            |  |               | (86,892   | ) |      |              | (88,721  
|Unearned
 restricted stock compensation                           |  |               | (9,210    | ) |      |              | (12,389  
|Treasury
 stock, at cost (16,406 shares at June 30, 2010 and      |  |               |           |   |      |              |          
|15,435
 shares at December 31, 2009)                              |  |               | (222,835  | ) |      |              | (211,582 
|Retained
 earnings                                                |  |               | 505,694   |   |      |              | 486,974  
|Accumulated
 other comprehensive income (note 16)                 |  |               | 30,667    |   |      |              | 13,967   
|                                                                 
|Total
 stockholders equity                                       |  |               | 1,464,171 |   |      |              | 1,434,953
|                                                                 
|Total
 liabilities and stockholders equity                       |  | $             | 8,712,097 |   |      | $            | 8,434,313
|                                                                 

See accompanying notes to consolidated financial
 statements.

3




NewAlliance
 Bancshares, Inc.Consolidated Statements of Income

|                                                                               |  | Three Months Ended |        | Six Months Ended
|------------------------------------------------------------------------------ |  | ------------------ | ------ | ----------------
|                                                                               |  | June 30,           |        | June 30,        
|                                                                               |  |                    |        |                 
|(In thousands, except per share data) (Unaudited)                              |  | 2010               |        |                 
|                                                                              
|Interest
 and dividend income                                                  |  |                    |        |                 
|Residential
 real estate loans                                                 |  | $                  | 29,589 |                 
|Commercial
 real estate loans                                                  |  |                    | 18,662 |                 
|Commercial
 business loans                                                     |  |                    | 5,591  |                 
|Consumer
 loans                                                                |  |                    | 7,946  |                 
|Investment
 securities                                                         |  |                    | 25,239 |                 
|Federal
 funds sold and other short-term investments                           |  |                    | 34     |                 
|                                                                              
|Total
 interest and dividend income                                            |  |                    | 87,061 |                 
|                                                                              
|                                                                               |  |                    |        |                 
|Interest
 expense                                                              |  |                    |        |                 
|Deposits                                                                       |  |                    | 12,464 |                 
|Borrowings                                                                     |  |                    | 16,856 |                 
|                                                                              
|Total
 interest expense                                                        |  |                    | 29,320 |                 
|                                                                              
|                                                                               |  |                    |        |                 
|Net
 interest income before provision for loan losses                          |  |                    | 57,741 |                 
|                                                                               |  |                    |        |                 
|Provision
 for loan losses                                                     |  |                    | 5,500  |                 
|                                                                              
|Net
 interest income after provision for loan losses                           |  |                    | 52,241 |                 
|                                                                              
|                                                                               |  |                    |        |                 
|Non-interest
 income                                                           |  |                    |        |                 
|Depositor
 service charges                                                     |  |                    | 7,457  |                 
|Loan
 and servicing income, net                                                |  |                    | 351    |                 
|Trust
 fees                                                                    |  |                    | 1,573  |                 
|Investment
 management, brokerage and insurance fees                           |  |                    | 1,302  |                 
|Bank
 owned life insurance                                                     |  |                    | 847    |                 
|Other-than-temporary
 impairment losses on securities                          |  |                    | (30    | )               
|Less:
 Portion of loss recognized in other comprehensive income (before taxes) |  |                    | (522   | )               
|                                                                              
|Net
 impairment losses on securities recognized in earnings                    |  |                    | (552   | )               
|                                                                              
|Net
 gain on sale of securities                                                |  |                    | 750    |                 
|                                                                              
|Net
 securities gain                                                           |  |                    | 198    |                 
|                                                                               |  |                    |        |                 
|Mortgage
 origination activity and loan sale income                            |  |                    | 571    |                 
|Net
 gain (loss) on limited partnerships                                       |  |                    | 2,372  |                 
|Other                                                                          |  |                    | 1,215  |                 
|                                                                              
|Total
 non-interest income                                                     |  |                    | 15,886 |                 
|                                                                              
|                                                                               |  |                    |        |                 
|Non-interest
 expense                                                          |  |                    |        |                 
|Salaries
 and employee benefits (notes 9 & 10)                                 |  |                    | 23,982 |                 
|Occupancy                                                                      |  |                    | 4,094  |                 
|Furniture
 and fixtures                                                        |  |                    | 1,426  |                 
|Outside
 services                                                              |  |                    | 4,718  |                 
|Advertising,
 public relations, and sponsorships                               |  |                    | 1,486  |                 
|Amortization
 of identifiable intangible assets                                |  |                    | 1,953  |                 
|FDIC
 insurance premiums                                                       |  |                    | 1,898  |                 
|Other                                                                          |  |                    | 4,071  |                 
|                                                                              
|Total
 non-interest expense                                                    |  |                    | 43,628 |                 
|                                                                              
|                                                                               |  |                    |        |                 
|Income
 before income taxes                                                    |  |                    | 24,499 |                 
|                                                                              
|Income
 tax provision (note 11)                                                |  |                    | 8,226  |                 
|                                                                              
|Net income                                                                     |  | $                  | 16,273 |                 
|                                                                              
|                                                                               |  |                    |        |                 
|                                                                               |  |                    |        |                 
|Basic
 earnings per share (note 17)                                            |  | $                  | 0.16   |                 
|Diluted
 earnings per share (note 17)                                          |  |                    | 0.16   |                 
|Weighted-average
 shares outstanding (note 17)                                 |  |                    |        |                 
|Basic                                                                          |  |                    | 98,781 |                 
|Diluted                                                                        |  |                    | 98,860 |                 
|Dividends
 per share                                                           |  | $                  | 0.07   |                 

See accompanying notes to consolidated financial
 statements.

4




NewAlliance Bancshares, Inc.Consolidated
 Statement of Changes in Stockholders Equity

|                                                   |  |             |   |  |   |           |  |  |   |            |   |  |   | Unallocated |   |  |   |              |   |  |   |          |   |  |   |          |   |  |   | Accumulated   |  |  |   |               |  
|-------------------------------------------------- |  | ----------- | - |  | - | --------- |  |  | - | ---------- | - |  | - | ----------- | - |  | - | ------------ | - |  | - | -------- | - |  | - | -------- | - |  | - | ------------- |  |  | - | ------------- | -
|                                                   |  | Common      |   |  |   | Par Value |  |  |   | Additional |   |  |   | Common      |   |  |   |              |   |  |   |          |   |  |   |          |   |  |   | Other         |  |  |   | Total         |  
|For the Six
 Months Ended June 30, 2010            |  | Shares      |   |  |   | Common    |  |  |   | Paid-in    |   |  |   | Stock Held  |   |  |   | Unearned     |   |  |   | Treasury |   |  |   | Retained |   |  |   | Comprehensive |  |  |   | Stockholders |  
|(In thousands,
 except per share data) (Unaudited) |  | Outstanding |   |  |   | Stock     |  |  |   | Capital    |   |  |   | by ESOP     |   |  |   | Compensation |   |  |   | Stock    |   |  |   | Earnings |   |  |   | Income        |  |  |   | Equity        |  
|                                                  
|Balance December
 31, 2009                         |  | 106,051     |   |  | $ | 1,215     |  |  | $ | 1,245,489  |   |  | $ | (88,721     | ) |  | $ | (12,389      | ) |  | $ | (211,582 | ) |  | $ | 486,974  |   |  | $ | 13,967        |  |  | $ | 1,434,953     |  
|                                                   |  |             |   |  |   |           |  |  |   |            |   |  |   |             |   |  |   |              |   |  |   |          |   |  |   |          |   |  |   |               |  |  |   |               |  
|Dividends
 declared ($0.14 per share)              |  |             |   |  |   |           |  |  |   |            |   |  |   |             |   |  |   |              |   |  |   |          |   |  |   | (13,986  | ) |  |   |               |  |  |   | (13,986       | )
|Allocation
 of ESOP shares, net of tax             |  |             |   |  |   |           |  |  |   | (205       | ) |  |   | 1,829       |   |  |   |              |   |  |   |          |   |  |   |          |   |  |   |               |  |  |   | 1,624         |  
|Treasury shares
 acquired (note 15)                |  | (971        | ) |  |   |           |  |  |   |            |   |  |   |             |   |  |   |              |   |  |   | (11,253  | ) |  |   |          |   |  |   |               |  |  |   | (11,253       | )
|Restricted
 stock expense                          |  |             |   |  |   |           |  |  |   |            |   |  |   |             |   |  |   | 3,179        |   |  |   |          |   |  |   |          |   |  |   |               |  |  |   | 3,179         |  
|Stock option
 expense                              |  |             |   |  |   |           |  |  |   | 248        |   |  |   |             |   |  |   |              |   |  |   |          |   |  |   |          |   |  |   |               |  |  |   | 248           |  
|                                                   |  |             |   |  |   |           |  |  |   |            |   |  |   |             |   |  |   |              |   |  |   |          |   |  |   |          |   |  |   |               |  |  |   |               |  
|Comprehensive
 income:                             |  |             |   |  |   |           |  |  |   |            |   |  |   |             |   |  |   |              |   |  |   |          |   |  |   |          |   |  |   |               |  |  |   |               |  
|Net
 income                                        |  |             |   |  |   |           |  |  |   |            |   |  |   |             |   |  |   |              |   |  |   |          |   |  |   | 32,706   |   |  |   |               |  |  |   | 32,706        |  
|Other
 comprehensive income, net of tax (note 16)  |  |             |   |  |   |           |  |  |   |            |   |  |   |             |   |  |   |              |   |  |   |          |   |  |   |          |   |  |   | 16,700        |  |  |   | 16,700        |  
|                                                  
|Total comprehensive
 income                        |  |             |   |  |   |           |  |  |   |            |   |  |   |             |   |  |   |              |   |  |   |          |   |  |   |          |   |  |   |               |  |  |   | 49,406        |  
|                                                  
|Balance June
 30, 2010                             |  | 105,080     |   |  | $ | 1,215     |  |  | $ | 1,245,532  |   |  | $ | (86,892     | ) |  | $ | (9,210       | ) |  | $ | (222,835 | ) |  | $ | 505,694  |   |  | $ | 30,667        |  |  | $ | 1,464,171     |  
|                                                  

See accompanying notes to consolidated financial
 statements.

5




NewAlliance
 Bancshares, Inc. Consolidated Statements of Cash Flows

|                                                                                  |  |                  |          |   |      |   |          |  
|--------------------------------------------------------------------------------- |  | ---------------- | -------- | - | ---- | - | -------- | -
|                                                                                  |  | Six Months Ended
|                                                                                  |  | June 30,        
|                                                                                  |  |                 
|(In thousands)
 (Unaudited)                                                       |  | 2010             |          |   | 2009 |  
|                                                                                 
|Cash flows
 from operating activities                                             |  |                  |          |   |      |   |          |  
|Net income                                                                        |  | $                | 32,706   |   |      | $ | 21,698   |  
|Adjustments
 to reconcile net income to net cash provided by operating activities |  |                  |          |   |      |   |          |  
|Provision
 for loan losses                                                        |  |                  | 10,300   |   |      |   | 9,100    |  
|Loss
 on OREO                                                                     |  |                  | 18       |   |      |   | 193      |  
|Restricted
 stock compensation expense                                            |  |                  | 3,179    |   |      |   | 2,900    |  
|Stock
 option compensation expense                                                |  |                  | 248      |   |      |   | 131      |  
|ESOP
 expense                                                                     |  |                  | 1,624    |   |      |   | 1,613    |  
|Amortization
 of identifiable intangible assets                                   |  |                  | 3,905    |   |      |   | 4,257    |  
|Net
 amortization/accretion of fair market adjustments from net assets acquired   |  |                  | (941     | ) |      |   | (1,673   | )
|Net
 amortization/accretion of investment securities                              |  |                  | 4,929    |   |      |   | 1,892    |  
|Deferred
 income taxes                                                            |  |                  | (504     | ) |      |   | 240      |  
|Depreciation
 and amortization of premises and equipment                          |  |                  | 3,101    |   |      |   | 3,253    |  
|Net
 gain on securities                                                           |  |                  | (198     | ) |      |   | (3,483   | )
|Mortgage
 origination activity and loan sale income                               |  |                  | (1,299   | ) |      |   | (3,500   | )
|Proceeds
 from sales of loans held for sale                                       |  |                  | 114,875  |   |      |   | 280,195  |  
|Loans
 originated for sale                                                        |  |                  | (112,279 | ) |      |   | (325,813 | )
|(Gain)
 loss on sale of fixed assets                                              |  |                  | (5       | ) |      |   | 19       |  
|Net
 (gain) loss on limited partnerships                                          |  |                  | (2,703   | ) |      |   | 659      |  
|Increase
 in cash surrender value of bank owned life insurance                    |  |                  | (1,677   | ) |      |   | (1,770   | )
|Increase
 in other assets                                                         |  |                  | (1,757   | ) |      |   | (181     | )
|Increase
 in other liabilities                                                    |  |                  | 2,058    |   |      |   | 5,101    |  
|                                                                                 
|Net
 cash provided by (used in) operating activities                              |  |                  | 55,580   |   |      |   | (5,169   | )
|                                                                                 
|Cash flows
 from investing activities                                             |  |                  |          |   |      |   |          |  
|Purchase
 of securities available for sale                                        |  |                  | (535,189 | ) |      |   | (747,883 | )
|Purchase
 of securities held to maturity                                          |  |                  | (140,638 | ) |      |   | (21,451  | )
|Proceeds
 from maturity, sales, calls and principal reductions of                 |  |                  |          |   |      |   |          |  
|securities
 available for sale                                                    |  |                  | 482,235  |   |      |   | 386,276  |  
|Proceeds
 from maturity, calls and principal reductions of                        |  |                  |          |   |      |   |          |  
|securities
 held to maturity                                                      |  |                  | 58,059   |   |      |   | 43,503   |  
|Proceeds
 from sales of fixed assets                                              |  |                  | 6        |   |      |   | 32       |  
|Net
 (increase) decrease in loans held for investment                             |  |                  | (176,031 | ) |      |   | 102,268  |  
|Proceeds
 from sales of other real estate owned                                   |  |                  | 2,616    |   |      |   | 2,310    |  
|Proceeds
 from bank owned life insurance                                          |  |                  | 6,776    |   |      |   | 263      |  
|Purchase
 of premises and equipment                                               |  |                  | (4,629   | ) |      |   | (1,342   | )
|                                                                                 
|Net
 cash used in investing activities                                            |  |                  | (306,795 | ) |      |   | (236,024 | )
|                                                                                 
|Cash flows
 from financing activities                                             |  |                  |          |   |      |   |          |  
|Net
 increase in customer deposit balances                                        |  |                  | 112,678  |   |      |   | 414,752  |  
|Net
 increase (decrease) in short-term borrowings                                 |  |                  | 76,856   |   |      |   | (52,018  | )
|Proceeds
 from long-term borrowings                                               |  |                  | 491,100  |   |      |   | 142,000  |  
|Repayments
 of long-term borrowings                                               |  |                  | (433,414 | ) |      |   | (252,324 | )
|Book
 under/(over) tax benefit of stock-based compensation                        |  |                  | -        |   |      |   | (98      | )
|Acquisition
 of treasury shares                                                   |  |                  | (11,253  | ) |      |   | (3,105   | )
|Dividends
 paid                                                                   |  |                  | (13,986  | ) |      |   | (14,075  | )
|                                                                                 
|Net
 cash provided by financing activities                                        |  |                  | 221,981  |   |      |   | 235,132  |  
|                                                                                 
|Net
 decrease in cash and cash equivalents                                        |  |                  | (29,234  | ) |      |   | (6,061   | )
|                                                                                 
|Cash
 and equivalents, beginning of period                                        |  |                  | 146,927  |   |      |   | 153,131  |  
|                                                                                 
|Cash
 and equivalents, end of period                                              |  | $                | 117,693  |   |      | $ | 147,070  |  
|                                                                                 
|Supplemental
 information                                                         |  |                  |          |   |      |   |          |  
|Cash
 paid for                                                                    |  |                  |          |   |      |   |          |  
|Interest
 on deposits and borrowings                                              |  | $                | 62,101   |   |      | $ | 92,142   |  
|Income
 taxes paid, net                                                           |  |                  | 15,945   |   |      |   | 11,447   |  
|Noncash
 transactions                                                             |  |                  |          |   |      |   |          |  
|Loans
 transferred to other real estate owned                                     |  |                  | 2,075    |   |      |   | 1,560    |  

See accompanying notes to consolidated financial
 statements.

6




NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

|1. |  | Summary
 of Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |  | Financial
 Statement PresentationThe consolidated financial statements of NewAlliance
 Bancshares, Inc. (the Company) have been prepared in conformity with
 accounting principles generally accepted in the United States of America. In the
 opinion of management, all adjustments (consisting of normal recurring accruals)
 considered necessary for a fair presentation have been included. All significant
 intercompany transactions and balances have been eliminated in consolidation. Amounts
 in prior period financial statements are reclassified whenever necessary to conform
 to the current year presentation. These consolidated financial statements should
 be read in conjunction with the audited consolidated financial statements and notes
 thereto included in the Companys Annual Report on Form 10-K as of and for
 the year ended December 31, 2009.                                                                                                                                                                                                                                                                                    
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |  | The preparation
 of the consolidated financial statements requires management to make estimates and
 assumptions that affect the reported amounts of assets, liabilities, revenues and
 expenses and the disclosure of contingent assets and liabilities. Actual results
 could differ from those estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |  | Material estimates
 that are particularly susceptible to significant near-term change relate to the
 determination of the allowance for loan losses, the obligation and expense for pension
 and other postretirement benefits, and estimates used to evaluate asset impairment
 including investment securities, income tax contingencies and deferred tax assets
 and liabilities and the recoverability of goodwill and other intangible assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |  | Management
 has determined that no subsequent events have occurred following the balance sheet
 date of June 30, 2010 which require recognition or disclosure in the financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |  | Cash and
 Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |  | For purposes
 of reporting cash flows, cash and cash equivalents include cash on hand and due
 from banks and short-term investments with original maturities of three months or
 less. At June 30, 2010, included in the balance of cash and due from banks were
 cash on hand of $97.7 million, which includes required reserves in the form of deposits
 with the Federal Reserve Bank (FRB) of approximately $33.6 million. Short-term
 investments included money market funds of $20.0 million at June 30, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |  | Investment
 Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |  | Marketable
 equity and debt securities are classified as either trading, available for sale,
 or held to maturity (applies only to debt securities). Management determines the
 appropriate classifications of securities at the time of purchase. At June 30, 2010
 and December 31, 2009, the Company had no debt or equity securities classified as
 trading. Held to maturity securities are debt securities for which the Company has
 the ability and intent to hold until maturity. All other securities not included
 in held to maturity are classified as available for sale. Held to maturity securities
 are recorded at amortized cost, adjusted for the amortization or accretion of premiums
 or discounts. Available for sale securities are recorded at fair value. Unrealized
 gains and losses, net of the related tax effect, on available for sale securities
 are excluded from earnings and are reported in accumulated other comprehensive income,
 a separate component of equity, until realized. Further information relating to
 the fair value of securities can be found within Note 13 of the Notes to Consolidated
 Financial Statements.
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |  | Premiums and
 discounts on debt securities are amortized or accreted into interest income over
 the term of the securities using the level yield method. In accordance with Financial
 Accounting Standards Board (FASB) Accounting Standards Codification
 (FASB ASC) 320 Debt and Equity Securities, a decline in
 market value of a debt security below amortized cost that is deemed other than temporary
 is charged to earnings for the credit related other than temporary impairment (OTTI) resulting in the establishment of a new cost basis for the security,
 while the non-credit related OTTI is recognized in other comprehensive income (OCI) if there is no intent to sell or will not be required to sell the
 security. If an equity security is deemed other-than-temporarily impaired, the
 full impairment is recorded as a charge to earnings. Gains and losses on sales of
 securities are recognized at the time of sale on a specific identification basis.                                                                                                                                                                           
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |  | Federal
 Home Loan Bank of Boston stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |  | As a member
 of the Federal Home Loan Bank of Boston, (FHLB Boston), the Bank is
 required to hold a certain amount of FHLB Boston stock. This stock is considered
 to be a non-marketable equity security reported at cost. The level of stock purchases
 is determined by the Banks advances outstanding and the amount of residential
 mortgage assets on the Banks balance sheet. The shares can only be purchased
 and sold between the FHLB Boston and the Company at a par value of $100 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

7




NewAlliance
 Bancshares, Inc.Notes to Unaudited Consolidated Financial
 Statements



---

| |  | Loans Held
 for Sale                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company
 currently sells the majority of originated fixed rate residential real estate loans
 with terms of 15 years and over. Mortgage loans held for sale are carried at fair
 value. Fair value is estimated using quoted loan market prices provided by government-sponsored
 entities of Federal National Mortgage Association (FNMA) and Federal
 Home Loan Mortgage Corporation (FHLMC). Further information regarding
 the fair value measurement of mortgage loans held for sale can be found in Note
 13 of the Notes to Consolidated Financial Statements. Residential loans are sold
 by the Company without recourse. The Company currently sells these loans servicing
 released.                                                                                                                                                                                                                                                         
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | The Company
 is also involved in the Small Business Administration (SBA) loan secondary
 market. The Company currently sells the guaranteed portion of SBA loans that meet
 certain criteria and retains the unguaranteed portion and the right to service the
 sold portion of the loan in its portfolio. Such loans are included in loans held
 for sale on the balance sheet upon origination. SBA loans held for sale are valued
 at the lower of cost (less principal payments received and net of deferred fees
 and costs) or estimated fair value. Fair value is estimated using quoted market
 prices from a secondary market broker. All other loan originations are classified
 as loans held for investment.                                                                                                                                                                                                                                      
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Loans Receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | Loans are
 stated at their principal amounts outstanding, net of deferred loan fees and costs
 and fair value adjustments for loans acquired.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Interest on
 loans is credited to income as earned based on the rate applied to principal amounts
 outstanding. Loans are placed on nonaccrual status when timely collection of principal
 or interest in accordance with contractual terms is in question. The Companys
 policy is to discontinue the accrual of interest when principal or interest payments
 become 90 days delinquent or sooner if management concludes that circumstances indicate
 borrowers may be unable to meet contractual principal or interest payments. If ultimately
 collected, such interest is credited to income when received. Loans are removed
 from nonaccrual status when they become current as to principal and interest and
 when, in the opinion of management concern no longer exists as to the collectability
 of principal and interest.                                                                                                                        
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Certain direct
 loan origination fees and costs and fair value adjustments to acquired loans are
 recognized over the lives of the related loans as an adjustment of interest using
 the level yield method. When loans are prepaid, sold or participated out, the unamortized
 portion is recognized as income or expense at that time.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Allowance
 for Loan Losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | The adequacy
 of the allowance for loan losses is regularly evaluated by management. Factors considered
 in evaluating the adequacy of the allowance include previous loss experience, current
 economic conditions and their effect on borrowers, the performance of individual
 loans in relation to contract terms, and other pertinent factors. The provision
 for loan losses charged to expense is based upon managements judgment of the
 amount necessary to maintain the allowance at a level adequate to absorb probable
 losses inherent in the loan portfolio. Loan losses are charged against the allowance
 when management believes the collectability of the principal balance outstanding
 is unlikely.                                                                                                                                                                                                                                       
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | In determining
 the adequacy of the allowance for loan losses, management reviews overall portfolio
 quality through an evaluation of individual performing and impaired loans, the risk
 characteristics of the loan portfolios, an analysis of current levels and trends
 in charge offs, delinquency and nonperforming loan data, and the credit risk profile
 of each component of the portfolio, among other factors. While management uses the
 best available information to recognize losses on loans, future additions to the
 allowance for loan losses may be necessary based on changes in economic conditions.
 In addition, various regulatory agencies, as an integral part of their examination
 process, periodically review the Banks allowance for loan losses. Such agencies
 may require the Bank to recognize additions to the allowance based on their judgments
 about information available to them at the time of their examinations.
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | The allowance
 for loan losses consists of a formula allowance following FASB ASC 450 Contingencies and FASB ASC 310 - Receivables, based on a variety of factors
 including historical loss experience for various loan portfolio classifications,
 and a specific valuation allowance for loans identified as impaired. The allowance
 is an estimate, and ultimate losses may vary from managements estimate. Changes
 in the estimate are recorded in the results of operations in the period in which
 they become known, along with provisions for estimated losses incurred during that
 period.                                                                                                                                                                                                                                                                                                                                                       
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | A loan is
 considered to be impaired when it is probable that the Company will be unable to
 collect all amounts due according to the contractual terms of the loan agreement.
 Impaired loans, as defined, may be measured based on the present value of expected
 future cash flows discounted at the loans original effective interest rate,
 at the loans observable market price or the fair value of the collateral if
 the loan is collateral dependent. When the measurement of the impaired loan is less
 than the recorded investment in the loan, the impairment is recorded through a valuation
 allowance.                                                                                                                                                                                                                                                                                                                                       

8




NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| |  | Loan Servicing
 Rights                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company
 capitalizes servicing rights for loans sold based on the relative fair value which
 is allocated between the servicing rights and the loans (without servicing rights).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | The cost basis
 of loan servicing rights is amortized on a level yield basis over the period of
 estimated net servicing revenue and such amortization is included in the consolidated
 statement of income as a reduction of loan servicing fee income. Servicing rights
 are evaluated for impairment by comparing their aggregate carrying amount to their
 fair value. The fair value of loan servicing rights is estimated using a present
 value cash flow model. The most important assumptions used in the valuation model
 are the anticipated rate of loan prepayments and discount rates. All assumptions
 are based on standards used by market participants. An independent appraisal of
 the fair value of the Companys loan servicing rights is obtained as necessary,
 but at least annually and is used by management to evaluate the reasonableness of
 the fair value estimates. For interim quarters, management analyzes the current
 variables and assesses the need for an independent appraisal. Impairment is recognized
 as an adjustment to loan and servicing income.
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | Premises
 and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Premises and
 equipment are carried at cost less accumulated depreciation and amortization. Depreciation
 and amortization are computed on the straight-line method using the estimated lives
 of the assets. Estimated lives are 5 to 40 years for building and improvements and
 3 to 10 years for furniture, fixtures and equipment. Amortization of leasehold improvements
 is calculated on a straight-line basis over the terms of the related leases or the
 life of the asset, whichever is shorter. The cost of maintenance and repairs is
 charged to expense as incurred, whereas significant renovations are capitalized.                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | Bank Owned
 Life Insurance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | Bank owned
 life insurance (BOLI) represents life insurance on certain employees
 who have consented to allow the Bank to be the beneficiary of those policies. BOLI
 is recorded as an asset at cash surrender value. Increases in the cash value of
 the policies, as well as insurance proceeds received in excess of cash values, are
 recorded in other non-interest income and are not subject to income tax. Management
 reviews the financial strength of the insurance carriers on a quarterly basis and
 BOLI with any individual carrier is limited to 15% of capital plus reserves.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | Goodwill
 and Identifiable Intangible Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | The assets
 (including identifiable intangible assets) and liabilities acquired in a business
 combination are recorded at fair value at the date of acquisition. Goodwill is recognized
 for the excess of the acquisition cost over the fair values of the net assets acquired
 and is not subsequently amortized. Identifiable intangible assets are subsequently
 amortized on a straight-line or accelerated basis, over their estimated lives. Management
 assesses the recoverability of goodwill at least on an annual basis and all intangible
 assets whenever events or changes in circumstances indicate that their carrying
 value may not be recoverable. If carrying amount exceeds fair value an impairment
 charge is recorded to income.                                                                                                                                                                                                                                                                                                                                        
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | Income
 Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | The Company
 files a consolidated federal tax return and various combined and separate Company
 state tax returns. The Company uses the asset and liability method of accounting
 for income taxes. Under this method, deferred tax assets and liabilities are established
 for the temporary differences between the financial reporting basis and the tax
 basis of the Companys assets and liabilities. Deferred tax assets are also
 recognized for available tax carryforwards. Deferred tax assets and liabilities
 are measured using enacted tax rates expected to be in effect when temporary differences
 and carryforwards are realized or settled.                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | The deferred
 tax asset is subject to reduction by a valuation allowance in certain circumstances.
 This valuation allowance is recognized if, based on an analysis of available evidence,
 management determines that it is more likely than not that some portion or all of
 the deferred tax asset will not be realized. The valuation allowance is subject
 to ongoing adjustment based on changes in circumstances that affect managements
 judgment about the realization of the deferred tax asset. Adjustments to increase
 or decrease the valuation allowance are charged or credited, respectively, to income
 tax expense or in certain limited circumstances to equity.                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | Income tax
 expense includes the amount of taxes payable for the current year, and the deferred
 tax benefit or expense for the period. The effect on deferred tax assets and liabilities
 of a change in tax rates is recognized in income tax expense in the period that
 includes the enactment date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | The Company
 is required to make a determination of an inventory of tax positions (federal and
 state) for which the sustainability of the position, based upon the technical merits,
 is uncertain. The Company regularly evaluates all tax positions taken and the likelihood
 of those positions being sustained. If management is highly confident that the position
 will be allowed and there is a                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

9




NewAlliance
 Bancshares, Inc.Notes to Unaudited Consolidated Financial
 Statements



---

| |  | greater than
 50% likelihood that the full amount of the tax position will be ultimately realized,
 the company recognizes the full benefit associated with the tax position. Additionally,
 interest and penalties related to uncertain tax positions are included as a component
 of income tax expense.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Trust Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | The Bank had
 approximately $1.01 billion and $1.03 billion of assets under management at June 30,
 2010 and December 31, 2009, respectively, in a fiduciary or agency capacity for
 customers. These assets are not included in the accompanying consolidated financial
 statements since they are not owned by the Bank. Trust income primarily consists
 of management fees based on the assets under management.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Pension
 and Other Postretirement Benefit Plans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | The Company
 has a noncontributory pension plan covering substantially all employees who meet
 certain age and length of service requirements and who were employed by the Company
 prior to January 1, 2008. Pension costs related to this plan are based upon actuarial
 computations of current and future benefits for employees based on years of service
 and the employees highest career earnings over a five-year consecutive period.
 Costs are charged to non-interest expense and are funded in accordance with requirements
 of the Employee Retirement Income Security Act and the Pension Protection Act of
 2006. Contributions are intended to provide not only for benefits attributed to
 service to date, but also for those expected to be earned in the future.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | In addition
 to the qualified plan, the Company has supplemental retirement plans for certain
 key officers. These plans, which are nonqualified, were designed to offset the impact
 of changes in the pension plan that limit benefits for highly compensated employees
 under qualified pension plans.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | The Company
 also accrues costs related to postretirement healthcare and life insurance benefits,
 which recognizes costs over the employees period of active employment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | The discount
 rate is set for the retirement plans by reference to high quality long-term fixed
 income instrument yields. The discount rates were determined by applying the estimated
 cash flows of the Companys retirement plans to the Citigroup Pension Liability
 Yield Curve. The Moodys Aa long-term corporate bond index was also reviewed
 as a benchmark. The expected long-term rate of return on the assets held in our
 defined pension plan is based on market and economic conditions, the Plans
 asset allocation and other factors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Based on our
 review of rates at December 31, 2009, separate discount rates were chosen for each
 type of benefit plan for the measurement of benefit obligations to better represent
 the actual plans. Discount rates as of December 31, 2009 were 5.85% for the defined
 benefit plan, 5.50% for the postretirement plan and 5.75% for the supplemental executive
 retirement benefit plan. The expected long-term rate of return on the pension plan
 assets was 7.75% for December 31, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Stock-Based
 Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | The Company
 accounts for stock option and restricted stock awards in accordance with FASB ASC
 718 Compensation  Stock Compensation. Pursuant to this
 guidance, the fair value of stock option and restricted stock awards, measured at
 grant date, is amortized to compensation expense on a straight-line basis over the
 vesting period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Repurchase
 Agreements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Repurchase
 agreements are accounted for as secured borrowings since the Company maintains effective
 control over the transferred securities and the transfer meets the other criteria
 for such accounting. Securities are sold to a counterparty with an agreement to
 repurchase the same or substantially the same security at a specified price and
 date. The Company has repurchase agreements with commercial or municipal customers
 that are offered as a business banking service. Customer repurchase agreements are
 for a term of one day and are backed by the purchasers interest in certain
 U.S. Treasury Notes or other U.S. Government securities. The Company also has a
 single dealer repurchase agreement that was initiated as a means to manage the Companys interest rate risk. The dealer repurchase agreement was issued for a term
 of five years and matures in 2012. The dealer repurchase agreement is collateralized
 by U.S. Government mortgage-backed securities. Obligations to repurchase securities
 sold are reflected as a liability in the Consolidated Balance Sheets. The Company
 does not record transactions of repurchase agreements as sales. The securities underlying
 the repurchase agreements remain in the available-for-sale investment securities
 portfolio.
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Merger
 Related Charges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | The Company
 accounts for acquisitions in accordance with FASB ASC 805, Business Combinations.
 Costs that do not meet the conditions for inclusion in the allocation of acquisition
 cost, costs for contemplated acquisitions and recurring costs related to prior acquisitions
 are expensed as incurred and are reported in other non-interest expense. These charges
 consist primarily of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

10




NewAlliance
 Bancshares, Inc.Notes to Unaudited Consolidated Financial
 Statements



---

|   |  | consulting,
 legal, system conversion, printing and advertising costs associated with acquired
 companies, acquisition targets and potential acquisition targets. For acquisitions
 completed after January 1, 2009, pursuant to new business combination accounting
 guidance, merger-related charges will also include acquisition related transaction
 and restructuring costs which were previously capitalized as part of the cost of
 the acquisition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |  | Related
 Party Transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |  | Directors
 and executive officers of the Company and its subsidiaries and their associates
 have been customers of and have had transactions with the Company, and management
 expects that such persons will continue to have such transactions in the future.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |  | Comprehensive
 Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |  | The purpose
 of reporting comprehensive income is to report a measure of all changes in an entity
 that result from recognized transactions and other economic events of the period
 other than transactions with owners in their capacity as owners. Comprehensive income
 includes net income and certain changes in capital that are not recognized in the
 statement of income (such as changes in net unrealized gains and losses on securities
 available for sale). The Company has reported comprehensive income for the three
 and six months ended June 30, 2010 and 2009 in the Consolidated Statement of Changes
 in Stockholders Equity. The components of comprehensive income are presented
 in Note 16 of the Notes to Consolidated Financial Statements.                                                                                                                                                                                                                                                               
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |  | Segment
 Reporting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |  | The Companys only business segment is Community Banking. During the six months ended June
 30, 2010 and the years ended 2009 and 2008, this segment represented all the revenues
 and income of the consolidated group and therefore, is the only reported segment
 as defined by FASB ASC 820, Segment Reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |  | Earnings
 Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |  | Basic earnings
 per share (EPS) excludes dilution and is calculated by dividing net
 income available to common stockholders by the weighted-average number of shares
 of common stock outstanding during the period. Diluted EPS is computed in a manner
 similar to that of basic EPS except that the weighted-average number of common shares
 outstanding is increased to include the number of incremental common shares (computed
 using the treasury stock method) that would have been outstanding if all potentially
 dilutive common shares (such as stock options and unvested restricted stock) were
 issued during the period. Unallocated common shares held by the Employee Stock Ownership
 Plan (ESOP) are not included in the weighted-average number of common
 shares outstanding for either basic or diluted earnings per share calculations.                                                                                                                                                                   
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |  | Earnings per
 share for the three and six months ended June 30, 2010 and 2009 can be found in
 Note 17 of the Notes to Consolidated Financial Statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|2. |  | Recent
 Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |  | Receivables
 (Topic 310)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |  | In July 2010,
 the FASB issued Accounting Standards Update (ASU) No. 2010-20, Disclosures
 about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. The statement is intended to improve the transparency of financial reporting
 by requiring enhanced disclosures about a banks allowance for loan losses and the credit quality of its financing receivables (generally defined as loans
 and leases). The primary goal of the disclosure requirements is to provide more
 information about the credit risk in a banks portfolio of loans and how that
 risk is analyzed and assessed in arriving at the allowance for loan loss. The guidance
 is effective for public entities for annual and interim reporting periods ending
 on or after December 15, 2010. The adoption of ASU No. 2010-06 on December 31, 2010
 will not have a material impact on the financial statements as it impacts disclosures
 only.                                                                                
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |  | Fair Value
 Measurements and Disclosures (Topic 820)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |  | In February
 2010, the FASB issued ASU No. 2010-06, Improving Disclosures about Fair Value
 Measurements. The amendment to Topic 820, Fair Value Measurements and Disclosures, requires additional disclosures about fair value measurements including transfer
 in and out of Levels 1 and 2 and higher levels of disaggregation for the different
 types of financial instruments. For the reconciliation of Level 3 fair values measurements,
 information about purchases, sales, issuances and settlements should be presented
 separately. The guidance was effective for annual and interim reporting periods
 beginning after December 15, 2009, except for the disclosure of information about
 sales, issuances and settlements on a gross basis for assets and liabilities classified
 as level 3, which is effective for reporting periods beginning after December 15,
 2010. The adoption of ASU No. 2010-06 on January 1, 2010 did not have a material
 impact on the financial statements as it impacts disclosures only.

11




NewAlliance
 Bancshares, Inc.Notes to Unaudited Consolidated Financial
 Statements



---

| |  | Investments
  Debt and Equity Securities (Topic 320)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | In April 2009,
 the FASB issued new guidance on the Recognition and Presentation of Other-Than-Temporary
 Impairments (FASB ASC 320-10), which amends FASB ASC 320, Investments  Debt and Equity Securities,
 to make the other-than-temporary impairment (OTTI) guidance more
 operational and to improve the presentation of other-than-temporary impairments
 in the financial statements. This guidance replaced the existing requirement that
 the entitys management assert it has both the intent and ability to hold an
 impaired debt security until recovery with a requirement that management assert
 it does not have the intent to sell the security, and it is more likely than not
 it will not have to sell the security before recovery of its cost basis. When an
 other-than-temporary impairment exists under this stated assertion, the amount of
 impairment related to the credit loss component would be recognized in earnings
 while the remaining amount would be recognized in other comprehensive income. This
 guidance provides increased disclosure about the credit and noncredit components
 of impaired debt securities that are not expected to be sold and also requires increased
 and more frequent disclosures regarding expected cash flows, credit losses, and
 an aging of securities with unrealized losses. Although this amendment does not
 result in a change in the carrying amount of debt securities, it does require that
 the portion of an other-than-temporary impairment not related to a credit loss for
 a held-to-maturity security be recognized in a new category of other comprehensive
 income and be amortized over the remaining life of the debt security as an increase
 in the carrying value of the security. This new guidance does not amend existing
 recognition and measurement guidance for other-than-temporary impairments of equity
 securities. This guidance was effective for interim and annual periods ending after
 June 15, 2009, with early adoption permitted for periods ending after March 15,
 2009. The Company did not elect early application and the adoption resulted in a $1.0
 million cumulative effect adjustment, net of taxes, to increase retained earnings
 and decrease accumulated other comprehensive income as of April 1, 2009 for the
 non-credit component of debt securities for which an other-than-temporary impairment
 was previously recognized. Refer to Note 3 of the Notes to Consolidated Financial
 Statements for further information on the Companys adoption of this guidance.
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Transfers
 of Financial Assets (Topic 860)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | In December
 2009, the FASB issued ASU No. 2009-16 codifying the new guidance issued in June
 2009 regarding the Transfer of Financial Assets. This guidance requires entities
 to provide more information about sales of securitized financial assets and similar
 transactions, particularly if the seller retains some risk in the assets. The guidance
 eliminates the concept of a qualifying special-purpose entity, changes the requirements
 for the derecognition of financial assets, and enhances the disclosure requirements
 for sellers of the assets. This guidance was effective for the fiscal year beginning
 after November 15, 2009. The adoption of ASU No. 2009-16 on January 1, 2010 did
 not have a material impact on the financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Consolidation
 (Topic 810)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | In December
 2009, the FASB issued ASU No. 2009-17 codifying the new guidance issued in June
 2009 regarding Consolidations. The guidance requires an enterprise to perform
 an analysis to determine whether the enterprises variable interest or interests
 give it a controlling financial interest in a variable interest entity (which would
 result in the enterprise being deemed the primary beneficiary of that entity and,
 therefore, obligated to consolidate the variable interest entity in its financial
 statements); to require ongoing reassessments of whether an enterprise is the primary
 beneficiary of a variable interest entity; to revise guidance for determining whether
 an entity is a variable interest entity; and to require enhanced disclosures that
 will provide more transparent information about an enterprises involvement
 with a variable interest entity. The guidance was effective for interim periods
 as of the beginning of the first annual reporting period beginning after November
 15, 2009. The adoption of ASU No. 2009-17 on January 1, 2010 did not have a material
 impact on the financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Subsequent
 Events (Topic 855)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | In February
 2010, the FASB issued ASU 2010-09 for amendments to certain recognition and disclosure
 requirements. Among other things, this guidance retracts, for public entities, the
 requirement to disclose the date through which subsequent events have been evaluated
 and whether that date is the date the financial statements were issued or were available
 to be issued. The portion of the ASU that addresses the disclosure of the date through
 which subsequent events have been evaluated, and that impacts the Company, was effective
 upon issuance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

12




NewAlliance
 Bancshares, Inc.Notes to Unaudited Consolidated Financial
 Statements



---

|   |  |                                                                                                                                                                                 
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3. |  | Investment
 Securities                                                                                                                                                          
|   |  |                                                                                                                                                                                 
|   |  | The following
 table presents the amortized cost, gross unrealized gains, gross unrealized losses
 and estimated fair values of investment securities for the periods presented:

| |  |                                                       |  |               |           |                   |            |       |         |            |  |       |         |   |  |           |           |  |            |   |           |            |       |   |        |       |  |   |         |   |  |   |           | 
| |  | ----------------------------------------------------- |  | ------------- | --------- | ----------------- | ---------- | ----- | ------- | ---------- |  | ----- | ------- | - |  | --------- | --------- |  | ---------- | - | --------- | ---------- | ----- | - | ------ | ----- |  | - | ------- | - |  | - | --------- | 
| |  |                                                       |  | June 30, 2010 |           | December 31, 2009
| |  |                                                       |  |               |           |                  
| |  |                                                       |  |               |           |                   |            | Gross |         |            |  | Gross |         |   |  |           |           |  |            |   |           |            | Gross |   |        | Gross |  |   |         |   | 
| |  |                                                       |  | Amortized     |           |                   | unrealized |       |         | unrealized |  |       | Fair    |   |  | Amortized |           |  | unrealized |   |           | unrealized |       |   | Fair   |      
| |  | (In thousands)                                        |  | cost          |           |                   | gains      |       |         | losses     |  |       | value   |   |  | cost      |           |  | gains      |   |           | losses     |       |   | value  |      
| |  |                                                      
| |  | Available
 for sale                                   |  |               |           |                   |            |       |         |            |  |       |         |   |  |           |           |  |            |   |           |            |       |   |        |       |  |   |         |   |  |   |           | 
| |  | U.S.
 Treasury obligations                            |  | $             | -         |                   |            | $     | -       |            |  | $     | -       |   |  | $         | -         |  |            | $ | 597       |            |       | $ | -      |       |  | $ | -       |   |  | $ | 597       | 
| |  | U.S.
 Government sponsored                            |  |               |           |                   |            |       |         |            |  |       |         |   |  |           |           |  |            |   |           |            |       |   |        |       |  |   |         |   |  |   |           | 
| |  | enterprise obligations                                |  |               | 399,327   |                   |            |       | 5,874   |            |  |       | (22     | ) |  |           | 405,179   |  |            |   | 198,692   |            |       |   | 1,621  |       |  |   | (583    | ) |  |   | 199,730   | 
| |  | Corporate
 obligations                                |  |               | 8,118     |                   |            |       | 612     |            |  |       | -       |   |  |           | 8,730     |  |            |   | 8,139     |            |       |   | 378    |       |  |   | -       |   |  |   | 8,517     | 
| |  | Other
 bonds and obligations                          |  |               | 13,496    |                   |            |       | 184     |            |  |       | (1,419  | ) |  |           | 12,261    |  |            |   | 14,625    |            |       |   | 127    |       |  |   | (1,518  | ) |  |   | 13,234    | 
| |  | Auction
 rate certificates                            |  |               | 12,050    |                   |            |       | -       |            |  |       | -       |   |  |           | 12,050    |  |            |   | 27,550    |            |       |   | -      |       |  |   | (2,755  | ) |  |   | 24,795    | 
| |  | Marketable
 equity securities                         |  |               | 8,582     |                   |            |       | 197     |            |  |       | -       |   |  |           | 8,779     |  |            |   | 8,567     |            |       |   | 216    |       |  |   | -       |   |  |   | 8,783     | 
| |  | Trust
 preferred equity securities                    |  |               | 48,223    |                   |            |       | 3       |            |  |       | (13,444 | ) |  |           | 34,782    |  |            |   | 48,754    |            |       |   | -      |       |  |   | (15,458 | ) |  |   | 33,296    | 
| |  | Private
 label residential mortgage-backed securities |  |               | 21,428    |                   |            |       | 27      |            |  |       | (1,229  | ) |  |           | 20,226    |  |            |   | 23,871    |            |       |   | -      |       |  |   | (3,015  | ) |  |   | 20,856    | 
| |  | Residential
 mortgage-backed securities               |  |               | 1,820,482 |                   |            |       | 80,828  |            |  |       | -       |   |  |           | 1,901,310 |  |            |   | 1,951,297 |            |       |   | 68,393 |       |  |   | (1,643  | ) |  |   | 2,018,047 | 
| |  |                                                      
| |  | Total
 available for sale                             |  |               | 2,331,706 |                   |            |       | 87,725  |            |  |       | (16,114 | ) |  |           | 2,403,317 |  |            |   | 2,282,092 |            |       |   | 70,735 |       |  |   | (24,972 | ) |  |   | 2,327,855 | 
| |  |                                                      
| |  | Held to
 maturity                                     |  |               |           |                   |            |       |         |            |  |       |         |   |  |           |           |  |            |   |           |            |       |   |        |       |  |   |         |   |  |   |           | 
| |  | Residential
 mortgage-backed securities               |  |               | 313,520   |                   |            |       | 12,172  |            |  |       | -       |   |  |           | 325,692   |  |            |   | 230,596   |            |       |   | 11,360 |       |  |   | -       |   |  |   | 241,956   | 
| |  | Other
 bonds                                          |  |               | 9,735     |                   |            |       | 311     |            |  |       | (2      | ) |  |           | 10,044    |  |            |   | 10,170    |            |       |   | 243    |       |  |   | (38     | ) |  |   | 10,375    | 
| |  |                                                      
| |  | Total
 held to maturity                               |  |               | 323,255   |                   |            |       | 12,483  |            |  |       | (2      | ) |  |           | 335,736   |  |            |   | 240,766   |            |       |   | 11,603 |       |  |   | (38     | ) |  |   | 252,331   | 
| |  |                                                      
| |  | Total
 securities                                     |  | $             | 2,654,961 |                   |            | $     | 100,208 |            |  | $     | (16,116 | ) |  | $         | 2,739,053 |  |            | $ | 2,522,858 |            |       | $ | 82,338 |       |  | $ | (25,010 | ) |  | $ | 2,580,186 | 
| |  |                                                      

| |  | The securities
 portfolio is reviewed on a monthly basis for the presence of other-than-temporary
 impairment (OTTI). In accordance with OTTI guidance issued by the FASB
 in 2009, credit related OTTI for debt securities is recognized in earnings while
 non-credit related OTTI is recognized in other comprehensive income (OCI)
 if there is no intent to sell or will not be required to sell the security. If an
 equity security is deemed other-than-temporarily impaired, the full impairment is
 considered to be credit-related and a charge to earnings would be recorded. During
 the second quarter of 2010, the Company recorded an OTTI loss on a debt security
 in accordance with this FASB guidance, as described below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | During the
 three months ended June 30, 2010, a pooled trust preferred security, which had a
 previous credit related impairment charge during 2009, was deemed to have an additional
 credit related OTTI loss in the amount of $552,000 based on a further decline in
 expected cash flows. The credit related impairment, which was reclassified from
 other comprehensive income as it was previously recognized as non-credit related
 was due to a cash flow analysis that indicated further credit related impairment.
 The Company received nine cash flow scenarios from the underwriter which were utilized
 by management to analyze this security for potential OTTI. The nine scenarios covered
 various default rates, recovery rates and prepayment options over different time
 periods. Two of the nine cash flow analyses indicated impairment over the life of
 the security. The driver of the indicated impairment was the recovery rate, which
 was modeled at 0% in these two cash flow scenarios. As the severity of the estimated
 loss in these two cash flow scenarios increased by a factor of five since the prior
 OTTI analysis in the first quarter of 2010 and the past history of the security
 indicates that there have not been any recoveries to date from securities that have
 defaulted, the Company recorded a credit related impairment charge. The credit impairment
 represents the average loss of the two negative cash flow analyses. After the write-down,
 the pooled trust preferred security had an amortized cost and fair value of approximately $869,000
 and $220,000, respectively. There is no intent to sell nor is it more likely than
 not that the Company will be required to sell this security.
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | The following
 tables present the fair value of investments with continuous unrealized losses for
 less than one year and those that have been in a continuous unrealized loss position
 for more than one year as of June 30, 2010 and December 31, 2009. Of the securities
 summarized, one issue has an unrealized loss for less than twelve months and 33
 have unrealized losses for twelve months or more at June 30, 2010. This compares
 to a total of 72 issues that had an unrealized loss at December 31, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

13




NewAlliance
 Bancshares, Inc.Notes to Unaudited Consolidated Financial
 Statements



---

| |  |                                                       |  | June 30, 2010     
| |  | ----------------------------------------------------- |  | ------------------
| |  |                                                       |  |                   
| |  |                                                       |  | Less Than One Year
| |  |                                                       |  |                   
| |  |                                                       |  | Fair              
| |  | (In thousands)                                        |  | value             
| |  |                                                      
| |  | U.
 S. Government sponsored enterprise obligations    |  | $                 
| |  | Corporate
 obligations                                |  |                   
| |  | Other
 bonds and obligations                          |  |                   
| |  | Auction
 rate certificates                            |  |                   
| |  | Marketable
 equity securities                         |  |                   
| |  | Trust
 preferred equity securities                    |  |                   
| |  | Private
 label residential mortgage-backed securities |  |                   
| |  | Residential
 mortgage-backed securities               |  |                   
| |  |                                                      
| |  | Total
 securities with unrealized losses              |  | $                 
| |  |                                                      
| |  |                                                       |  | December 31, 2009 
| |  |                                                       |  |                   
| |  |                                                       |  | Less Than One Year
| |  |                                                       |  |                   
| |  |                                                       |  |                   
| |  | (In thousands)                                        |  |                   
| |  |                                                      
| |  | U. S. Government
 sponsored enterprise obligations    |  | $                 
| |  | Corporate
 obligations                                |  |                   
| |  | Other bonds
 and obligations                          |  |                   
| |  | Auction rate
 certificates                            |  |                   
| |  | Marketable
 equity securities                         |  |                   
| |  | Trust preferred
 equity securities                    |  |                   
| |  | Private label
 residential mortgage-backed securities |  |                   
| |  | Residential
 mortgage-backed securities               |  |                   
| |  |                                                      
| |  | Total
 securities with unrealized losses              |  | $                 
| |  |                                                      

| |  | Management
 believes that no individual unrealized loss as of June 30, 2010 represents an other-than-temporary
 impairment, based on its detailed monthly review of the securities portfolio. Among
 other things, the other-than-temporary impairment review of the investment securities
 portfolio focuses on the combined factors of percentage and length of time by which
 an issue is below book value as well as consideration of issuer specific (present
 value of cash flows expected to be collected, issuer rating changes and trends,
 credit worthiness and review of underlying collateral), broad market details and
 the Companys intent to sell the security or if it is more likely than not
 that the Company will be required to sell the debt security before recovering its
 cost. The Company also considers whether the depreciation is due to interest rates
 or credit risk. The following paragraphs outline the Companys position related
 to unrealized losses in its investment securities portfolio at June 30, 2010.                                                                                      
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | The unrealized
 loss on private label residential mortgage-backed securities is primarily concentrated
 in one BBB rated private-label mortgage-backed security which is substantially
 paid down, well seasoned and of an earlier vintage that has not been significantly
 affected by high delinquency levels or vulnerable to lower collateral coverage as
 seen in later issued pools. Widening in non-agency mortgage spreads since the date
 purchased is the primary factor for the unrealized losses reported on private label
 residential mortgage-backed securities. None of the securities are backed by subprime
 mortgage loans and none have suffered losses. One of the private issue securities
 is rated BBB and the remaining securities are AA through AAA rated. Management reviewed
 the above factors and issuer specific data and concluded that these private-label
 mortgage-backed securities are not other-than-temporarily impaired.                                                                                                                                                                             
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | The unrealized
 losses on other bonds and obligations primarily relates to a position in an adjustable
 rate mortgage mutual fund that holds positions in non-agency mortgage-backed securities
 that are facing negative mark to market pressures due to widening spreads in non-agency
 mortgage products. Although the fund has experienced declines in credit ratings
 during 2009, it was not due to customer redemptions or forced selling of the investments.
 During 2009, the Company recorded an OTTI loss of $816,000 on this adjustable rate
 mortgage mutual fund due to a decrease in the credit quality of the security coupled
 with a loss recognized by the fund. As of June 30, 2010, the investment carries
 a market value to book value ratio of 82.43%, a weighted average underlying investment
 credit rating of A+ and it continues to pay normal monthly dividends. There is no
 intent to sell nor is it more likely than not that the Company will be required
 to sell these securities and management has therefore concluded that the fund experienced
 no further OTTI in the six months ended June 30, 2010.
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | Trust preferred
 securities are comprised of two pooled trust preferreds with an amortized cost of $5.6
 million, one of which is rated A and the other is rated CC at June 30, 2010, a downgrade
 from BB at December 31, 2009. During 2009, the Company recorded a credit related
 impairment of $581,000 on the CC rated pooled trust preferred security based on a
 cash flow analysis and a subsequent credit related impairment of $552,000 during
 the second quarter ending June 30, 2010 as discussed above. The remaining $42.6 million
 of trust preferred securities are comprised of twelve individual names
 issues with the following                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

14




NewAlliance Bancshares, Inc.Notes to Unaudited Consolidated Financial
 Statements



---

| |  | ratings: $15.6
 million rated A to A-, $14.6 million rated BBB- to BBB+ and $12.4 million rated BB.
 The unrealized losses reported for trust preferred securities relate to the financial
 and liquidity stresses in the fixed income markets and in the banking sector and
 are not reflective of individual stresses in the individual company names. The ratings
 on all of the issues with the exception of the CC rated pooled security have improved
 or remained the same since December 31, 2009. Additionally, there have not been
 any disruptions in the cash flows of these securities and all are currently paying
 the contractual principal and interest payments. A detailed review of the two pooled
 trust preferreds and the individual names trust preferred equity securities
 was completed by management. This review included an analysis of collateral reports,
 cash flows, stress default levels and financial ratios of the underlying issuers.
 Management reviewed the above factors and issuer specific data and concluded that
 after the OTTI loss recorded on the CC rated pooled trust preferred security, these
 securities are not other-than-temporarily impaired.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | The Company
 has no intent to sell nor is it more likely than not that the Company will be required
 to sell any of the securities contained in the table during the period of time necessary
 to recover the unrealized losses, which may be until maturity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | The following
 table presents the changes in the credit loss component of the amortized cost of
 debt securities available for sale that have been written down for other-than-temporary
 impairment loss and recognized in earnings. The credit loss component represents
 the difference between the present value of expected future cash flows and the amortized
 cost basis of the security prior to considering credit losses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

| |  |                                                                   |  | Three Months Ended | Six Months Ended
| |  | ----------------------------------------------------------------- |  | ------------------ | ----------------
| |  |                                                                   |  | June 30,           | June 30,        
| |  |                                                                   |  |                   
| |  | (In thousands)                                                    |  | 2010               |                 
| |  |                                                                  
| |  | Balance, beginning
 of period                                     |  | $                  | 1,397           
| |  | Additions:                                                        |  |                    |                 
| |  | Initital
 credit impairments which were not previously recognized |  |                    |                 
| |  | as
 a component of earnings                                       |  |                    | -               
| |  | Subsequent
 credit impairments                                    |  |                    | 552             
| |  | Reductions:                                                       |  |                    |                 
| |  | Securities
 sold                                                  |  |                    | -               
| |  |                                                                  
| |  | Balance, end
 of period                                           |  | $                  | 1,949           
| |  |                                                                  

| |  | As of June
 30, 2010, the amortized cost and fair values of debt securities and short-term obligations,
 by contractual maturity, are shown below. Expected maturities may differ from contracted
 maturities because issuers may have the right to call or prepay obligations with
 or without call or prepayment penalties.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |                                         |  |                    |           |                  |            |   |           |                |  |   |            |  |  |   |         | 
| |  | --------------------------------------- |  | ------------------ | --------- | ---------------- | ---------- | - | --------- | -------------- |  | - | ---------- |  |  | - | ------- | 
| |  |                                         |  | Available for Sale |           | Held to Maturity
| |  |                                         |  |                    |           |                 
| |  | (In thousands)                          |  | Amortized cost     |           |                  | Fair value |   |           | Amortized cost |  |   | Fair value | 
| |  |                                        
| |  | June 30, 2010                           |  |                    |           |                  |            |   |           |                |  |   |            |  |  |   |         | 
| |  | Due
 in one year or less                |  | $                  | 119,165   |                  |            | $ | 118,380   |                |  | $ | 2,565      |  |  | $ | 2,606   | 
| |  | Due
 after one year through five years  |  |                    | 98,465    |                  |            |   | 101,345   |                |  |   | 6,170      |  |  |   | 6,438   | 
| |  | Due
 after five years through ten years |  |                    | 212,813   |                  |            |   | 215,966   |                |  |   | -          |  |  |   | -       | 
| |  | Due
 after ten years                    |  |                    | 50,771    |                  |            |   | 37,311    |                |  |   | 1,000      |  |  |   | 1,000   | 
| |  |                                         |  |                    |           |                  |            |   |           |                |  |   |            |  |  |   |         | 
| |  | Residential
 mortgage-backed securities |  |                    | 1,841,910 |                  |            |   | 1,921,536 |                |  |   | 313,520    |  |  |   | 325,692 | 
| |  |                                        
| |  | Total
 debt securities                  |  | $                  | 2,323,124 |                  |            | $ | 2,394,538 |                |  | $ | 323,255    |  |  | $ | 335,736 | 
| |  |                                        

| |  | Securities
 with a fair value of $772.8 million and $673.8 million at June 30, 2010 and December
 31, 2009, respectively, were pledged to secure public deposits, repurchase agreements
 and Federal Home Loan Bank of Boston (FHLB) borrowings.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

15




NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| | The following
 table presents information related to realized gains and losses on sales of securities
 available for sale during the three and six months ended June 30, 2010 and 2009.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                 |  | Debt Securities             |      | Equity Securities
| | --------------- |  | --------------------------- | ---- | -----------------
| |                 |  |                             |      |                  
| |                 |  |                             |      |                  
| |                 |  | Three Months Ended June 30,
| |                 |  |                            
| | (In thousands)  |  |                             | 2010 |                  
| |                
| | Realized gains  |  | $                           | 750  |                  
| | Realized losses |  |                             | -    |                  
| |                

| |                 |  | Debt Securities           |      | Equity Securities
| | --------------- |  | ------------------------- | ---- | -----------------
| |                 |  |                           |      |                  
| |                 |  |                           |      |                  
| |                 |  | Six Months Ended June 30,
| |                 |  |                          
| | (In thousands)  |  |                           | 2010 |                  
| |                
| | Realized gains  |  | $                         | 750  |                  
| | Realized losses |  |                           | -    |                  
| |                

|4. | Loans                                                           |  |          |           |   |              |   |           |  
|-- | --------------------------------------------------------------- |  | -------- | --------- | - | ------------ | - | --------- | -
|   |                                                                 |  |          |           |   |              |   |           |  
|   | The composition
 of the Companys loan portfolio is as follows: |  |          |           |   |              |   |           |  
|   |                                                                 |  |          |           |   |              |   |           |  
|   |                                                                 |  | June 30, |           |   | December 31, |  
|   | (In thousands)                                                  |  | 2010     |           |   | 2009         |  
|   |                                                                
|   | Residential real estate                                         |  | $        | 2,472,730 |   |              | $ | 2,382,514 |  
|   | Commercial
 real estate                                         |  |          | 1,192,934 |   |              |   | 1,100,880 |  
|   | Construction                                                    |  |          |           |   |              |   |           |  
|   | Residential                                                     |  |          | 18,431    |   |              |   | 13,789    |  
|   | Commercial                                                      |  |          | 68,884    |   |              |   | 132,370   |  
|   | Commercial
 business                                            |  |          | 473,329   |   |              |   | 411,211   |  
|   | Consumer                                                        |  |          |           |   |              |   |           |  
|   | Home
 equity and equity lines of credit                         |  |          | 687,635   |   |              |   | 705,673   |  
|   | Other                                                           |  |          | 14,428    |   |              |   | 15,608    |  
|   |                                                                
|   | Total
 consumer                                                 |  |          | 702,063   |   |              |   | 721,281   |  
|   |                                                                
|   | Total
 loans                                                    |  |          | 4,928,371 |   |              |   | 4,762,045 |  
|   | Allowance
 for loan losses                                      |  |          | (54,945   | ) |              |   | (52,463   | )
|   |                                                                
|   | Total
 loans, net                                               |  | $        | 4,873,426 |   |              | $ | 4,709,582 |  
|   |                                                                

| | As of June
 30, 2010 and December 31, 2009, the Companys residential real estate loan,
 residential construction loan, home equity loan and equity lines of credit portfolios
 are collateralized by one-to-four family homes and condominiums, the majority of
 which are located in Connecticut and Massachusetts. The commercial real estate loan
 and commercial construction portfolios are collateralized primarily by multi-family,
 commercial and industrial properties located predominately in Connecticut and Massachusetts.
 A variety of different assets, including accounts receivable, inventory and property,
 plant and equipment, collateralize the majority of the commercial business loan
 portfolio. The Company does not originate or directly invest in subprime loans.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

16




NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| | Allowance
 for Loan Losses                                                                                      
| | ----------------------------------------------------------------------------------------------------------------
| |                                                                                                                 
| | The following
 table provides a summary of activity in the allowance for loan losses for the periods
 presented:

| |                                   |  | At or For the Three Months |        | At or For the Six Months
| | --------------------------------- |  | -------------------------- | ------ | ------------------------
| |                                   |  | Ended June 30,             |        | Ended June 30,          
| |                                   |  |                            |        |                         
| | (In thousands)                    |  |                            | 2010   |                         
| |                                  
| | Balance at beginning of period    |  | $                          | 54,164 |                         
| | Provisions
 charged to operations |  |                            | 5,500  |                         
| | Charge-offs                       |  |                            |        |                         
| | Residential
 real estate loans    |  |                            | 1,293  |                         
| | Commercial
 real estate loans     |  |                            | 1,244  |                         
| | Commercial
 construction loans    |  |                            | 832    |                         
| | Commercial
 business loans        |  |                            | 1,459  |                         
| | Consumer
 loans                   |  |                            | 213    |                         
| |                                  
| | Total
 charge-offs                |  |                            | 5,041  |                         
| |                                  
| | Recoveries                        |  |                            |        |                         
| | Residential
 real estate loans    |  |                            | 8      |                         
| | Commercial
 real estate loans     |  |                            | -      |                         
| | Commercial
 construction loans    |  |                            | -      |                         
| | Commercial
 business loans        |  |                            | 276    |                         
| | Consumer
 loans                   |  |                            | 38     |                         
| |                                  
| | Total
 recoveries                 |  |                            | 322    |                         
| |                                  
| | Net charge-offs                   |  |                            | 4,719  |                         
| |                                  
| | Balance at
 end of period         |  | $                          | 54,945 |                         
| |                                  

| | Nonperforming
 Assets                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                        
| | Nonperforming
 assets include loans that are 90 days or more past due, restructured loans due to
 a weakening in the financial condition of the borrower, other loans which have been
 identified by the Company as presenting uncertainty with respect to the collectability
 of principal or interest and other real estate owned. All of the Companys
 nonperforming assets do not accrue interest.
| |                                                                                                                                                                                                                                                                                                                                                                                                        
| | The following
 table provides a summary of nonperforming assets for the periods presented:                                                                                                                                                                                                                                                                                                             

| |                                                                      |  | June 30, |        |  | December 31,
| | -------------------------------------------------------------------- |  | -------- | ------ |  | ------------
| | (In thousands)                                                       |  | 2010     |        |  | 2009        
| |                                                                     
| | Nonaccrual loans                                                     |  | $        | 68,295 |  |             
| | Other real
 estate owned                                             |  |          | 2,648  |  |             
| |                                                                     
| | Total
 nonperforming assets                                          |  | $        | 70,943 |  |             
| |                                                                     
| | Troubled debt
 restructured loans included in nonaccrual loans above |  | $        | 4,073  |  |             
| |                                                                     

17




NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

|5. | Goodwill
 and Identifiable Intangible Assets                                                                  
|-- | --------------------------------------------------------------------------------------------------------------
|   |                                                                                                               
|   | The changes
 in the carrying amount of goodwill and identifiable intangible assets are summarized
 as follows:

| |                                                      |  |          |         |  |        |              |        |        |              | Total |       
| | ---------------------------------------------------- |  | -------- | ------- |  | ------ | ------------ | ------ | ------ | ------------ | ----- | ------
| |                                                      |  |          |         |  |        | Identifiable |        |        | Identifiable |      
| |                                                      |  |          |         |  |        | Intangible   |        |        | Intangible   |      
| | (In thousands)                                       |  | Goodwill |         |  | Assets |              |        | Assets |             
| |                                                     
| | Balance, December 31, 2008                           |  | $        | 527,167 |  |        | $            | 43,860 |        |              | $     | 43,860
| | Amortization
 expense                                |  |          | -       |  |        |              | (8,501 | )      |              |       | (8,501
| |                                                     
| | Balance, December
 31, 2009                          |  |          | 527,167 |  |        |              | 35,359 |        |              |       | 35,359
| | Amortization
 expense                                |  |          | -       |  |        |              | (3,905 | )      |              |       | (3,905
| |                                                     
| | Balance, June
 30, 2010                              |  | $        | 527,167 |  |        | $            | 31,454 |        |              | $     | 31,454
| |                                                     
| | Estimated
 amortization expense for the year ending: |  |          |         |  |        |              |        |        |              |       |       
| | Remaining
 2010                                      |  |          |         |  |        | $            | 3,904  |        |              | $     | 3,904 
| | 2011                                                 |  |          |         |  |        |              | 7,556  |        |              |       | 7,556 
| | 2012                                                 |  |          |         |  |        |              | 7,556  |        |              |       | 7,556 
| | 2013                                                 |  |          |         |  |        |              | 7,461  |        |              |       | 7,461 
| | 2014                                                 |  |          |         |  |        |              | 3,617  |        |              |       | 3,617 
| | 2015                                                 |  |          |         |  |        |              | 982    |        |              |       | 982   
| | Thereafter                                           |  |          |         |  |        |              | 378    |        |              |       | 378   
| |                                                     

| | The Company
 completed its annual test for goodwill impairment during the first quarter of 2010
 and no impairment charge was deemed necessary. There have been no impairments recorded
 for goodwill and identifiable intangible assets since inception.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                          
| | The components
 of identifiable intangible assets are core deposit and customer relationships and
 had the following balances at June 30, 2010:                                                                                                          

| |                                         |  | Original |        |  |              |   |        |          | Balance
| | --------------------------------------- |  | -------- | ------ |  | ------------ | - | ------ | -------- | -------
| |                                         |  | Recorded |        |  | Cumulative   |   |        | June 30,
| | (In thousands)                          |  | Amount   |        |  | Amortization |   |        | 2010    
| |                                        
| | Core deposit and customer relationships |  | $        | 86,908 |  |              | $ | 55,454 |          |        
| |                                        

|6. | Other Assets                                        
|-- | ----------------------------------------------------
|   |                                                     
|   | Selected components
 of other assets are as follows:

| |                                                            |  | June 30, |         |  | December 31,
| | ---------------------------------------------------------- |  | -------- | ------- |  | ------------
| | (In thousands)                                             |  | 2010     |         |  | 2009        
| |                                                           
| | Deferred tax asset, net                                    |  | $        | 5,433   |  |             
| | Accrued interest
 receivable                               |  |          | 32,106  |  |             
| | Investments
 in limited partnerships and other investments |  |          | 9,858   |  |             
| | Receivables
 arising from securities transactions          |  |          | 13,227  |  |             
| | Prepaid FDIC
 assessments                                  |  |          | 22,584  |  |             
| | All other                                                  |  |          | 24,689  |  |             
| |                                                           
| | Total
 other assets                                        |  | $        | 107,897 |  |             
| |                                                           

18




NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

|7. | Deposits                                             
|-- | -----------------------------------------------------
|   |                                                      
|   | A summary
 of deposits by account type is as follows:

| |                 |  | June 30, |           |  | December 31,
| | --------------- |  | -------- | --------- |  | ------------
| | (In thousands)  |  | 2010     |           |  | 2009        
| |                
| | Savings         |  | $        | 1,798,881 |  |             
| | Money market    |  |          | 915,510   |  |             
| | NOW             |  |          | 406,069   |  |             
| | Demand          |  |          | 568,414   |  |             
| | Time            |  |          | 1,447,872 |  |             
| |                
| | Total
 deposits |  | $        | 5,136,746 |  |             
| |                

|8. | Borrowings                                                  
|-- | ------------------------------------------------------------
|   |                                                             
|   | The following
 is a summary of the Companys borrowed funds:

| |                                                                 |  |               |           |  |      | December 31,
| | --------------------------------------------------------------- |  | ------------- | --------- |  | ---- | ------------
| | (In thousands)                                                  |  | June 30, 2010 |           |  | 2009
| |                                                                
| | FHLB advances (1)                                               |  | $             | 1,900,561 |  |      | $           
| | Repurchase
 agreements                                          |  |               | 100,951   |  |      |             
| | Mortgage loans
 payable                                         |  |               | 1,085     |  |      |             
| | Junior subordinated
 debentures issued to affiliated trusts (2) |  |               | 21,135    |  |      |             
| |                                                                
| | Total
 borrowings                                               |  | $             | 2,023,732 |  |      | $           
| |                                                                

| | (1) | Includes
 fair value adjustments on acquired borrowings, in accordance with purchase accounting
 standards of $2.4 million and $3.1 million at June 30, 2010 and December 31, 2009,
 respectively. The acquisition fair value adjustments (premiums) are being amortized
 as an adjustment to interest expense on borrowings over their remaining terms using
 the level yield method.                       
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                              
| | (2) | The trusts
 were organized to facilitate the issuance of "trust preferred" securities. The Company
 acquired these subsidiaries when it acquired Alliance Bancorp of New England, Inc.
 and Westbank Corporation, Inc. ("Westbank"). The affiliated trusts are wholly-owned
 subsidiaries of the Company and the payments of these securities are irrevocably
 and unconditionally guaranteed by the Company.

|   | FHLB advances
 are secured by the Companys investment in FHLB stock, a blanket security agreement
 and other eligible investment securities. This agreement requires the Bank to maintain
 as collateral certain qualifying assets, principally mortgage loans. Investment
 securities currently maintained as collateral are all U.S. Agency mortgage-backed
 securities. At June 30, 2010 and December 31, 2009, the Bank was in compliance with
 the FHLB collateral requirements. At June 30, 2010, the Company could immediately
 borrow an additional $315.5 million from the FHLB, inclusive of a line of credit
 of approximately $20.0 million. Additional borrowing capacity of approximately $1.53
 billion would be available by pledging additional eligible securities as collateral.
 The Company also has borrowing capacity at the Federal Reserve Bank of Bostons
 discount window, which was approximately $101.3 million as of June 30, 2010, all
 of which was available on that date. Repurchase agreements with commercial or municipal
 customers or dealer/brokers are secured by the Companys investment in specific
 issues of agency mortgage-backed securities and agency obligations of $38.6 million
 and $92.6 million, respectively, as of June 30, 2010. Repurchase agreement lines
 of credit with four large broker-dealers totaled $200.0 million at June 30, 2010,
 with availability of $175.0 million. At June 30, 2010, all of the Companys $1.90
 billion outstanding FHLB advances were at fixed rates ranging from 0.22% to 8.17%.
 The weighted average rate for all FHLB advances at June 30, 2010 was 3.35%.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|9. | Pension
 and Other Postretirement Benefit Plans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The Company
 provides various defined benefit and other postretirement benefit plans (postretirement
 health and life insurance benefits) to substantially all employees hired prior to
 January 1, 2008. The Company also has supplemental retirement plans (the Supplemental
 Plans) that provide benefits for certain key executive officers. Benefits
 under the supplemental plans are based on a predetermined formula and are reduced
 by other benefits. The liability arising from these plans is being accrued over
 the participants remaining periods of service so that at the expected retirement
 dates, the present value of the annual payments will have been expensed. Due to
 the retirement of an executive officer, the Company expects to record additional
 expense of approximately $1.3 million for the supplemental executive retirement plans
 in the third quarter of 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The following
 table presents the amount of net periodic pension cost for the three months ended
 June 30, 2010 and 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

19




NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| |                                                                                                                        |  |                   |        |                  |      |          |        |      |  | Supplemental |      |                      |  |      |     |  |      |  
| | ---------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------ | ---------------- | ---- | -------- | ------ | ---- |  | ------------ | ---- | -------------------- |  | ---- | --- |  | ---- | -
| |                                                                                                                        |  |                   |        |                  |      |          |        |      |  | Executive    |      | Other Postretirement
| |                                                                                                                        |  | Qualified Pension |        | Retirement Plans |      | Benefits
| |                                                                                                                        |  |                   |        |                  |      |         
| | (In thousands)                                                                                                         |  | 2010              |        |                  | 2009 |          |        | 2010 |  |              | 2009 |                      |  | 2010 |     |  | 2009 |  
| |                                                                                                                       
| | Service cost - benefits earned during the period                                                                       |  | $                 | 853    |                  |      | $        | 809    |      |  | $            | 139  |                      |  | $    | 112 |  |      | $
| | Interest cost
 on projected benefit obligation                                                                         |  |                   | 1,471  |                  |      |          | 1,430  |      |  |              | 173  |                      |  |      | 194 |  |      |  
| | Expected return
 on plan assets                                                                                        |  |                   | (1,693 | )                |      |          | (1,741 | )    |  |              | -    |                      |  |      | -   |  |      |  
| | Amortization:                                                                                                          |  |                   |        |                  |      |          |        |      |  |              |      |                      |  |      |     |  |      |  
| | Transition                                                                                                             |  |                   | -      |                  |      |          | -      |      |  |              | -    |                      |  |      | -   |  |      |  
| | Prior
 service cost                                                                                                    |  |                   | 14     |                  |      |          | 13     |      |  |              | 2    |                      |  |      | 2   |  |      |  
| | Loss
 (gain)                                                                                                           |  |                   | 324    |                  |      |          | 204    |      |  |              | -    |                      |  |      | -   |  |      |  
| |                                                                                                                       
| | Net
 periodic benefit cost                                                                                             |  | $                 | 969    |                  |      | $        | 715    |      |  | $            | 314  |                      |  | $    | 308 |  |      | $
| |                                                                                                                       
| |                                                                                                                        |  |                   |        |                  |      |          |        |      |  |              |      |                      |  |      |     |  |      |  
| | The following table presents the amount of net periodic pension cost for the six
 months ended June 30, 2010 and 2009.

| |                                                  |  |                   |        |                  |      |          |        |      |  | Supplemental |      |                      |  |      |     |  |      |  
| | ------------------------------------------------ |  | ----------------- | ------ | ---------------- | ---- | -------- | ------ | ---- |  | ------------ | ---- | -------------------- |  | ---- | --- |  | ---- | -
| |                                                  |  |                   |        |                  |      |          |        |      |  | Executive    |      | Other Postretirement
| |                                                  |  | Qualified Pension |        | Retirement Plans |      | Benefits
| |                                                  |  |                   |        |                  |      |         
| | (In thousands)                                   |  | 2010              |        |                  | 2009 |          |        | 2010 |  |              | 2009 |                      |  | 2010 |     |  | 2009 |  
| |                                                 
| | Service cost - benefits earned during the period |  | $                 | 1,706  |                  |      | $        | 1,617  |      |  | $            | 278  |                      |  | $    | 225 |  |      | $
| | Interest cost
 on projected benefit obligation   |  |                   | 2,943  |                  |      |          | 2,861  |      |  |              | 346  |                      |  |      | 389 |  |      |  
| | Expected return
 on plan assets                  |  |                   | (3,386 | )                |      |          | (3,482 | )    |  |              | -    |                      |  |      | -   |  |      |  
| | Amortization:                                    |  |                   |        |                  |      |          |        |      |  |              |      |                      |  |      |     |  |      |  
| | Transition                                       |  |                   | -      |                  |      |          | -      |      |  |              | -    |                      |  |      | -   |  |      |  
| | Prior
 service cost                              |  |                   | 27     |                  |      |          | 26     |      |  |              | 3    |                      |  |      | 3   |  |      |  
| | Loss
 (gain)                                     |  |                   | 648    |                  |      |          | 408    |      |  |              | -    |                      |  |      | -   |  |      |  
| |                                                 
| | Net
 periodic benefit cost                       |  | $                 | 1,938  |                  |      | $        | 1,430  |      |  | $            | 627  |                      |  | $    | 617 |  |      | $
| |                                                 

| | In connection
 with its conversion to a state-chartered stock bank, the Company established an
 employee stock ownership plan (ESOP) to provide substantially all employees
 of the Company the opportunity to become stockholders. The ESOP borrowed $109.7
 million of a $112.0 million line of credit from the Company and used the funds to
 purchase 7,454,562 shares of common stock in the open market subsequent to the subscription
 offering. The loan will be repaid principally from the Banks discretionary
 contributions to the ESOP over a remaining period of 24 years. The unallocated ESOP
 shares are pledged as collateral on the loan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | At June
 30, 2010, the loan had an outstanding balance of $96.3 million and an interest rate
 of 4.0%. The Company accounts for its ESOP in accordance with FASB ASC 718-40,
Compensation  Stock Compensation. Under this guidance, unearned ESOP
 shares are not considered outstanding and are shown as a reduction of stockholders equity as unearned compensation. The Company will recognize compensation cost
 equal to the fair value of the ESOP shares during the periods in which they are
 committed to be released. To the extent that the fair value of the Companys
 ESOP shares differs from the cost of such shares, this difference will be credited
 or debited to equity. The Company will receive a tax deduction equal to the cost
 of the shares released to the extent of the principal paydown on the loan by the
 ESOP. As the loan is internally leveraged, the loan receivable from the ESOP to
 the Company is not reported as an asset nor is the debt of the ESOP shown as a liability
 in the Companys financial statements. Dividends on unallocated shares are
 used to pay the ESOP debt. The ESOP compensation expense for the three and six months
 ended June 30, 2010 was approximately $759,000 and $1.5 million. The ESOP compensation
 expense for the three and six months ended June 30, 2009 was approximately $779,000
 and $1.5 million. The amount of loan repayments made by the ESOP is used to reduce
 the unallocated common stock held by the ESOP.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | The ESOP
 shares as of June 30, 2010 were as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

| |                                                                   
| | ------------------------------------------------------------------
| | Shares released for allocation                                    
| | Unreleased
 shares                                                
| |                                                                   
| | Total
 ESOP shares                                                
| |                                                                   
| | Market value
 of unreleased shares at June 30, 2010 (in thousands)

20




NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

|10. | Stock-Based
 Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The Company
 provides compensation benefits to employees and non-employee directors under its
 2005 Long-Term Compensation Plan (the LTCP) which was approved by shareholders.
 The Company accounts for stock-based compensation using the fair value recognition
 provisions of FASB ASC 718, Compensation - Stock Compensation. Pursuant to
 this guidance, the fair value of stock option and restricted stock awards, measured
 at grant date, is amortized to compensation expense on a straight-line basis over
 the vesting period or over the requisite service period for awards expected to vest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The LTCP
 allows for the issuance of up to 11.4 million Options or Stock Appreciation Rights
 and up to 4.6 million Stock Awards or Performance Awards. As of June 30, 2010, a
 mix of stock options, restricted stock and performance-based restricted shares were
 awarded to employees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | Option
 Awards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Options
 awarded to date are for a term of ten years and total approximately 10.0 million
 shares. The majority of these options were awarded on the original award date of
 June 17, 2005 and these 2005 option awards had the following vesting schedule: 40%
 vested at year-end 2005 and 20% vested at year-end 2006, 2007 and 2008, respectively.
 Subsequent awards have vesting periods of either three or four years. The Company
 assumed a 2.9% average forfeiture rate on options granted subsequent to June 17,
 2005 as the majority of the options were awarded to senior level management. Compensation
 expense recorded on options for the three and six months ended June 30, 2010 was $133,000
 and $249,000, respectively, or after tax expense of approximately $86,000 and $160,000,
 respectively. Compensation expense for the three and six months ended June 30, 2009
 was $78,000 and $132,000, respectively, or after tax expense of approximately $50,000
 and $86,000, respectively, was recorded. Under the terms of the LTCP, additional
 awards are likely to be granted, which will increase the amount of expense in future
 periods.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | Options
 to purchase 407,068 shares and 411,130 shares were granted to employees during the
 six months ended June 30, 2010 and June 30, 2009, respectively. Using the Black-Scholes
 option pricing model, the weighted-average grant date fair value was $2.10 and $2.37
 per share for the options which were granted in 2010 and 2009, respectively. The
 weighted-average assumptions for the six months ended June 30, 2010 and 2009 are
 presented in the following table.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

| |                                                                                                           |  | 2010 |       |   | 2009 | 
| | --------------------------------------------------------------------------------------------------------- |  | ---- | ----- | - | ---- | 
| |                                                                                                          
| | Risk-free interest rate                                                                                   |  |      | 2.60  | % |      | 
| | Expected dividend
 yield                                                                                  |  |      | 2.37  | % |      | 
| | Expected volatility                                                                                       |  |      | 19.82 | % |      | 
| | Expected life
 (years)                                                                                    |  |      | 6.25  |   |      | 
| |                                                                                                          
| |                                                                                                           |  |      |       |   |      | 
| | A summary of option activity as of June 30, 2010 and changes during the period ended
 is presented below.

| |                                          |  |        |           |   |       |           |       |             | Weighted- |           |  |  
| | ---------------------------------------- |  | ------ | --------- | - | ----- | --------- | ----- | ----------- | --------- | --------- |  | -
| |                                          |  |        |           |   |       | Weighted- |       | Average     |           | Aggregate
| |                                          |  |        |           |   |       | Average   |       | Remaining   |           | Intrinsic
| |                                          |  |        |           |   |       | Exercise  |       | Contractual |           | Value    
| |                                          |  | Shares |           |   | Price |           | Term  |             | ($000)   
| |                                         
| | Options outstanding at beginning of year |  |        | 7,884,801 |   |       | $         | 14.30 |             |           |           |  |  
| | Granted                                  |  |        | 407,068   |   |       |           | 11.80 |             |           |           |  |  
| | Exercised                                |  |        | -         |   |       |           | -     |             |           |           |  |  
| | Forfeited/cancelled                      |  |        | (22,985   | ) |       |           | 12.94 |             |           |           |  |  
| | Expired                                  |  |        | (566,164  | ) |       |           | 14.39 |             |           |           |  |  
| |                                         
| | Options outstanding
 at June 30, 2010    |  |        | 7,702,720 |   |       | $         | 14.16 |             |           | 5.54      |  | $
| |                                         
| | Options exercisable
 at June 30, 2010    |  |        | 6,829,861 |   |       | $         | 14.38 |             |           | 5.07      |  | $
| |                                         

21




NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| | The following table summarizes the nonvested options during the six months ended
 June 30, 2010.
| | ------------------------------------------------------------------------------------------------
| |                                                                                                 
| |                                                                                                 
| |                                                                                                 
| |                                                                                                 
| |                                                                                                 
| | Nonvested at January 1, 2010                                                                    
| | Granted                                                                                         
| | Vested                                                                                          
| | Forfeited
 / Cancelled                                                                          
| |                                                                                                 
| | Nonvested
 at June 30, 2010                                                                     
| |                                                                                                 

| | Restricted
 Stock and Performance-Based Restricted Stock Awards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | To date,
 approximately 4.0 million shares of restricted stock have been awarded under the
 LTCP. The majority of these shares were awarded in 2005 and these 2005 awards have
 a vesting schedule of 15% per year for six years and 10% in the seventh year. Subsequent
 awards have vesting schedules of three years, four years, or cliff vest after three
 years. During the six months ended June 30, 2010, the Company granted approximately
 252,000 restricted stock awards.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Performance-based
 restricted stock shares were awarded to executive management and other key members
 of senior management during 2010. The vesting for these performance-based awards
 is conditional upon fulfillment of a market condition and on meeting a service period
 requirement. The actual number of performance shares to be earned will be based
 on performance criteria over a three-year performance period which began May 28,
 2010 and ending May 31, 2013. Performance shares vest based on total shareholder
 return (TSR) (defined as share price appreciation from the beginning
 of the performance period to the end of the performance period, plus the total dividends
 paid on the common stock during the period) for the group of banks and thrifts listed
 on the SNL Thrift Index versus the Companys TSR (the TSR Percentage). The performance shares, if earned, will vest on May 31, 2013. A simulation
 model was used to provide a grant date fair value for the performance-based shares.
 Expense for the performance-based awards is recognized based on the probability
 of attaining the performance targets and over the service period similar to the
 recognition of the expense associated with the other restricted stock awards that
 only have a service condition.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Total compensation
 expense for the three months ended June 30, 2010 and 2009 was approximately $1.7
 million and $1.2 million or after tax expense of approximately $1.3 million and $946,000
 million, respectively. For the six months ended June 30, 2010 and 2009, compensation
 expense was $3.2 million and $2.9 million or after tax expense of approximately $2.5
 million and $2.2 million was recorded. The Company anticipates that it will record
 expense of approximately $7.0 million, $5.6 million and $1.5 million and $389,000 in
 calendar years 2010 through 2013, respectively. Under the terms of the LTCP, additional
 awards are likely to be granted, which will increase the amount of expense recognized
 in future periods.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | The following
 table summarizes the nonvested restricted stock and performance-based restricted
 stock awards during the six months ended June 30, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

| |                              |  |        |           |   |            | Weighted-average
| | ---------------------------- |  | ------ | --------- | - | ---------- | ----------------
| |                              |  |        |           |   |            | Grant-Date      
| |                              |  | Shares |           |   | Fair Value
| |                             
| | Nonvested at January 1, 2010 |  |        | 1,225,063 |   |            | $               
| | Granted                      |  |        | 251,795   |   |            |                 
| | Vested                       |  |        | (394,747  | ) |            |                 
| | Forfeited
 / Cancelled       |  |        | (57,643   | ) |            |                 
| |                             
| | Nonvested
 at June 30, 2010  |  |        | 1,024,468 |   |            | $               
| |                             

|11. | Income
 Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | The Company
 has transactions in which the related tax effect was recorded directly to stockholders equity or goodwill instead of operations. Transactions in which the tax effect
 was recorded directly to stockholders equity included the tax effects of unrealized
 gains and losses on available for sale securities and excess tax benefits related
 to stock awards. Deferred taxes charged to goodwill were in connection with prior
 acquisitions. The Company had a net deferred tax asset of $5.4 million and $14.1
 million at June 30, 2010 and December 31, 2009, respectively.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | As of June
 30, 2010 and December 31, 2009, the Company has a valuation allowance of $1.1 million
 and $1.5 million, respectively, for the tax effect of capital loss carryforwards
 associated with realized and unrealized capital losses on capital                                                                                                                                                                                                                                                                                                                                          

22




NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| | assets,
 of which $434,000 and $462,000, respectively, was recorded as an adjustment to other
 comprehensive income and the remainder had an effect on continuing operations.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                              
| | The components
 of income tax expense are summarized as follows:                                                                                                             

| |                                                                                                                                                                                       |  | Three Months Ended |        |   | Six Months Ended
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | - | ----------------
| |                                                                                                                                                                                       |  | June 30,           |        |   | June 30,        
| |                                                                                                                                                                                       |  |                    |        |   |                 
| | (In thousands)                                                                                                                                                                        |  | 2010               |        |   | 2009            
| |                                                                                                                                                                                      
| | Current tax
 expense                                                                                                                                                                  |  |                    |        |   |                 
| | Federal                                                                                                                                                                               |  | $                  | 10,453 |   |                 
| | State                                                                                                                                                                                 |  |                    | 275    |   |                 
| |                                                                                                                                                                                      
| | Total
 current                                                                                                                                                                        |  |                    | 10,728 |   |                 
| |                                                                                                                                                                                      
| | Deferred tax
 expense, net of valuation reserve                                                                                                                                       |  |                    |        |   |                 
| | Federal                                                                                                                                                                               |  |                    | (2,447 | ) |                 
| | State                                                                                                                                                                                 |  |                    | (55    | ) |                 
| |                                                                                                                                                                                      
| | Total
 deferred                                                                                                                                                                       |  |                    | (2,502 | ) |                 
| |                                                                                                                                                                                      
| | Total
 income tax expense                                                                                                                                                             |  | $                  | 8,226  |   |                 
| |                                                                                                                                                                                      
| |                                                                                                                                                                                       |  |                    |        |   |                 
| | The allocation of changes in net deferred tax assets involving items charged to income,
 items charged directly to shareholders equity and items charged to goodwill
 is as follows:

| |                                                                                                                                                                                            |  | Three Months Ended |        | Six Months Ended
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------ | ------ | ----------------
| |                                                                                                                                                                                            |  | June 30,           |        | June 30,        
| |                                                                                                                                                                                            |  |                    |        |                 
| | (In thousands)                                                                                                                                                                             |  | 2010               |        |                 
| |                                                                                                                                                                                           
| | Deferred tax
 asset allocated to:                                                                                                                                                          |  |                    |        |                 
| | Stockholders equity,
 tax effect of net unrealized gain on investment securities available for sale, net of valuation allowance                                                           |  | $                  | 11,270 |                 
| | Reclass
 as a result of adoption of new OTTI accounting pronouncement                                                                                                                      |  |                    |        |                 
| | Income                                                                                                                                                                                     |  |                    | (2,502 | )               
| |                                                                                                                                                                                           
| | Total
 change in deferred tax assets, net                                                                                                                                                  |  | $                  | 8,768  |                 
| |                                                                                                                                                                                           
| |                                                                                                                                                                                            |  |                    |        |                 
| | The Company accounts for uncertainty in income taxes in accordance with FASB ASC
 740-10. A reconciliation of the beginning and ending amount of unrecognized tax
 benefits is as follows:

| |                                              |  | June 30,
| | -------------------------------------------- |  | --------
| | (In thousands)                               |  | 2010    
| |                                             
| | Balance, beginning of period                 |  | $       
| | Additions
 for tax positions of current year |  |         
| | Additions
 for tax positions of prior year   |  |         
| | Reductions
 for tax positions of prior year  |  |         
| |                                             
| | Balance, end
 of period                      |  | $       
| |                                             

|    | Included
 in the balance at June 30, 2010 is $400,000 of tax positions for which the ultimate
 deductibility is highly uncertain and for which the disallowance of the tax position
 would affect the annual effective tax rate. The Company anticipates that $140,000
 of the unrecognized tax benefits will reverse in the next twelve months due to statute
 expirations. The Company recognizes interest and penalties accrued related to unrecognized
 tax benefits as a component of income tax expense. As of June 30, 2010, the Company
 has accrued approximately $420,000 in interest and penalties.                                                                  
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | The Company
 is generally no longer subject to federal, state or local income tax examinations
 by tax authorities for the years before 2006. In the third quarter of 2008, the
 IRS commenced an examination of the 2006 and 2007 tax years for Westbank. As of
 June 30, 2010, the IRS has completed their audit and they have communicated that
 there are no adjustments to Westbanks tax returns for the audited tax years.
 In the second quarter of 2009, the IRS commenced an examination of the 2006 and
 2007 tax years for the Company. As of June 30, 2010, the IRS has not proposed any
 significant adjustments to the Companys tax returns for these tax years.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|12. | Commitments
 and Contingencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | The Company
 is party to financial instruments with off-balance sheet risk in the normal course
 of business to meet the financing needs of its customers. These financial instruments
 consist primarily of commitments to extend credit and standby letters of credit.
 Commitments to extend credit are agreements to lend to customers as long as there
 is no violation of any terms or                                                                                                                                                                                                                                                                                    

23




NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| | covenants
 established in the contract. Commitments generally have fixed expiration dates or
 other termination clauses that may require payment of a fee. The Company monitors
 customer compliance with commitment terms. Since many of the commitments could expire
 without being drawn upon, the total commitment amounts do not necessarily represent
 future cash requirements. These commitments consist principally of unused commercial
 and consumer lines of credit. Standby letters of credit generally are contingent
 upon the failure of the customer to perform according to the terms of an underlying
 contract with a third party. The credit risks associated with commitments to extend
 credit and standby letters of credit are essentially the same as those involved
 with extending loans to customers and are subject to normal credit policies. Collateral
 may be obtained based on managements assessment of the customers creditworthiness.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | The table
 below summarizes the Companys commitments and contingencies discussed above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

| |                                           |  | June 30, |         |  | December 31,
| | ----------------------------------------- |  | -------- | ------- |  | ------------
| | (In thousands)                            |  | 2010     |         |  | 2009        
| |                                          
| | Loan origination commitments              |  | $        | 248,918 |  |             
| | Unadvanced
 portion of construction loans |  |          | 52,401  |  |             
| | Standby letters
 of credit                |  |          | 12,580  |  |             
| | Unadvanced
 portion of lines of credit    |  |          | 679,105 |  |             
| |                                          
| | Total
 commitments                        |  | $        | 993,004 |  |             
| |                                          

|    | Other Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | As of June
 30, 2010 and December 31, 2009, the Company was contractually committed under limited
 partnership agreements to make additional partnership investments of approximately $1.4
 million which constitutes the Companys maximum potential obligation to these
 partnerships. The Company is obligated to make additional investments in response
 to formal written requests, rather than a funding schedule. Funding requests are
 submitted when the partnerships plan to make additional investments.                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Legal Proceedings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | We are
 not involved in any pending legal proceedings other than routine legal proceedings
 occurring in the ordinary course of business. We believe that those routine proceedings
 involve, in the aggregate, amounts which are immaterial to the financial condition
 and results of operations of NewAlliance Bancshares, Inc.                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|13. | Fair Value
 Measurements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Fair value
 estimates are made as of a specific point in time based on the characteristics of
 the financial instruments and relevant market information. In accordance with FASB
 ASC 820, the fair value estimates are measured within the fair value hierarchy.
 The hierarchy gives the highest priority to unadjusted quoted prices in active markets
 for identical assets or liabilities (level 1 measurements) and the lowest priority
 to unobservable inputs (level 3 measurements). The three levels of the fair value
 hierarchy are described below:

| |         |  | Basis of
 Fair Value Measurement                                                                                                                                               
| | ------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |         |  |                                                                                                                                                                                
| | Level 1 |  | Unadjusted
 quoted prices in active markets that are accessible at the measurement date for
 identical, unrestricted assets or liabilities;                                    
| |         |  |                                                                                                                                                                                
| | Level 2 |  | Quoted
 prices in markets that are not active, or inputs that are observable either directly
 or indirectly, for substantially the full term of the asset or liability;        
| |         |  |                                                                                                                                                                                
| | Level 3 |  | Prices
 or valuation techniques that require inputs that are both significant to the fair
 value measurement and unobservable (i.e. supported by little or no market activity).

| | When available,
 quoted market prices are used. In other cases, fair values are based on estimates
 using present value or other valuation techniques. These techniques involve uncertainties
 and are significantly affected by the assumptions used and judgments made regarding
 risk characteristics of various financial instruments, discount rates, estimates
 of future cash flows, future expected loss experience and other factors. Changes
 in assumptions could significantly affect these estimates. Derived fair value estimates
 cannot be substantiated by comparison to independent markets and, in certain cases,
 could not be realized in an immediate sale of the instrument.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | Fair value
 estimates are based on existing financial instruments without attempting to estimate
 the value of anticipated future business and the value of assets and liabilities
 that are not financial instruments. Accordingly, the aggregate fair value amounts
 presented do not purport to represent the underlying market value of the Company.                                                                                                                                                                                                                                                                                                                                           

24




NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| | Fair Value Option                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | FASB ASC
 825-10 allows for the irrevocable option to elect fair value accounting for the
 initial and subsequent measurement for certain financial assets and liabilities
 on a contract-by-contract basis that may otherwise not be required to be measured
 at fair value under other accounting standards. The Company elected the fair value
 option as of January 1, 2009 for its portfolio of mortgage loans held for sale pursuant
 to forward loan sale commitments originated after January 1, 2009 in order to reduce
 certain timing differences and better match changes in fair values of the loans
 with changes in the value of the derivative forward loan sale contracts used to
 economically hedge them. In the first quarter of 2009 as a result of the surge of
 refinances resulting from the drop in mortgage rates within the industry, the balance
 of loans held for sale and derivative contracts relating to those loans increased
 significantly. Mortgage loan activity has slowed from 2009 levels, however, it is
 still strong thus far in 2010. The fair value option election relating to mortgage
 loans held for sale did not result in a transition adjustment to retained earnings
 and instead changes in the fair value have an impact on earnings as a component
 of noninterest income.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | At June
 30, 2010, mortgage loans held for sale pursuant to forward loan sale commitments
 had a fair value of $11.7 million, which includes a positive fair value adjustment
 of $132,000. For the three and six months ended June 30, 2010, gains from fair value
 changes of $182,000 and $353,000, respectively, and for the three and six months ended
 June 30, 2009, losses from fair value changes of $712,000 and $581,000, respectively
 were recorded in non-interest income as mortgage origination activity and loan sale
 income.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | Assets
 and Liabilities Measured at Fair Value on a Recurring Basis                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The following
 table details the financial instruments carried at fair value on a recurring basis
 as of June 30, 2010 and December 31, 2009 and indicates the fair value hierarchy
 of the valuation techniques utilized by the Company to determine the fair value.
 There were no transfers in and out of Level 1 and Level 2 measurements during the
 quarter ended June 30, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

| |                                         |  | June 30, 2010
| | --------------------------------------- |  | -------------
| |                                         |  |              
| |                                         |  |              
| |                                         |  |              
| |                                         |  |              
| |                                         |  |              
| | (In thousands)                          |  | Total        
| |                                        
| | Securities
 Available for Sale          |  |              
| | Marketable equity securities            |  | $            
| | Bonds
 and obligations                  |  |              
| | Auction
 rate certificates              |  |              
| | Trust
 preferred equity securities      |  |              
| | Residential
 mortgage-backed securities |  |              
| |                                        
| | Total Securities
 Available for Sale    |  | $            
| |                                        
| | Mortgage Loans
 Held for Sale           |  |              
| | Mortgage Loan
 Derivative Assets        |  |              
| | Mortgage Loan
 Derivative Liabilities   |  |              
| |                                        

| |                                         |  | December 31, 2009
| | --------------------------------------- |  | -----------------
| |                                         |  |                  
| |                                         |  |                  
| |                                         |  |                  
| |                                         |  |                  
| |                                         |  |                  
| | (In thousands)                          |  | Total            
| |                                        
| | Securities Available for Sale           |  |                  
| | Marketable equity securities            |  | $                
| | Bonds
 and obligations                  |  |                  
| | Auction
 rate certificates              |  |                  
| | Trust
 preferred equity securities      |  |                  
| | Residential
 mortgage-backed securities |  |                  
| |                                        
| | Total Securities
 Available for Sale    |  | $                
| |                                        
| | Mortgage Loans
 Held for Sale           |  |                  
| | Mortgage Loan
 Derivative Assets        |  |                  
| | Mortgage Loan
 Derivative Liabilities   |  |                  
| |                                        

25




NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| | The following
 table presents additional information about assets measured at fair value on a recurring
 basis for which the Company utilized Level 3 inputs to determine fair value.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                                |  | Securities Available for Sale
| | ---------------------------------------------- |  | -----------------------------
| |                                                |  |                              
| |                                                |  | For the three months ended   
| |                                                |  | June 30,                     
| |                                                |  |                              
| | (In thousands)                                 |  | 2010                         
| |                                               
| | Balance at beginning of period                 |  | $                            
| | Transfer
 into Level 3                         |  |                              
| | Total
 gains (losses) - (realized/unrealized): |  |                              
| | Included
 in earnings                          |  |                              
| | Included
 in other comprehensive income        |  |                              
| | Settlements                                    |  |                              
| | Discount
 accretion                            |  |                              
| | Principal
 payments                            |  |                              
| |                                               
| | Balance at
 end of period                      |  | $                            
| |                                               

| | The following
 is a description of the valuation methodologies used for instruments measured at
 fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Securities
 Available for Sale: Included in the available for sale category are both debt
 and equity securities. The Company utilizes Interactive Data Corp., a third-party,
 nationally-recognized pricing service (IDC) to estimate fair value measurements
 for 99.2% of this portfolio. The pricing service evaluates each asset class based
 on relevant market information considering observable data that may include dealer
 quotes, reported trades, market spreads, cash flows, the U.S. Treasury yield curve,
 the LIBOR swap yield curve, trade execution data, market prepayment speeds, credit
 information and the bonds terms and conditions, among other things, but these
 prices are not binding quotes. The fair value prices on all investment securities
 are reviewed for reasonableness by management through an extensive process. This
 review process was implemented to determine any unusual market price fluctuations
 and the analysis includes changes in the LIBOR / swap curve, the treasury curve,
 mortgage rates and credit spreads as well as a review of the securities inventory
 list which details issuer name, coupon and maturity date. The review resulted in
 no adjustments to the IDC pricing as of June 30, 2010. Also, management assessed
 the valuation techniques used by IDC based on a review of their pricing methodology
 to ensure proper hierarchy classifications. The Companys Level 3 available
 for sale debt securities include auction rate certificates, a pooled trust preferred
 security and an individual named trust preferred security which were valued through
 means other than quoted market prices due to the fact that these securities were
 not priced by the pricing service. The fair value for these securities are based
 on Level 3 inputs in accordance with FASB ASC 820.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | The major
 categories of securities available for sale are:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| |  |  | Marketable
 Equity Securities: Included within this category are exchange-traded securities,
 including common and preferred equity securities, measured at fair value based on
 quoted prices for identical securities in active markets and therefore meet the
 Level 1 criteria. Also included are auction rate preferred securities rated AAA,
 which are priced at par and are classified as Level 2 of the valuation hierarchy.                                                                                                                                                                                                                                                                                                                      
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |  | Bonds
 and obligations: Included within this category are highly liquid government
 obligations and government agency obligations that are measured at fair value based
 on quoted prices for identical securities in active markets and therefore are classified
 within Level 1 of the fair value hierarchy. Also included in this category are municipal
 obligations, corporate obligations and a mortgage mutual fund where the fair values
 are estimated by using pricing models (i.e. matrix pricing) with observable market
 inputs including recent transactions and/or benchmark yields or quoted prices of
 securities with similar characteristics and are therefore classified within Level
 2 of the valuation hierarchy.                   
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |  | Auction
 Rate Certificates: The Company owns auction rate certificates which are pools
 of government guaranteed student loans issued by state student loan departments.
 Due to the lack of liquidity in the auction rate market, the Company had been obtaining
 a price from the market maker that factored in credit risk and liquidity premiums
 to determine a current fair value market price. At June 30, 2010, these securities
 were priced at par as the Company tendered its three remaining positions to the
 underwriter at par as part of their 2008 settlement agreement. The auction rate
 certificates fall into the classification of Level 3 within the fair value hierarchy.
 These securities were not priced by the pricing service.

26




NewAlliance
 Bancshares, Inc.Notes to Unaudited Consolidated Financial
 Statements



---

| |  |  | Trust preferred
 equity securities: Included in this category are two pooled trust preferred securities
 and individual name trust preferred securities of financial companies.
 One of the pooled trust preferred securities of $2.8 million and an individual name
 trust preferred security of $3.7 million are not priced by IDC, both of which are
 classified within Level 3 of the valuation hierarchy. The remaining securities are
 at Level 2 and are priced by IDC based upon matrix pricing factoring in observable
 benchmark yields and issuer spreads. The Company calculates the fair value of the
 Level 3 pooled trust preferred security based on a cash flow methodology that uses
 the Bloomberg A rated bank yield curve to discount the current expected cash flows.
 In order to derive the fair value of the individual name security, the Company uses
 the Bloomberg A rated insurance yield curve to discount the current expected cash
 flows. Additionally, the low level of the three month LIBOR rate, the general widening
 of credit spreads compared to when these securities were purchased and the reduced
 level of liquidity in the fixed income markets, were all factors in the determination
 of the current fair value market price.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |  | Mortgage-Backed
 Securities: The Company owns residential mortgage-backed securities. As there are
 no quoted market prices available, the fair values of mortgage backed securities
 are based upon matrix pricing factoring in observable benchmark yields and issuer
 spreads and are therefore classified within Level 2 of the valuation hierarchy.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| | Mortgage
 Loans Held for Sale: Fair values were estimated utilizing quoted prices for
 similar assets in active markets. Any change in the valuation of mortgage loans
 held for sale is based upon the change in market interest rates between closing
 the loan and the measurement date. As the loans are sold in the secondary market,
 the market prices are obtained from Freddie Mac and represent a delivery price which
 reflects the underlying price Freddie Mac would pay the Company for an immediate
 sale on these mortgages.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Derivatives: Derivative instruments related to loans held for sale are carried at fair value.
 Fair value is determined through quotes obtained from actively traded mortgage markets.
 Any change in fair value for rate lock commitments to the borrower is based upon
 the change in market interest rates between making the rate lock commitment and
 the measurement date and, for forward loan sale commitments to the investor, is
 based upon the change in market interest rates from entering into the forward loan
 sales contract and the measurement date. Both the rate lock commitments to the borrowers
 and the forward loan sale commitments to investors are derivatives pursuant to the
 requirements of FASB ASC 815-10, however, the Company has not designated them as
 hedging instruments. Accordingly, they are marked to fair value through earnings.
 At June 30, 2010, the effects of fair value measurements for interest rate lock
 commitment derivatives and forward loan sale commitments were as follows (mortgage
 loans held for sale are shown for informational purposes only):

| |                               |  | June 30, 2010
| | ----------------------------- |  | -------------
| |                               |  |              
| |                               |  | Notional or  
| |                               |  | Principal    
| | (In thousands)                |  | Amount       
| |                              
| | Rate Lock Commitments         |  | $            
| | Forward Sales
 Commitments    |  |              
| | Mortgage Loans
 Held for Sale |  |              
| |                              

| | The Company
 sells the majority of its fixed rate mortgage loans with original terms of 15 years
 or more on a servicing released basis and receives a servicing released premium
 upon sale. The servicing value has been included in the pricing of the rate lock
 commitments and loans held for sale. The Company estimates a fallout rate of approximately
 13% based upon historical averages in determining the fair value of rate lock commitments.
 Although the use of historical averages is based upon unobservable data, the Company
 believes that this input is insignificant to the valuation and, therefore, has concluded
 that the fair value measurements meet the Level 2 criteria. The collection of upfront
 fees from the borrower is the driver of the Companys low fallout rate. If
 this practice were to change, the fallout rate would most likely increase and the
 Company would reassess the significance of the fallout rate on the fair value measurement.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | Assets
 and Liabilities Measured at Fair Value on a Nonrecurring BasisThe following
 tables detail the financial instruments carried at fair value on a nonrecurring
 basis as of June 30, 2010 and December 31, 2009 and indicate the fair value hierarchy
 of the valuation techniques utilized by the Company to determine the fair value:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

27




NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| |                          |  | June 30, 2010
| | ------------------------ |  | -------------
| |                          |  |              
| |                          |  |              
| |                          |  |              
| |                          |  |              
| |                          |  |              
| | (In thousands)           |  | Total        
| |                         
| | Loan Servicing Rights    |  | $            
| | Other Real
 Estate Owned |  |              
| | Impaired Loans           |  |              
| |                         

| |                          |  | December 31, 2009
| | ------------------------ |  | -----------------
| |                          |  |                  
| |                          |  |                  
| |                          |  |                  
| |                          |  |                  
| |                          |  |                  
| | (In thousands)           |  | Total            
| |                         
| | Loan Servicing Rights    |  | $                
| | Other Real
 Estate Owned |  |                  
| | Impaired Loans           |  |                  
| |                         

| | The following
 is a description of the valuation methodologies used for instruments measured at
 fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Loan
 Servicing Rights: A loan servicing right asset represents the amount by which
 the present value of the estimated future net cash flows to be received from servicing
 loans are expected to more than adequately compensate the Company for performing
 the servicing. The fair value of servicing rights is estimated using a present value
 cash flow model. The most important assumptions used in the valuation model are
 the anticipated rate of the loan prepayments and discount rates. Adjustments are
 only recorded when the discounted cash flows derived from the valuation model are
 less than the carrying value of the asset. As such, measurement at fair value is
 on a nonrecurring basis. Although some assumptions in determining fair value are
 based on standards used by market participants, some are based on unobservable inputs
 and therefore are classified in Level 3 of the valuation hierarchy.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Other
 Real Estate Owned: The Company classifies property acquired through foreclosure
 or acceptance of deed-in-lieu of foreclosure as other real estate owned in its financial
 statements. Upon foreclosure, the property securing the loan is written down to
 fair value. The writedown is based upon differences between the appraised value
 and the book value. Appraisals are based upon observable market data such as comparable
 sale within the real estate market, however assumptions made in determining comparability
 are unobservable and therefore these assets are classified as Level 3 within the
 valuation hierarchy.                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Impaired
 Loans: Impaired loans are measured based on the present value of expected future
 cash flows discounted at the loans original effective interest rate, at the
 loans observable market price or the fair value of the collateral if the loan
 is collateral dependent. Consequently, measurement at fair value is on a nonrecurring
 basis. These loans are written down through a valuation allowance within the Banks total loan loss reserve allowance. The fair value of these assets are classified
 within Level 3 of the valuation hierarchy and are estimated based on collateral
 values supported by appraisals.                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Disclosures
 about Fair Value of Financial InstrumentsThe following methods and assumptions
 were used by management to estimate the fair value of each class of financial instruments
 for which it is practicable to estimate that value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Cash
 and cash equivalents: Carrying value is assumed to represent fair value for
 cash and due from banks and short-term investments, which have original maturities
 of 90 days or less.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Investment
 securities: Refer to the above discussion on securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Federal
 Home Loan Bank of Boston stock: FHLB Boston stock is a non-marketable equity
 security which is assumed to have a fair value equal to its carrying value due to
 the fact that it can only be redeemed back to the FHLB Boston at par value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Loans
 held for sale: The fair value of residential mortgage loans held for sale is
 estimated using quoted market prices provided by government-sponsored entities as
 described above. The fair value of SBA loans is estimated using quoted market prices
 from a secondary market broker.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

28




NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| | Accrued
 income receivable: Carrying value is assumed to represent fair value.                                                                                                                                                                                                                                                                                                                                                                 
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Loans: The fair value of the net loan portfolio is determined by discounting the estimated
 future cash flows using the prevailing interest rates and appropriate credit and
 prepayment risk adjustments as of period-end at which similar loans would be made
 to borrowers with similar credit ratings and for the same remaining maturities.
 The fair value of nonperforming loans is estimated using the Banks prior credit
 experience.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Derivative
 Assets: Refer to the above discussion on derivatives.                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Deposits: The fair value of demand, non-interest bearing checking, savings and certain
 money market deposits is determined as the amount payable on demand at the reporting
 date. The fair value of time deposits is estimated by discounting the estimated
 future cash flows using rates offered for deposits of similar remaining maturities
 as of period-end.                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Borrowed
 Funds: The fair value of borrowed funds is estimated by discounting the future
 cash flows using market rates for similar borrowings.                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Derivative
 Liabilities: Refer to the above discussion on derivatives.                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The following
 are the carrying amounts and estimated fair values of the Companys financial
 assets and liabilities as of June 30, 2010 and December 31, 2009:                                                                                                                                                                                                                                                                                

| |                                                                                |  | June 30, 2010 |           | December 31, 2009
| | ------------------------------------------------------------------------------ |  | ------------- | --------- | -----------------
| |                                                                                |  |              
| |                                                                                |  | Carrying      |           |                  
| | (In thousands)                                                                 |  | Amounts       |           |                  
| |                                                                               
| | Financial
 Assets                                                              |  |               |           |                  
| | Cash and due from banks                                                        |  | $             | 97,693    |                  
| | Short-term
 investments                                                        |  |               | 20,000    |                  
| | Investment
 securities                                                         |  |               | 2,726,572 |                  
| | Loans
 held for sale                                                           |  |               | 13,362    |                  
| | Loans,
 net                                                                    |  |               | 4,873,426 |                  
| | Federal
 Home Loan Bank of Boston stock                                        |  |               | 120,821   |                  
| | Accrued
 income receivable                                                     |  |               | 32,106    |                  
| | Derivative
 assets                                                             |  |               | 601       |                  
| | Financial
 Liabilities                                                         |  |               |           |                  
| | Interest
 and non-interest bearing checking, savings and money market accounts |  | $             | 3,688,874 |                  
| | Time
 deposits                                                                 |  |               | 1,447,872 |                  
| | Borrowed
 funds                                                                |  |               | 2,023,732 |                  
| | Derivative
 liabilities                                                        |  |               | 504       |                  
| |                                                                               

|14. | Derivative Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The Company
 accounts for derivatives in accordance with FASB ASC 815, Derivatives and Hedging,
 which requires that all derivative instruments be recorded on the consolidated
 balance sheets at their fair values. The Company does not enter into derivative
 transactions for speculative purposes, does not have any derivatives designated
 as hedging instruments, nor is party to a master netting agreement as of June 30,
 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | Loan
 Commitments and Forward Loan Sale Commitments: The Company enters into interest
 rate lock commitments with borrowers, to finance residential mortgage loans. Primarily
 to mitigate the interest rate risk on these commitments, the Company also enters
 into mandatory and best effort forward loan sale delivery
 commitments with investors. The interest rate lock commitments and the forward loan
 delivery commitments meet the definition of a derivative, however, the Company has
 not designated them as hedging instruments. Upon closing the loan, the loan commitment
 expires and the Company records a loan held for sale subject to the same forward
 loan sale commitment. Prior to January 1, 2009, the Company accounted for loans
 held for sale at the lower of cost or fair value in accordance with accounting guidance
 for certain mortgage banking activities. Fluctuations in the fair value of loan
 commitments, loans held for sale, and forward loan sale commitments generally move
 in opposite directions, and the net impact of the changes in these valuations on
 net income is generally inconsequential to the financial statements.

29




NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| | The following
 table summarizes the Companys derivative positions at June 30.
| | ------------------------------------------------------------------------------

| |                                |  | 2010        |        | 2009
| | ------------------------------ |  | ----------- | ------ | ----
| |                                |  |             |        |     
| |                                |  | Notional or |        |     
| |                                |  | Principal   |        |     
| | (In thousands)                 |  | Amount      |        |     
| |                               
| | Interest Rate Lock Commitments |  | $           | 36,212 |     
| | Forward Sales
 Commitments     |  |             | 45,214 |     
| |                               

| | (1) An immaterial
 portion of these amounts was attributable to changes in instrument-specific credit
 risk.                           
| | ---------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                        
| | The following
 two tables present the fair values of the Companys derivative instruments
 and their effect on the Statement of Income:
| |                                                                                                                                        
| | Fair Values
 of Derivative Instruments                                                                                                 

| |                                                          |  |               |  |  | Asset Derivatives |            |  |  |   |              | Liability Derivatives
| | -------------------------------------------------------- |  | ------------- |  |  | ----------------- | ---------- |  |  | - | ------------ | ---------------------
| |                                                          |  |               |  |  |                   |            |  |  |   |              |                      
| |                                                          |  |               |  |  |                   | June 30,   |  |  |   | December 31, |                      
| |                                                          |  |               |  |  |                   | 2010       |  |  |   | 2009         |                      
| |                                                          |  | Balance Sheet |  |  |                   |            |  |  |   |              |                      
| | (In thousands)                                           |  | Location      |  |  |                   | Fair Value |  |  |   | Fair Value   |                      
| |                                                         
| | Derivatives not designated as hedging instruments        |  |               |  |  |                   |            |  |  |   |              |                      
| | Interest rate contracts                                  |  | Other Assets  |  |  | $                 | 601        |  |  | $ | 495          |                      
| |                                                         
| | Total derivatives
 not designated as hedging instruments |  |               |  |  | $                 | 601        |  |  | $ | 495          |                      
| |                                                         

| | Effect
 of Derivative Instruments on the Statement of Income |  |                                        |  |  |                          |      |                          |      |   |     |      |  |   |      |   |  |   |      
| | ------------------------------------------------------------ |  | -------------------------------------- |  |  | ------------------------ | ---- | ------------------------ | ---- | - | --- | ---- |  | - | ---- | - |  | - | -----
| |                                                              |  |                                        |  |  | For the Three            |      | For the Six             
| |                                                              |  |                                        |  |  | Months Ended             |      | Months Ended            
| |                                                              |  |                                        |  |  | June 30,                 |      | June 30,                
| |                                                              |  |                                        |  |  |                          |      |                         
| |                                                              |  |                                        |  |  | 2010                     |      |                          | 2009 |   |     | 2010 |  |   | 2009
| |                                                              |  |                                        |  |  |                          |      |                          |      |   |     |      |  |   |     
| |                                                              |  |                                        |  |  | Amount of Gain or (Loss) |      | Amount of Gain or (Loss)
| |                                                              |  | Location
 of Gain or (Loss) Recognized |  |  | Recognized in Income on  |      | Recognized in Income on 
| | (In thousands)                                               |  | in Income
 on Derivatives              |  |  | Derivatives              |      | Derivatives             
| |                                                             
| | Derivatives
 not designated as hedging instruments           |  |                                        |  |  |                          |      |                          |      |   |     |      |  |   |      |   |  |   |      
| | Interest rate contracts                                      |  | Non-interest income                    |  |  | $                        | (130 | )                        |      | $ | 807 |      |  | $ | (323 | ) |  | $ | 1,107
| |                                                             
| | Total derivatives
 not designated as hedging
 instruments    |  |                                        |  |  | $                        | (130 | )                        |      | $ | 807 |      |  | $ | (323 | ) |  | $ | 1,107
| |                                                             

|15. | Stockholders Equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | At June
 30, 2010 and December 31, 2009, stockholders equity amounted to $1.46 billion
 and $1.43 billion, respectively, representing 16.8% and 17.0% of total assets, respectively.
 The Company paid cash dividends totaling $0.14 per share on common stock during the
 six months ended June 30, 2010.                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Dividends                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The Company
 and the Bank are subject to dividend restrictions imposed by various regulators.
 Connecticut banking laws limit the amount of annual dividends that the Bank may
 pay to the Company to an amount that approximates the Banks net income retained
 for the current year plus net income retained for the two previous years. In addition,
 the Bank may not declare or pay dividends on, and the Company may not repurchase
 any of its shares of its common stock if the effect thereof would cause stockholders equity to be reduced below applicable regulatory capital maintenance requirements
 or if such declaration, payment or repurchase would otherwise violate regulatory
 requirements.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Treasury
 Shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Share Repurchase
 PlanOn January 31, 2006, the Companys Board of Directors authorized a repurchase
 plan of up to an additional 10.0 million shares or approximately 10% of the then
 outstanding Company common stock. Under this plan the Company has repurchased 8,578,062
 million shares of common stock at a weighted average price of $12.80 per share as
 of June 30, 2010. During 2010, there were approximately 882,000 shares repurchased.
 There is no set expiration date for this repurchase plan.                                                                                                                                                                                                   

30




NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| | Other                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Upon vesting
 of shares under the Companys benefit plans, plan participants may choose to
 have the Company withhold a number of shares necessary to satisfy tax withholding
 requirements. The withheld shares are classified as treasury shares by the Company.
 For the six months ended June 30, 2010, approximately 89,000 shares were returned
 to the Company for this purpose.                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Regulatory
 Capital                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Capital
 guidelines of the Federal Reserve Board and the Federal Deposit Insurance Corporation
 (FDIC) require the Company and its banking subsidiary to maintain certain
 minimum ratios, as set forth below. At June 30, 2010, the Company and the Bank were
 deemed to be well capitalized under the regulations of the Federal Reserve
 Board and the FDIC, respectively, and in compliance with the applicable capital
 requirements.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | The following
 table provides information on the capital ratios.                                                                                                                                                                                                                                                                                                                                                                              

| |                                           |  |        |         |          |  |                   |      |        |  |             |         |                   |  |        |     |   |  | To Be Well
| | ----------------------------------------- |  | ------ | ------- | -------- |  | ----------------- | ---- | ------ |  | ----------- | ------- | ----------------- |  | ------ | --- | - |  | ----------
| |                                           |  |        |         |          |  |                   |      |        |  | For Capital |         | Capitalized Under
| |                                           |  |        |         |          |  |                   |      |        |  | Adequacy    |         | Prompt Corrective
| |                                           |  | Actual |         | Purposes |  | Action Provisions
| |                                           |  |        |         |          |  |                  
| | (Dollars in
 thousands)                   |  | Amount |         |          |  | Ratio             |      | Amount |  |             |         | Ratio             |  | Amount |     |   |  | Ratio     
| |                                          
| | NewAlliance
 Bank                         |  |        |         |          |  |                   |      |        |  |             |         |                   |  |        |     |   |  |           
| | June
 30, 2010                            |  |        |         |          |  |                   |      |        |  |             |         |                   |  |        |     |   |  |           
| | Tier 1 Capital (to Average Assets)        |  | $      | 775,050 |          |  |                   | 9.7  | %      |  | $           | 320,203 |                   |  |        | 4.0 | % |  | $         
| | Tier
 1 Capital (to Risk Weighted Assets) |  |        | 775,050 |          |  |                   | 17.3 |        |  |             | 179,064 |                   |  |        | 4.0 |   |  |           
| | Total
 Capital (to Risk Weighted Assets)  |  |        | 830,084 |          |  |                   | 18.5 |        |  |             | 358,128 |                   |  |        | 8.0 |   |  |           
| |                                           |  |        |         |          |  |                   |      |        |  |             |         |                   |  |        |     |   |  |           
| | December
 31, 2009                        |  |        |         |          |  |                   |      |        |  |             |         |                   |  |        |     |   |  |           
| | Tier
 1 Capital (to Average Assets)       |  | $      | 734,951 |          |  |                   | 9.3  | %      |  | $           | 317,623 |                   |  |        | 4.0 | % |  | $         
| | Tier
 1 Capital (to Risk Weighted Assets) |  |        | 734,951 |          |  |                   | 16.7 |        |  |             | 176,043 |                   |  |        | 4.0 |   |  |           
| | Total
 Capital (to Risk Weighted Assets)  |  |        | 787,510 |          |  |                   | 17.9 |        |  |             | 352,085 |                   |  |        | 8.0 |   |  |           
| |                                           |  |        |         |          |  |                   |      |        |  |             |         |                   |  |        |     |   |  |           
| | NewAlliance
 Bancshares, Inc.             |  |        |         |          |  |                   |      |        |  |             |         |                   |  |        |     |   |  |           
| | June
 30, 2010                            |  |        |         |          |  |                   |      |        |  |             |         |                   |  |        |     |   |  |           
| | Tier
 1 Capital (to Average Assets)       |  | $      | 895,079 |          |  |                   | 11.2 | %      |  | $           | 320,554 |                   |  |        | 4.0 | % |  | $         
| | Tier
 1 Capital (to Risk Weighted Assets) |  |        | 895,079 |          |  |                   | 20.0 |        |  |             | 179,375 |                   |  |        | 4.0 |   |  |           
| | Total
 Capital (to Risk Weighted Assets)  |  |        | 950,113 |          |  |                   | 21.2 |        |  |             | 358,750 |                   |  |        | 8.0 |   |  |           
| |                                           |  |        |         |          |  |                   |      |        |  |             |         |                   |  |        |     |   |  |           
| | December
 31, 2009                        |  |        |         |          |  |                   |      |        |  |             |         |                   |  |        |     |   |  |           
| | Tier
 1 Capital (to Average Assets)       |  | $      | 878,553 |          |  |                   | 11.1 | %      |  | $           | 318,072 |                   |  |        | 4.0 | % |  | $         
| | Tier
 1 Capital (to Risk Weighted Assets) |  |        | 878,553 |          |  |                   | 19.9 |        |  |             | 176,422 |                   |  |        | 4.0 |   |  |           
| | Total
 Capital (to Risk Weighted Assets)  |  |        | 931,113 |          |  |                   | 21.1 |        |  |             | 352,844 |                   |  |        | 8.0 |   |  |           
| |                                          

|16. | Other Comprehensive
 Income                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                   
|    | The following
 table presents the components of other comprehensive income and the related tax
 effects for the periods presented:

| |                                                                                                   |  | Three Months Ended |         | Six Months Ended
| | ------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | ----------------
| |                                                                                                   |  | June 30,           |         | June 30,        
| |                                                                                                   |  |                    |         |                 
| | (In thousands)                                                                                    |  | 2010               |         |                 
| |                                                                                                  
| | Net income                                                                                        |  | $                  | 16,273  |                 
| | Other comprehensive
 income, before tax                                                           |  |                    |         |                 
| | Unrealized
 gains on securities                                                                   |  |                    |         |                 
| | Unrealized
 holding gains, arising during the period                                              |  |                    | 31,446  |                 
| | Reclassification
 adjustment for gains, included in net income                                    |  |                    | (198    | )               
| | Non-credit
 unrealized loss on other-than-temporarily impaired debt securities                    |  |                    | -       |                 
| | Credit
 related other than temporary realized loss transferred out of other comprehensive
 income |  |                    | 522     |                 
| |                                                                                                  
| | Other comprehensive
 income, before tax                                                           |  |                    | 31,770  |                 
| | Income tax
 expense, net of valuation allowance                                                   |  |                    | (11,270 | )               
| |                                                                                                  
| | Other comprehensive
 income, net of tax                                                           |  |                    | 20,500  |                 
| |                                                                                                  
| | Comprehensive
 income                                                                             |  | $                  | 36,773  |                 
| |                                                                                                  

31




NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

|17. | Earnings
 Per Share                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------
|    |                                                                                                                  
|    | The following
 table includes the calculation of basic and diluted earnings per share for the periods
 presented:

| |                                                               |  |                    |        |                  |      |   |        |      |  |   |        |  |  |   |        | 
| | ------------------------------------------------------------- |  | ------------------ | ------ | ---------------- | ---- | - | ------ | ---- |  | - | ------ |  |  | - | ------ | 
| |                                                               |  | Three Months Ended |        | Six Months Ended
| |                                                               |  | June 30,           |        | June 30,        
| |                                                               |  |                    |        |                 
| | (In thousands,
 except per share data)                        |  | 2010               |        |                  | 2009 |   |        | 2010 |  |   | 2009   | 
| |                                                              
| | Net income                                                    |  | $                  | 16,273 |                  |      | $ | 10,108 |      |  | $ | 32,706 |  |  | $ | 21,698 | 
| | Average common
 shares outstanding for basic EPS              |  |                    | 98,781 |                  |      |   | 99,278 |      |  |   | 98,900 |  |  |   | 99,266 | 
| | Effect of
 dilutive stock options and unvested stock awards   |  |                    | 79     |                  |      |   | 33     |      |  |   | 37     |  |  |   | 44     | 
| |                                                              
| | Average common
 and common-equivalent shares for dilutive EPS |  |                    | 98,860 |                  |      |   | 99,311 |      |  |   | 98,937 |  |  |   | 99,310 | 
| | Net income
 per common share:                                 |  |                    |        |                  |      |   |        |      |  |   |        |  |  |   |        | 
| | Basic                                                         |  | $                  | 0.16   |                  |      | $ | 0.10   |      |  | $ | 0.33   |  |  | $ | 0.22   | 
| | Diluted                                                       |  |                    | 0.16   |                  |      |   | 0.10   |      |  |   | 0.33   |  |  |   | 0.22   | 
| |                                                              

32




|Forward-Looking Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|This report
 may contain certain forward-looking statements as that term is defined in the U.S.
 federal securities laws.                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Forward-looking
 statements are based on certain assumptions and describe future plans, strategies,
 and expectations of management and are generally identified by use of the word plan, believe, expect, intend, anticipate, estimate, project, or similar expressions. Managements ability to predict results or the actual effects of its plans or strategies
 is inherently uncertain. Accordingly, actual results may differ materially from
 anticipated results.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Factors
 that could have a material adverse effect on the operations of NewAlliance Bancshares,
 Inc. (NewAlliance or the Company) and its subsidiaries include,
 but are not limited to:                                                                                                                                                                                                                                                                                          

| |  | Changes
 in the interest rate environment may reduce the net interest margin and/or the volumes
 and values of loans made or held as well as the value of other financial assets
 held;                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | General
 economic or business conditions, either nationally or regionally, may be less favorable
 than expected, resulting in, among other things, a deterioration in credit quality
 and/or a reduced demand for credit or other services;
| |  | Adverse
 changes may occur in the securities markets impacting the value of NewAlliances
 investments;                                                                                                                                    
| |  | Competitive
 pressures among depository and other financial institutions may increase significantly
 and may decrease the profit margin associated with its business;                                                                      
| |  | Recent
 government initiatives including the Dodd-Frank Wall Street Reform and Consumer
 Protection Act is expected to have an effect on the financial services industry;                                                                  
| |  | Other legislative
 or regulatory changes, changes in accounting standards and FDIC initiatives, may
 adversely affect the businesses in which NewAlliance is engaged;                                                                      
| |  | Local,
 state or federal taxing authorities may take tax positions that are adverse to NewAlliance;                                                                                                                                        
| |  | Expected
 cost savings associated with completed mergers may not fully be realized or realized
 within expected time frames;                                                                                                               
| |  | Deposit
 attrition, customer loss or revenue loss following completed mergers may be greater
 than expected;                                                                                                                               
| |  | Competitors
 of NewAlliance may have greater financial resources and develop products that enable
 them to compete more successfully than NewAlliance;                                                                                     
| |  | Costs or
 difficulties related to the integration of acquired businesses may be greater than
 expected; and                                                                                                                                
| |  | Unfavorable
 changes related to economic stress and dislocation may impact the Companys
 vendors, counter-parties, and other entities on which the company has a dependence.                                                              

|Readers
 are cautioned not to place undue reliance on these forward-looking statements, which
 speak only as of the date of this report. Except as required by applicable law or
 regulation, management undertakes no obligation to update these forward-looking
 statements to reflect events or circumstances that occur after the date on which
 such statements were made.                                                                                                                                                                                                                       
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|The following
 Managements Discussion and Analysis of Financial Condition and Results of
 Operations (MD&A) is intended to help the reader understand NewAlliance
 Bancshares, Inc., our operations and our present business environment. We believe
 transparency and clarity are the primary goals of successful financial reporting.
 We remain committed to increasing the transparency of our financial reporting, providing
 our stockholders with informative financial disclosures and presenting an accurate
 view of our financial disclosures, financial position and operating results.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|MD&A
 is provided as a supplement toand should be read in conjunction withour
 Consolidated Financial Statements (unaudited) and the accompanying notes thereto
 contained in Part I, Item 1, of this report as well as our Annual Report on Form
 10-K for the year ended December 31, 2009. The following sections are included in
 MD&A:                                                                                                                                                                                                                                                         

| | Our Business
  a general description of our business, our objectives and
 regulatory considerations.                                                    
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | Critical Accounting
Estimates  a discussion of accounting estimates that
 require critical judgments and estimates.                                     
| | Recent Accounting
 Changes  a discussion of recently adopted accounting
 pronouncements or changes.                                                     
| | Operating Results
  an analysis of our Companys consolidated results
 of operations for the periods presented in our Consolidated Financial Statements.

33




| | Financial Condition
 and Management of Market and Interest Rate Risk  an
 overview of financial condition and market and interest rate risk.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------

|Our Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|General                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|By assets,
 NewAlliance is the third largest banking institution headquartered in Connecticut
 and the fourth largest based in New England with consolidated assets of $8.71 billion
 and stockholders equity of $1.46 billion at June 30, 2010. Its business philosophy
 is to operate as a community bank with local decision-making authority. NewAlliance
 delivers financial services to individuals, families and businesses throughout Connecticut
 and Western Massachusetts through its 88 banking offices, 104 ATMs and internet
 website (www.newalliancebank.com). NewAlliance common stock is traded on the New
 York Stock Exchange under the symbol NAL.                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|NewAlliance
 has a relentless commitment to improve the financial well-being of the people and
 businesses in the markets we serve, and to invest in the communities where they
 reside and work. We accomplish this by operating a community banking business model
 with a commitment to be a leader in our markets by seeking to continually deliver
 superior value to our customers, shareholders, employees and communities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|The Companys results of operations depend primarily on net interest income, which is the
 difference between the income earned on its loan and securities portfolios and its
 cost of funds, consisting of the interest paid on deposits and borrowings. Results
 of operations are also affected by the Companys provision for loan losses,
 income and expenses pertaining to other real estate owned, gains and losses from
 sales of loans and securities and non-interest income and expenses. Non-interest
 income primarily consists of fee income from depositors and wealth management services
 and increases in cash surrender value of bank owned life insurance (BOLI).
 Non-interest expenses consist principally of compensation and employee benefits,
 occupancy, data processing, amortization of acquisition related intangible assets,
 marketing, professional services, FDIC insurance assessments and other operating
 expenses.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Results
 of operations are also significantly affected by general economic and competitive
 conditions and changes in interest rates as well as government policies and actions
 of regulatory authorities. Future changes in applicable laws, regulations or government
 policies may materially affect the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Our Objectives                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|NewAlliance
 seeks to continually deliver superior value to its customers, stockholders, employees
 and communities through achievement of its core operating objectives which are to:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

| |  |  | Grow and retain
 primary households to increase core deposit relationships with a focus on checking
 and savings accounts;       
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------
| |  |  | Build high
 quality, profitable loan portfolios using organic, purchase and acquisition strategies;                              
| |  |  | Build and
 diversify revenue streams through development of banking-related fee income and
 growth in wealth management services;
| |  |  | Grow through
 a disciplined acquisition strategy, de-novo branching and new business lines;                                      
| |  |  | Maintain expense
 discipline and improve operating efficiencies;                                                                 
| |  |  | Invest in
 technology to enhance superior customer service and products; and                                                     
| |  |  | Maintain a
 rigorous risk identification and management process.                                                                 

|Significant
 factors management reviews to evaluate achievement of the Companys operating
 objectives and its operating results and financial condition include, but are not
 limited to: net income and earnings per share, performance of acquisitions and integration
 activities, return on equity and assets, net interest margin, non-interest income,
 operating expenses related to total assets and efficiency ratio, asset quality,
 loan and deposit growth, capital management, liquidity and interest rate sensitivity
 levels, customer service standards, market share and peer comparisons.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Regulatory Considerations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|NewAlliance
 and its subsidiaries are subject to numerous examinations by federal and state banking
 regulators, as well as the Securities and Exchange Commission and the Financial
 Industry Regulatory Authority (FINRA). Please refer to                                                                                                                                                                                                                                                                                                                                                              

34




|NewAlliances Annual Report on Form 10-K for the year ended December 31, 2009 for additional
 disclosures with respect to laws and regulations affecting the Companys businesses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|NewAlliance
 is also subject to recent government initiatives. In July the U.S. Senate passed
 and the President signed into law, the Dodd-Frank Wall Street Reform and Consumer
 Protection Act. Although NewAlliances asset size is below the threshold for
 some of the new reforms such as regulation by the Consumer Financial Protection
 Bureau and the Durbin Amendment on interchange fees, the legislation could have
 a significant effect on the Company. The change in the FDIC assessment formula will
 probably be neutral for the Company and, in addition to being compliant with existing
 rules for corporate governance and executive compensation practices, the Company
 is also already in compliance with many of the new rules. NewAlliance would be subject
 to any new rules written by the CFPB governing all banks and compliance costs are
 expected to rise. The Company will continue to analyze the impact of this act as
 more information becomes available. Until such time, the Company is unable to fully
 analyze the impact that the act will have on its financial results.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Critical
 Accounting Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Our Consolidated
 Financial Statements are prepared in accordance with accounting principles generally
 accepted in the United States of America. In connection with the preparation of
 our financial statements, we are required to make assumptions and estimates about
 future events, and apply judgments that affect the reported amounts of assets, liabilities,
 revenue, expenses and the related disclosures. We base our assumptions, estimates
 and judgments on historical experience, current trends and other factors that management
 believes to be relevant at the time our Consolidated Financial Statements are prepared.
 On a regular basis, management reviews the accounting policies, assumptions, estimates
 and judgments to ensure that our financial statements are presented fairly and in
 accordance with GAAP. However, because future events and their effects cannot be
 determined with certainty, actual results could differ from our assumptions and
 estimates, and such differences could be material. We believe that our most critical
 accounting policies, and those which involve the most complex subjective decisions
 or assessments relate to income taxes, pension and other postretirement benefits,
 goodwill and intangible assets, the allowance for loan losses and other-than-temporary
 impairment of investments. None of the Companys critical accounting estimates
 have changed during the quarter. A brief description of our current policies involving
 significant management judgment follows:                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Other-Than-Temporary Impairment of Investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|We conduct
 a periodic review of our investment securities portfolio to determine if the value
 of any security has declined below its cost or amortized cost, and whether such
 decline is other-than-temporary. For equity securities, if such decline is deemed
 other-than-temporary, the security is written down to a new cost basis and the resulting
 loss is reported within non-interest income in the consolidated statement of income.
 For debt securities, if such decline is deemed other-than-temporary, the investment
 is written down for the portion of the impairment related to the estimated credit
 loss within non-interest income and the non-credit related impairment is recognized
 in other comprehensive income unless required to sell or there is intent to sell,
 in which case the entire loss would be recorded within non-interest income. Factors
 considered by management include, but are not limited to: percentage and length
 of time which an issue is below book value, the financial condition and near-term
 prospects of the issuer including their ability to meet contractual obligations
 in a timely manner, ratings of the security, whether the decline in fair value appears
 to be issuer specific or, alternatively, a reflection of general market or industry
 conditions, whether the decline is due to interest rates and spreads or credit risk,
 the value of the underlying collateral and our intent and ability to retain the
 security for a period of time sufficient to allow for the anticipated recovery in
 market value or more likely than not will be required to sell a debt security before
 its anticipated recovery which may be until maturity. Adverse changes in the factors
 used to determine that a security was not other-than-temporarily impaired could
 lead to additional impairment charges.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Allowance for Loan Losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|The allowance
 for loan losses reflects managements best estimate of probable losses inherent
 in the loan portfolio. The adequacy of the allowance is determined based upon a
 detailed evaluation of the portfolio and sub-portfolios through a process which
 considers numerous factors, including levels and direction of delinquencies, non-performing
 loans and assets, risk ratings, estimated credit losses using both internal and
 external portfolio reviews, current economic and market conditions, concentrations,
 portfolio volume and mix, changes in underwriting, experience of staff, historical
 loss rates over the business cycle and current economic trends. All of these factors
 may be susceptible to significant change.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Management
 uses the asset and liability method of accounting for income taxes in which deferred
 tax assets and liabilities are established for the temporary differences between
 the financial reporting basis and the tax basis of the Companys assets and
 liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

35




|Significant
 management judgment is required in determining income tax expense and deferred tax
 assets and liabilities. Some judgments are subjective and involve estimates and
 assumptions about matters that are inherently uncertain. In determining the valuation
 allowance, we use forecasted future operating results, based upon approved business
 plans, including a review of the eligible carryforward periods, tax planning opportunities
 and other relevant considerations. Management believes that the accounting estimate
 related to the valuation allowance is a critical accounting estimate because the
 underlying assumptions can change from period to period. For example, tax law changes
 or variances in future projected operating performance could result in a change
 in the valuation allowance. The reserve for tax contingencies contains uncertainties
 because management is required to make assumptions and to apply judgment to estimate
 the exposures associated with our various tax positions. The effective income tax
 rate is also affected by changes in tax law, entry into new tax jurisdictions, the
 level of earnings and the results of tax audits.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Pension and Other Postretirement Benefits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Management
 uses key assumptions that include discount rates, expected return on plan assets,
 benefits earned, interest costs, mortality rates, increases in compensation, and
 other factors. The two most critical assumptionsestimated return on plan assets
 and the discount rateare important elements of plan expense and asset/liability
 measurements. These critical assumptions are evaluated at least annually on a plan
 basis. Other assumptions are evaluated periodically and are updated to reflect actual
 experience and expectations for the future.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Goodwill and Identifiable Intangible Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|We evaluate
 goodwill and identifiable intangible assets for impairment annually or whenever
 events or changes in circumstances indicate the carrying value of the goodwill or
 identifiable intangible assets may be impaired. We complete our impairment evaluation
 by performing internal valuation analyses based on discounted cash flow modeling
 techniques, considering publicly available market information and using an independent
 valuation firm, as appropriate. These types of analyses contain uncertainties because
 they require management to make assumptions and to apply judgment to estimate industry
 economic factors and the profitability of future business strategies. A complete
 discussion of critical accounting estimates can be found in the Companys most
 recent Annual Report on Form 10-K (fiscal year ended December 31, 2009).                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Recent
 Accounting Changes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|We have
 adopted the following new accounting pronouncements and authoritative guidance during
 2010. Except as indicated, the adoption of the following pronouncements did not
 have a material impact on the Companys consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|FASB ASU
 2010-06, Improving Disclosures about Fair Value Measurements. This guidance
 amends Topic 820, Fair Value Measurements and Disclosures. The guidance requires
 additional disclosures about fair value measurements including transfer in and out
 of Levels 1 and 2 and higher levels of disaggregation for the different types of
 financial instruments. For the reconciliation of Level 3 fair values measurements,
 information about purchases, sales, issuances and settlements should be presented
 separately.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|FASB ASU
 2009-16, an update to Topic 860  Transfer of Financial Assets. This
 guidance requires entities to provide more information about sales of securitized
 financial assets and similar transactions, particularly if the seller retains some
 risk in the assets. The guidance eliminates the concept of a qualifying special-purpose
 entity, changes the requirements for the derecognition of financial assets, and
 enhances the disclosure requirements for sellers of the assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|FASB ASU
 No. 2009-17, an update to Topic 810  Consolidations. The guidance requires
 an enterprise to perform an analysis to determine whether the enterprises
 variable interest or interests give it a controlling financial interest in a variable
 interest entity (which would result in the enterprise being deemed the primary beneficiary
 of that entity and, therefore, obligated to consolidate the variable interest entity
 in its financial statements); to require ongoing reassessments of whether an enterprise
 is the primary beneficiary of a variable interest entity; to revise guidance for
 determining whether an entity is a variable interest entity; and to require enhanced
 disclosures that will provide more transparent information about an enterprises
 involvement with a variable interest entity.                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|FASB ASU
 2010-09, an update to Topic 855  Subsequent Events. The guidance updates
 certain recognition and disclosure requirements. Among other things, this guidance
 retracts, for public entities, the requirement to disclose the date through which
 subsequent events have been evaluated and whether that date is the date the financial
 statements were issued or were available to be issued.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

36




|Operating Results                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Executive Overview                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Earnings
 for the second quarter of 2010 were $16.3 million, or $0.16 per diluted share, compared
 to $10.1 million, or $0.10 per diluted share, for the second quarter in 2009. For
 the six months ended June 30, 2010 and 2009 the Company recorded earnings of $32.7
 million, or $0.33 per diluted share, and $21.7 million, or $0.22 per diluted share,
 respectively. Continued core business momentum has been driven by diversified loan
 growth, deposit growth and a decrease in the cost of funds, in tandem with solid
 asset quality and disciplined expense control.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|The Companys momentum in 2010 has also been incremently accentuated by a second quarter
 gain on a limited partnership investment of $2.6 million, or $1.7 million net of tax, and a gain of $2.6 million
 from the receipt of tax-exempt life insurance proceeds in the first quarter. Excluding
 these two items, earnings for the second quarter would have been $14.6 million, or $0.15
 per diluted share and $28.4 million, or $0.29 per diluted share for the six months
 ended June 30, 2010. The gain in limited partnerships was primarily related to an
 underlying investment in one of the partnerships which completed an initial public
 offering in June.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|The Companys net interest margin for the three months ended June 30, 2010 was 3.02%, an
 increase of 39 basis points over the prior year quarter of 2.63%. The net interest
 margin for the six months ended June 30, 2010 was 2.99% compared to 2.60% for the
 same period in 2009. The general year over year trends impacting the margin from
 the first quarter continued in the second quarter, which includes growth in the
 average balance of interest-earning assets and reductions in the Companys
 cost of funds, particularly deposits. The reduction in the cost of funds has been
 the foremost driver of the increase in net interest income and the margin, mainly
 due to repricing or maturing of interest-bearing liabilities outpacing interest-earning
 assets and the change in the mix of deposits from higher cost time deposits to core
 deposits. For both the current quarter and year-to-date periods, the average cost
 of deposits and borrowings has declined by more than double that of the decline
 in the average yield earned on interest-earning assets. A sustained period of low
 interest rates is anticipated, therefore, as interest-earning assets continue to
 originate or reprice downward, the net interest margin could be adversely affected.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|The asset
 quality of our loan portfolio has remained strong even as the leading economic indicators
 have provided mixed results as evidenced in part by the continued high unemployment
 and foreclosure rates throught the country. The Company has been adversely impacted
 by these trends but not to the severity experienced nationally. The allowance for
 loan losses to total loans ratio was 1.11% and 1.10% and the ratio of nonperforming
 loans to total loans was 1.39% and 1.06% at June 30, 2010 and December 31, 2009,
 respectively. Net charge-offs for the three months ended June 30, 2010 were $4.7
 million, or 0.39% of total average loans compared to $4.1 million, or 0.33% of average
 loans for the quarter ended June 30, 2009. For the six months ended June 30, 2010
 and 2009, net charge-offs were $7.8 million and $7.5 million, respectively, and as
 a percent to total average loans were 0.33% and 0.30%, respectively. A provision
 for loan losses of $5.5 million was recorded for the current quarter compared to $5.0
 million for the quarter ended June 30, 2009.                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|The Companys balance sheet growth has been due in part to targeted marketing efforts.
 Total loans increased from December 31, 2009 by $166.3 million primarily due to residential
 real estate and commercial business loans increasing $94.9 million and $62.1 million,
 respectively. The Company had record loan originations of $534.9 million and has
 originated a portion of loans for portfolio versus for sale higher than the prior
 year period. The increase in commercial business loans was primarily due to the
 Companys asset-based lending business which began in the fourth quarter of
 2009 and has begun to intensify. Core deposit generation also continues to be strong
 for the Company, increasing $146.3 million from December 31, 2009. Total deposits
 increased $112.7 million from year-end 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|The Company
 is also very focused on disciplined expense control. Non-interest expense for the
 three months ended June 30, 2010 declined approximately $800,000 from the 2009 comparative
 period and increased $1.0 million for the six months ended June 30, 2010. Non-interest
 expense as a percentage of average assets was 2.04% and 2.02% for the three and
 six months ended June 30, 2010, respectively. Included in these periods were due
 diligence related expenses of approximately $500,000. For the past three fiscal years,
 the Companys ratio has been either 2.03% or 2.04%, demonstrating our expense
 disclipline.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|NewAlliance
 will be aggressive in pursuing its strategic goals while practicing prudent risk
 management to achieve continued positive business momentum and success.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Selected
 financial data, ratios and per share data are provided in Table 1.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

37




|Table 1:
 Selected Data                               |  |                    |            |                  |      |   |            |      |  |   |            |   |  |   |            |  
|----------------------------------------------------- |  | ------------------ | ---------- | ---------------- | ---- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                      |  | Three Months Ended |            | Six Months Ended
|                                                      |  | June 30,           |            | June 30,        
|                                                      |  |                    |            |                 
|(Dollars in
 thousands, except share data)            |  | 2010               |            |                  | 2009 |   |            | 2010 |  |   | 2009       |  
|                                                     
|Condensed Income Statement                            |  |                    |            |                  |      |   |            |      |  |   |            |   |  |   |            |  
|Interest and dividend income                          |  | $                  | 87,061     |                  |      | $ | 94,082     |      |  | $ | 174,461    |   |  | $ | 188,837    |  
|Interest expense                                      |  |                    | 29,320     |                  |      |   | 44,155     |      |  |   | 61,078     |   |  |   | 90,917     |  
|                                                     
|Net interest
 income before provision for loan losses |  |                    | 57,741     |                  |      |   | 49,927     |      |  |   | 113,383    |   |  |   | 97,920     |  
|Provision
 for loan losses                            |  |                    | 5,500      |                  |      |   | 5,000      |      |  |   | 10,300     |   |  |   | 9,100      |  
|                                                     
|Net interest
 income after provision for loan losses  |  |                    | 52,241     |                  |      |   | 44,927     |      |  |   | 103,083    |   |  |   | 88,820     |  
|Non-interest
 income                                  |  |                    | 15,886     |                  |      |   | 15,291     |      |  |   | 31,285     |   |  |   | 29,554     |  
|Operating
 expenses                                   |  |                    | 43,628     |                  |      |   | 44,405     |      |  |   | 85,828     |   |  |   | 84,786     |  
|                                                     
|Income before
 income taxes                           |  |                    | 24,499     |                  |      |   | 15,813     |      |  |   | 48,540     |   |  |   | 33,588     |  
|Income tax
 provision                                 |  |                    | 8,226      |                  |      |   | 5,705      |      |  |   | 15,834     |   |  |   | 11,890     |  
|                                                     
|Net income                                            |  | $                  | 16,273     |                  |      | $ | 10,108     |      |  | $ | 32,706     |   |  | $ | 21,698     |  
|                                                     
|Weighted average
 shares outstanding                  |  |                    |            |                  |      |   |            |      |  |   |            |   |  |   |            |  
|Basic                                                 |  |                    | 98,780,567 |                  |      |   | 99,278,162 |      |  |   | 98,899,821 |   |  |   | 99,266,268 |  
|Diluted                                               |  |                    | 98,859,822 |                  |      |   | 99,310,611 |      |  |   | 98,936,601 |   |  |   | 99,309,719 |  
|Earnings per
 share                                   |  |                    |            |                  |      |   |            |      |  |   |            |   |  |   |            |  
|Basic                                                 |  | $                  | 0.16       |                  |      | $ | 0.10       |      |  | $ | 0.33       |   |  | $ | 0.22       |  
|Diluted                                               |  |                    | 0.16       |                  |      |   | 0.10       |      |  |   | 0.33       |   |  |   | 0.22       |  
|                                                     
|                                                     
|Financial Ratios                                      |  |                    |            |                  |      |   |            |      |  |   |            |   |  |   |            |  
|Return on
 average assets (1)                         |  |                    | 0.76       | %                |      |   | 0.47       | %    |  |   | 0.77       | % |  |   | 0.51       | %
|Return on
 average equity (1)                         |  |                    | 4.49       |                  |      |   | 2.89       |      |  |   | 4.53       |   |  |   | 3.12       |  
|Net interest
 margin (1)                              |  |                    | 3.02       |                  |      |   | 2.63       |      |  |   | 2.99       |   |  |   | 2.60       |  
|Dividend payout
 ratio                                |  |                    | 43.75      |                  |      |   | 70.00      |      |  |   | 42.42      |   |  |   | 63.64      |  
|Average equity
 to average assets ratio               |  |                    | 16.91      |                  |      |   | 16.39      |      |  |   | 16.99      |   |  |   | 16.48      |  
|                                                     
|Non-GAAP Ratios                                       |  |                    |            |                  |      |   |            |      |  |   |            |   |  |   |            |  
|Efficiency
 ratio (2)                                 |  |                    | 61.05      |                  |      |   | 69.65      |      |  |   | 60.20      |   |  |   | 67.72      |  
|Tangible common
 equity ratio (3)                     |  |                    | 11.11      |                  |      |   | 10.49      |      |  |   | 11.11      |   |  |   | 10.49      |  
|                                                     
|Per share data                                        |  |                    |            |                  |      |   |            |      |  |   |            |   |  |   |            |  
|Book value
 per share                                 |  | $                  | 13.93      |                  |      | $ | 13.18      |      |  | $ | 13.93      |   |  | $ | 13.18      |  
|Tangible book
 value per share                        |  |                    | 8.62       |                  |      |   | 7.87       |      |  |   | 8.62       |   |  |   | 7.87       |  
|                                                     

|(1) | Annualized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The efficiency
 ratio represents the ratio of non-interest expenses, net of OREO expenses, to the
 sum of net interest income before provision for loan losses and non-interest income,
 excluding security and limited partnership net gains or losses. The efficiency ratio
 is not a financial measurement required by accounting principles generally accepted
 in the United States of America. However, management believes such information is
 a useful tool to investors in evaluating how effectively the Company generates revenue.
|(3) | The tangible
 common equity ratio excludes goodwill and identifiable intangible assets. This ratio
 is not a financial measurement required by accounting principles generally accepted
 in the United States of America. However, management believes such information is
 useful to analyze the relative strength of NewAlliances capital position and
 is useful to investors in evaluating Company performance due to the importance that
 analysts placed on the ratio since the introduction of TARP.                                  

Average Balances, Interest,
 Average Yields/Cost and Rate/Volume AnalysisTables 2 and 3 below
 set forth certain information concerning average interest-earning assets and interest-bearing
 liabilities and their associated yields or rates for the periods indicated. The
 average yields and costs are derived by dividing annualized income or expenses by
 the average balances of interest-earning assets or interest-bearing liabilities,
 respectively, for the periods shown and reflect annualized yields and costs. Average
 balances are computed using daily balances. Yields and amounts earned include loan
 fees and fair value adjustments related to acquired loans, deposits and borrowings.
 Loans held for sale and nonaccrual loans have been included in interest-earning
 assets for purposes of these computations.

Table 4 below presents the extent to which
 changes in interest rates and changes in volume of interest-earning assets and interest-bearing
 liabilities have affected the Companys interest income and interest expense
 during the periods indicated. Information is provided in each category with respect
 to: (i) change attributable to change in volume (change in volume multiplied by
 prior rate), (ii) change attributable to change in rate (change in rate multiplied
 by prior volume); and (iii) the change attributable to rate and volume (change in
 rate multiplied by change in volume), which is prorated between the changes in rate
 and volume.

38




Table 2: Average Balance Sheets for the
 Three Months Ended June 30, 2010 and 2009

|                                                   |  | Three Months Ended June 30,
|-------------------------------------------------- |  | ---------------------------
|                                                   |  |                            
|                                                   |  | 2010                       
|                                                   |  |                            
|                                                   |  |                            
|                                                   |  | Average                    
|(Dollars in
 thousands)                            |  | Balance                    
|                                                  
|Interest-earning
 assets                           |  |                            
|Loans                                              |  |                            
|Residential real estate                            |  | $                          
|Commercial
 real estate                            |  |                            
|Commercial
 business                               |  |                            
|Consumer                                           |  |                            
|                                                  
|Total
 loans                                       |  |                            
|Fed
 funds sold and other short-term investments   |  |                            
|Federal
 Home Loan Bank of Boston stock            |  |                            
|Securities                                         |  |                            
|                                                  
|Total
 securities, short-term investments          |  |                            
|and
 federal home loan bank stock                  |  |                            
|                                                  
|Total
 interest-earning assets                     |  |                            
|Non-interest
 earning assets                       |  |                            
|                                                   |  |                            
|Total
 assets                                      |  | $                          
|                                                   |  |                            
|                                                   |  |                            
|Interest-bearing
 liabilities                      |  |                            
|Deposits                                           |  |                            
|Money
 Markets                                     |  | $                          
|NOW                                                |  |                            
|Savings                                            |  |                            
|Time                                               |  |                            
|                                                  
|Total
 interest-bearing deposits                   |  |                            
|Repurchase
 agreements                             |  |                            
|FHLB
 advances and other borrowings                |  |                            
|                                                  
|Total
 interest-bearing liabilities                |  |                            
|Non-interest-bearing
 demand deposits              |  |                            
|Other
 non-interest-bearing liabilities            |  |                            
|                                                   |  |                            
|Total
 liabilities                                 |  |                            
|Equity                                             |  |                            
|                                                   |  |                            
|Total
 liabilities and equity                      |  | $                          
|                                                   |  |                            
|Net
 interest-earning assets                       |  | $                          
|                                                   |  |                            
|Net
 interest income                               |  |                            
|                                                   |  |                            
|Interest
 rate spread                              |  |                            
|Net
 interest margin (net interest income          |  |                            
|as
 a percentage of total interest-earning assets) |  |                            
|Ratio
 of total interest-earning assets            |  |                            
|to
 total interest-bearing liabilitites            |  |                            
|                                                  

39




Table 3: Average Balance Sheets for the
 Six Months Ended June 30, 2010 and 2009

|                                                  |  | Six Months Ended June 30,
|------------------------------------------------- |  | -------------------------
|                                                  |  |                          
|                                                  |  | 2010                     
|                                                  |  |                          
|                                                  |  |                          
|                                                  |  | Average                  
|(Dollars in
 thousands)                           |  | Balance                  
|                                                 
|Interest-earning assets                           |  |                          
|Loans                                             |  |                          
|Residential
 real estate                          |  | $                        
|Commercial
 real estate                           |  |                          
|Commercial
 business                              |  |                          
|Consumer                                          |  |                          
|                                                 
|Total
 loans                                      |  |                          
|Fed
 funds sold and other short-term investments  |  |                          
|Federal
 Home Loan Bank of Boston stock           |  |                          
|Securities                                        |  |                          
|                                                 
|Total
 securities, short-term investments         |  |                          
|and
 federal home loan bank stock                 |  |                          
|                                                 
|Total
 interest-earning assets                    |  |                          
|Non-interest
 earning assets                      |  |                          
|                                                  |  |                          
|Total
 assets                                     |  | $                        
|                                                  |  |                          
|                                                  |  |                          
|Interest-bearing
 liabilities                     |  |                          
|Deposits                                          |  |                          
|Money
 Markets                                    |  | $                        
|NOW                                               |  |                          
|Savings                                           |  |                          
|Time                                              |  |                          
|                                                 
|Total
 interest-bearing deposits                  |  |                          
|Repurchase
 agreements                            |  |                          
|FHLB
 advances and other borrowings               |  |                          
|                                                 
|Total
 interest-bearing liabilities               |  |                          
|Non-interest-bearing
 demand deposits             |  |                          
|Other
 non-interest-bearing liabilities           |  |                          
|                                                  |  |                          
|Total
 liabilities                                |  |                          
|Equity                                            |  |                          
|                                                  |  |                          
|Total
 liabilities and equity                     |  | $                        
|                                                  |  |                          
|Net
 interest-earning assets                      |  | $                        
|                                                  |  |                          
|Net
 interest income                              |  |                          
|                                                  |  |                          
|Interest
 rate spread                             |  |                          
|Net
 interest margin (net interest income         |  |                          
|as
 a percentage of total interest-earning assets |  |                          
|Ratio
 of total interest-earning assets           |  |                          
|to
 total interest-bearing liabilitites           |  |                          
|                                                 

40




Table 4: Rate/Volume Analysis

|                                                 |  | Three Months Ended  |         | Six Months Ended
|------------------------------------------------ |  | ------------------- | ------- | ----------------
|                                                 |  | June 30, 2010       |         | June 30, 2010   
|                                                 |  | Compared to         |         | Compared to     
|                                                 |  | Three Months Ended  |         | Six Months Ended
|                                                 |  | June 30, 2009       |         | June 30, 2009   
|                                                 |  |                     |         |                 
|                                                 |  | Increase (Decrease) |         |                 
|                                                 |  | Due to              |         |                 
|                                                 |  |                     |         |                 
|(In thousands)                                   |  | Rate                |         |                 
|                                                
|Interest-earning
 assets                         |  |                     |         |                 
|Loans                                            |  |                     |         |                 
|Residential
 real estate                         |  | $                   | (2,755  | )               
|Commercial
 real estate                          |  |                     | 302     |                 
|Commercial
 business                             |  |                     | 176     |                 
|Consumer                                         |  |                     | (245    | )               
|                                                 |  |                    
|Total
 loans                                     |  |                     | (2,522  | )               
|Fed
 funds sold and other short-term investments |  |                     | (94     | )               
|Federal
 Home Loan Bank of Boston stock          |  |                     | -       |                 
|Securities                                       |  |                     | (4,786  | )               
|                                                 |  |                    
|Total
 securities, short-term investments        |  |                     |         |                 
|and
 federal home loan bank stock                |  |                     | (4,880  | )               
|                                                 |  |                    
|Total
 interest-earning assets                   |  | $                   | (7,402  | )               
|                                                 |  |                    
|Interest-bearing
 liabilities                    |  |                     |         |                 
|Deposits                                         |  |                     |         |                 
|Money
 market                                    |  | $                   | (1,171  | )               
|NOW                                              |  |                     | (37     | )               
|Savings                                          |  |                     | (4,028  | )               
|Time                                             |  |                     | (3,676  | )               
|                                                 |  |                    
|Total
 interest bearing deposits                 |  |                     | (8,912  | )               
|Repurchase
 agreements                           |  |                     | 83      |                 
|FHLB
 advances and other borrowings              |  |                     | (3,158  | )               
|                                                 |  |                    
|Total
 interest-bearing liabilities              |  | $                   | (11,987 | )               
|                                                 |  |                    
|                                                 |  |                     |         |                 
|Increase in
 net interest income                 |  | $                   | 4,585   |                 
|                                                

Net Interest Income Analysis

Net interest
 income is the amount that interest and fees on earning assets (loans and investments)
 exceeds the cost of funds, primarily interest paid to the Companys depositors
 and interest on external borrowings. Net interest margin is the difference between
 the income on earning assets and the cost of interest-bearing funds as a percentage
 of average earning assets.

As shown in
 Tables 2 and 4, net interest income increased $7.8 million for the three months
 ended June 30, 2010 compared to the three months ended June 30, 2009. For the six
 months ended June 30, 2010, as shown in Tables 3 and 4, net interest income was
 $113.4 million, an increase of $15.5 million, compared to the same period in 2009.
 These increases were primarily due to: a) repricing or maturing interest-bearing
 liabilities outpacing interest-earning assets during the period, thereby allowing
 us to reduce our cost of funds at a faster pace and b) the shift in the mix of funding
 sources from higher cost time deposits and borrowings to core interest and non-interest
 bearing deposits which was a factor in reducing the cost of funds. The net interest
 margin increased 39 basis points for both the three and six month periods ended
 June 30, 2010 compared to June 30, 2009. The net interest margin for the three and
 six months ended June 30, 2010 was 3.02% and 2.99%, respectively.

Comparison
 of Quarter-to-Date June 2010 and June 2009Interest and dividend income decreased
 $7.1 million to $87.1 million at June 30, 2010 compared to $94.1 million at June
 30, 2009 primarily due to lower asset yields. Partially offsetting this decrease
 was an increase in average interest-earning assets which have increased $41.9 million
 from the same period a year ago due to the growth in investment securities, partially
 offset by a decrease in average loan balances.

The decrease
 in income attributable to the loan portfolio was $3.6 million due to a decrease
 of $2.5 million due to lower yields and $1.0 million due to a decrease in the average
 balance. The decline in average yield of 19 basis points was primarily in organic
 residential mortgage loans as homeowners took advantage of refinancing opportunities
 at lower rates throughout 2009. The decrease in interest income attributable to
 the average balance was primarily due to a decrease in residential mortgage loans,
 specifically the purchased residential loan portfolio, as runoff in this portfolio
 was not replaced due to disruptions in the marketplace resulting in a lack of opportunities
 for purchases that met the Companys pricing and underwriting criteria. Loan
 yields have also been negatively impacted by the increase in nonperforming loans
 of $13.4 million from June 2009.

The investment
 securities portfolio interest and dividend income decreased $3.5 million due to
 the decline in the average yield, partially offset by an increase due to the average
 growth in the portfolio. Interest income declined $1.4 million resulting from a

41




decrease of
 70 bps in the average yield due to the low level of market interest rates. Although
 yields on the securities portfolio have declined, the growth in the portfolio has
 partially offset that decline. The average portfolio growth of $135.5 million was
 primarily in collateralized mortgage obligations and other bonds of $172.6 million
 and $192.8 million, respectively, partially offset by a decrease in the average
 balance of mortgage-backed securities. The increase in other bonds is attributable
 to select purchases of bullet, callable and step-up coupon agency debentures. The
 growth in average deposits, specifically core deposits was the main driver for the
 Companys purchases of these securities since June 30, 2009.

The cost of
 funds for the three months ended June 30, 2010 decreased $14.8 million, or 33.6%
 to $29.3 million, compared to $44.2 million for the same period a year ago. The
 decrease in the cost of funds was due primarily to a decrease due to rate and to
 a lesser extent volume of $12.0 million and $2.8 million, respectively.

The Companys continued strategy during
 this period has been to reduce deposit costs through disciplined pricing while maintaining
 a focus on the continued growth of core interest and non-interest-bearing deposits.
 While the average interest-bearing deposit balances increased $286.9 million, deposit
 costs declined $8.8 million. The Company experienced a decrease of $8.9 million
 in deposit interest expense due to a reduction of 90 basis points on the average
 rate paid. The decrease in deposit interest expense due to the decline in the average
 rate paid was attributable to all deposit categories, the majority of which was
 from savings, certificates and money markets deposits. Deposit interest expense
 increased approximately $99,000 due to the increase of the average balance of interest-bearing
 core deposits of $479.8 million, partially offset by a decrease of $192.9 million
 in the average certificate balances. Through our continued emphasis on building
 core deposit relationships and migration from maturing time deposits as they repriced
 at reduced rates, the Company has been able to grow core deposit average balances.
 The main driver of core deposit growth has been money market accounts with an average
 balance increase of $424.9 million. Additionally, when combined with the decline
 in the average rate paid of 72 basis points, interest expense increased by $128,000
 during this period for this product.

A further
 benefit of the core deposit growth has been a substantial reduction in and reliance
 on borrowings from the Federal Home Loan Bank (FHLB). FHLB advances
 and other borrowing costs decreased $6.0 million due to the decline in the average
 balance and the average rate paid of $287.9 million and 63 basis points, respectively,
 primarily on FHLB advances. The Company was able to replace maturing advances with
 new advances at substantially lower rates or payoff maturing advances.

Comparison
 of Year-to-Date June 2010 and June 2009Interest and dividend income decreased
 $14.4 million to $174.5 million for the six months ended June 30, 2010 compared
 to $188.8 million at June 30, 2009 and was due to a decrease of $14.7 million due
 to lower yields earned, partially offset by a $366,000 increase due to volume. The
 decline in average yield was primarily due to the decline in loan and investment
 yields due to lower market interest rates and to a lesser extent the level of nonperforming
 loans. The increase in organic loans and investment securities helped to relieve
 some of the interest rate pressure as the Company, with ready liquidity, increased
 the average balance of these earning assets by $243.5 million. Similar to the quarter-to-date
 discussion, the interest income decline in the loan portfolio related to the average
 balance was primarily due to the decrease in the average balance of the purchased
 loan portfolio of $200.0 million.

The cost of
 funds for the six months ended June 30, 2010 decreased $29.8 million to $61.1 million,
 compared to $90.9 million for the same period a year ago primarily resulting from
 the Companys diligence in bringing deposit costs down while continuing to
 increase core deposits. As shown in Table 4, deposit costs were reduced by $18.1
 million due to a decrease in the average rate paid of 96 basis points, partially
 offset by an increase of $297,000 due to the increase in the average balances of
 $347.6 million. This $17.8 million net decrease in deposit interest costs has been
 accomplished in tandem with growth in all core deposits of $644.3 million. Supported
 by the growth in deposits, the Company has been able to pay down higher cost borrowings
 as they mature or replace them with new advances at substantially lower rates and
 reduce its overall reliance on borrowings.

Provision for Loan LossesThe provision for loan losses (provision) is based on
 managements periodic assessment of the adequacy of the allowance for loan
 losses (allowance) which, in turn, is based on such interrelated factors
 as the composition of the loan portfolio and its inherent risk characteristics,
 the level of nonperforming loans and charge-offs, both current and historic, local
 economic conditions, the direction of real estate values, and regulatory guidelines.

Management performs a monthly
 review of the loan portfolio, and based on this review determines the level of the
 provision necessary to maintain an adequate allowance for loan losses. Management
 recorded a provision for loan losses of $5.5 million for the three months ended
 June 30, 2010. The primary factors that influenced managements decision to
 record this provision were increases in nonperforming loans since December 31, 2009
 of $17.8 million, or 35.2%, an increase in total delinquencies since December 31,
 2009 of $11.3 million, or 15.5%, primarily residential mortgages, net charge-offs
 of $4.7 million for the current quarter and to support estimated credit losses embedded
 in the portfolio. A provision for loan losses of $5.0 million was

42




recorded for the three months ended June
 30, 2009 based on the level of delinquencies, net charge-offs and nonperforming
 loans at that time.

For the year to date period ending June
 30, 2010, the provision for loan losses was $10.3 million compared to $9.1 million
 for the same period ended June 30, 2009. Future provisions for loan losses may be
 deemed necessary if economic conditions do not improve or continue to deteriorate.
 Further details about nonperforming loans can be found in the Asset Quality and Allowance for Loan Losses sections beginning on page 49.

At June 30, 2010, the allowance for loan
 losses was $54.9 million, which represented 1.11% of total loans and 80.45% of nonperforming
 loans. This compared to the allowance for loan losses of $52.5 million at December
 31, 2009 which represented 1.10% of total loans and 103.87% of nonperforming loans.

Table 5: Non-Interest Income

|                                                   |  | Three Months Ended |        |        |      |          |        |        |  |   |         | Six Months Ended |  |      |       |   |      |   |        |       
|-------------------------------------------------- |  | ------------------ | ------ | ------ | ---- | -------- | ------ | ------ |  | - | ------- | ---------------- |  | ---- | ----- | - | ---- | - | ------ | ------
|                                                   |  | June 30,           |        | Change |      | June 30, |        | Change
|                                                   |  |                    |        |        |      |          |        |       
|(Dollars in
 thousands)                            |  | 2010               |        |        | 2009 |          |        | Amount |  |   | Percent |                  |  | 2010 |       |   | 2009 |   |        | Amount
|                                                  
|Depositor
 service charges                         |  | $                  | 7,457  |        |      | $        | 6,953  |        |  | $ | 504     |                  |  |      | 7     | % |      | $ | 14,165 |       
|Loan and servicing
 income                         |  |                    | 351    |        |      |          | 357    |        |  |   | (6      | )                |  |      | (2    | ) |      |   | 668    |       
|Trust fees                                         |  |                    | 1,573  |        |      |          | 1,392  |        |  |   | 181     |                  |  |      | 13    |   |      |   | 3,174  |       
|Investment
 management, brokerage & insurance fees |  |                    | 1,302  |        |      |          | 1,564  |        |  |   | (262    | )                |  |      | (17   | ) |      |   | 2,816  |       
|Bank owned
 life insurance                         |  |                    | 847    |        |      |          | 899    |        |  |   | (52     | )                |  |      | (6    | ) |      |   | 4,309  |       
|Net gain on
 securities                            |  |                    | 198    |        |      |          | 1,617  |        |  |   | (1,419  | )                |  |      | (88   | ) |      |   | 198    |       
|Mortgage origination
 activity & loan sale income  |  |                    | 571    |        |      |          | 1,481  |        |  |   | (910    | )                |  |      | (61   | ) |      |   | 1,299  |       
|Net gain (loss)
 on limited partnerships           |  |                    | 2,372  |        |      |          | 89     |        |  |   | 2,283   |                  |  |      | 2,565 |   |      |   | 2,703  |       
|Other                                              |  |                    | 1,215  |        |      |          | 939    |        |  |   | 276     |                  |  |      | 29    |   |      |   | 1,953  |       
|                                                  
|Total
 non-interest income                         |  | $                  | 15,886 |        |      | $        | 15,291 |        |  | $ | 595     |                  |  |      | 4     | % |      | $ | 31,285 |       
|                                                  

Non-Interest IncomeComparison
 of Quarter-to-Date June 2010 and June 2009As displayed in Table 5, non-interest
 income increased $595,000 to $15.9 million for the three months ended June 30, 2010
 compared to $15.3 million for the prior year period. The main drivers of the increase
 were depositor service charges, trust fees, net gain on limited partnerships and
 other income. These increases were partially offset by decreases in investment management,
 brokerage and insurance fees, net security gains and mortgage origination and loan
 sale income.

| |  |  | Depositor
 service charges increased due to overdraft fee income, merchant services income
 and check card fees. Growth of fee income is attributable to an increase in consumer
 spending and the growth in retail and business core deposits. During the third quarter
 of 2010, federal banking regulations will change how the bank charges ATM and debit
 card transactions. The Company recently launched a campaign to raise awareness to
 our customers about the upcoming regulation changes. If customers do not opt-in,
 overdrafts for their ATM and debit card transactions will be denied. Depositor service
 charge income may be negatively impacted effective with these new regulatory changes.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |  | Trust fees
 increased due to the overall improvement in market conditions during the period.
 For the three months ended June 30, 2010, average assets under management were consistently
 ahead of 2009, and averaged $1.06 billion compared to $817.0 million for the prior
 year quarter, a 20% overall increase, evidencing the continued market corrections.                                                                                                                                                                                                                                                                                                                                                
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |  | Net gain
 on limited partnerships increased $2.3 million due primarily to the net increase
 in the carrying value on certain limited partnerships. Approximately a $2.0 million
 increase in the carrying value and a realized gain of $529,000 resulted from the
 initial public offering (IPO) of an underlying portfolio company in
 a limited partnership. The realized gain represents the Companys allocated
 income on 25.0% of the shares sold by the partnership in the IPO. The increase in
 the carrying value was due to an equity method adjustment for the remaining shares.                                                                                                                    
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |  | Other income
 increased primarily due to net gains recorded on the sale of other real estate owned.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |  | Investment
 management, brokerage and insurance fee income decreased due to the low interest
 rate environment as well as customer preference for deposit products over other
 investment alternatives.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |  | Net gain
 on securities decreased $1.4 million due to higher prior year gains recorded on the
 sale of mortgage backed securities. The net gain of $198,000 recorded in 2010 was
 due to the sale of residential mortgage-backed securities, partially offset by an
 impairment write-down on an investment in a pooled trust preferred security based
 on a cash flow analysis. The second quarter of 2009 included an impairment write-down
 of $626,000 for an adjustable rate mortgage mutal fund. Residential mortgage-backed
 securities were sold during the current                                                                                                                                      

43




| |   |  | year quarter
 to reduce FNMA pre-payment buy-out risk. Further information related to the impairment
 can be found in Footnote 3 of the Notes to Unaudited Consolidated Financial Statements.                                                                                                                                                                                                                                                 
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  |  | Mortgage origination
 and loan sale income decreased due to a lower number of mortgage loans originated
 for sale and sold in the secondary market and the effect of originations that were
 in the pipeline under commitments to be sold at June 30, 2010 compared to June 30,
 2009. Although the Company has had record residential mortgage originations of $332.0
 milion during the quarter, the majority were originated for portfolio.

Comparison of Year-to-Date June 2010
 and June 2009As displayed in Table 5, non-interest income increased $1.7
 million to $31.3 million for the three months ended June 30, 2010 from the prior
 year period. The main drivers of the increase were depositor service charges, loan
 and servicing income, trust fees, bank owned life insurance (BOLI) and
 net gain on limited partnerships. These increases were offset by a decrease in investment
 management, brokerage and insurance fees, net security gains and mortgage origination
 and loan sale income.

| |  |  | Depositor
 service charges increased due to overdraft fee income, merchant services income
 and check card fees. Growth in fee related income has resulted from profit improvement
 initiatives to expand core banking fee income, the increase in consumer spending
 and growth in retail and business core deposits.                            
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                                                                                                                                                                                                                                                                   
| |  |  | Loan and
 servicing income increased primarily due to a prior year write-down of approximately $475,000
 on the Banks mortgage servicing asset.                                                                                                                                                                                                  
| |   |  |                                                                                                                                                                                                                                                                                                                                                   
| |  |  | Trust fees
 increased due to the overall improvement in market conditions during this time period.
 For the six months ended June 30, 2010, average assets under management were $1.02
 billion compared to $851.0 million for the year-to-date period ended June 30, 2010
 , a 30% overall increase, evidencing the continued market corrections.
| |   |  |                                                                                                                                                                                                                                                                                                                                                   
| |  |  | BOLI income
 increased as the Company recorded a gain of approximately $2.6 million related to
 tax-exempt life insurance proceeds. This increase was partially offset by a decline
 in the average yield earned as a result of current market interest rates and a reduction
 in the BOLI asset.                                                 
| |   |  |                                                                                                                                                                                                                                                                                                                                                   
| |  |  | Limited
 partnership income increased due primarily to the same reasons as outlined in the
 quarterly discussion, in addition to an increase in the carrying value on certain
 limited partnerships compared to a net loss and an impairment write down recorded
 in the prior year period.                                                       
| |   |  |                                                                                                                                                                                                                                                                                                                                                   
| |  |  | The decreases
 in net security gains, investment management, brokerage and insurance fees and mortgage
 origination and loan sale income from a year ago are similar to those outlined in
 the quarterly discussion above.                                                                                                                        

Table 6: Non-Interest Expense

|                                                 |  | Three Months Ended |        |        |      |          |        |        |  |   |         | Six Months Ended |  |      |     |    |      |   |        |       
|------------------------------------------------ |  | ------------------ | ------ | ------ | ---- | -------- | ------ | ------ |  | - | ------- | ---------------- |  | ---- | --- | -- | ---- | - | ------ | ------
|                                                 |  | June 30,           |        | Change |      | June 30, |        | Change
|                                                 |  |                    |        |        |      |          |        |       
|(Dollars in
 thousands)                          |  | 2010               |        |        | 2009 |          |        | Amount |  |   | Percent |                  |  | 2010 |     |    | 2009 |   |        | Amount
|                                                
|Salaries and
 employee benefits                  |  | $                  | 23,982 |        |      | $        | 21,607 |        |  | $ | 2,375   |                  |  |      | 11  | %  |      | $ | 46,203 |       
|Occupancy                                        |  |                    | 4,094  |        |      |          | 4,644  |        |  |   | (550    | )                |  |      | (12 | )  |      |   | 8,715  |       
|Furniture
 and fixtures                          |  |                    | 1,426  |        |      |          | 1,453  |        |  |   | (27     | )                |  |      | (2  | )  |      |   | 2,771  |       
|Outside services                                 |  |                    | 4,718  |        |      |          | 4,455  |        |  |   | 263     |                  |  |      | 6   |    |      |   | 9,867  |       
|Advertising,
 public relations, and sponsorships |  |                    | 1,486  |        |      |          | 981    |        |  |   | 505     |                  |  |      | 51  |    |      |   | 3,017  |       
|Amortization
 of identifiable intangible assets  |  |                    | 1,953  |        |      |          | 2,129  |        |  |   | (176    | )                |  |      | (8  | )  |      |   | 3,905  |       
|FDIC insurance
 premiums                         |  |                    | 1,898  |        |      |          | 5,893  |        |  |   | (3,995  | )                |  |      | (68 | )  |      |   | 3,755  |       
|Other                                            |  |                    | 4,071  |        |      |          | 3,243  |        |  |   | 828     |                  |  |      | 26  |    |      |   | 7,595  |       
|                                                
|Total
 non-interest expense                      |  | $                  | 43,628 |        |      | $        | 44,405 |        |  | $ | (777    | )                |  |      | (2  | )% |      | $ | 85,828 |       
|                                                

Non-Interest ExpenseComparison of Quarter-to-Date June 2010 and June 2009As displayed
 in Table 6, non-interest expense decreased $777,000 to $43.6 million for the three
 months ended June 30, 2010 from $44.4 million for the same period a year ago. The
 main drivers of the decrease were lower FDIC insurance premiums and occupancy expense,
 partially offset by an increase in salaries and employee benefits, advertising,
 public relations, and sponsorships and other expense.

| |  |  | FDIC insurance
 premium expense decreased $4.0 million due entirely to the special assessment that
 was imposed by the FDIC in the second quarter of 2009.                                           
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                                                                                                                      
| |  |  | Occupancy
 expenses declined primarily due to leasing costs related to the closure of two branch
 offices in the second quarter of 2009 and reduced maintenance costs throughout the
 branch network.

44




| |  |  | Salaries
 and employee benefits increased mainly as a result of a) general merit increases,
 b) additions to the management team, c) higher levels of employee incentive accruals,
 d) a decrease in capitalized salaries due to a decline in the number of residential
 loan originations, e) increases in restricted stock and option expense due to additional
 grant awards, and f) increased expense for the Companys pension due to changes
 in assumption for 2010. We expect to record additional SERP expense in the third
 quarter of approximately $1.3 million due to the retirement of an executive officer.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |  | Advertising,
 public relations and sponsorships increased primarily due to advertising expenses
 associated with new marketing campaigns. These campaigns include expenses associated
 with TV commercials, radio, print and online advertising, branch merchandising and
 collateral pieces, a redesigned website, select sponsorships and cash incentive
 awards and is expected to continue throughout the remainder of the year.                                                                                                                                                                                      
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |  | Other expense
 increased due to expenses primarily associated with telephone costs, increased foreclosure
 expenses and merger related charges. Merger related expenses increased approximately $500,000
 due to expenses pertaining to due diligence efforts.                                                                                                                                                                                                                                                                                                                                                            

Comparison of Year-to-Date June 2010
 and June 2009As displayed in Table 6, non-interest expense increased $1.0
 million to $85.8 million for the six months ended June 30, 2010 from $84.8 million
 for the same period a year ago. The main driver of the increase was salaries and
 employee benefits, advertising, public relations, and sponsorships and other expenses.
 These increases were partially offset by decreased occupancy expense, FDIC insurance
 premiums and amortization of identifiable intangible assets.

| |  |  | The increase
 in salaries and employee benefits, advertising, public relations and sponsorships
 and other expenses in addition to the decrease in occupancy expenses were primarily
 due to the same reasons as outlined in the quarterly discussion above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  |  | FDIC insurance
 premium expense decreased $3.1 million primarily due to the special assessment of
 $4.0 million during the second quarter of 2009. The decrease was partially offset
 by an increase of approximately one basis point in the base assessment rate for
 2010, compared to 2009 based on new assessment rates implemented by the FDIC in
 April 2009. Additionally, the Bank was able to offset some of the first quarter
 2009 assessment costs through the exhaustion of the one-time credit established
 by the FDIC Reform Act of 2005. Although FDIC insurance premium expense may continue
 to be somewhat volatile, the FDIC has issued a final rule maintaining current deposit
 insurance rates at their current levels through the end of 2010 but will apply a
 three basis-point increase in assessment rates effective January 1, 2011.
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  |  | Amortization
 of identifiable intangible assets decreased due to less amortization on core deposit
 intangibles from using the accelerated method of accounting, therefore, there was
 more amortization expense in 2009 compared to 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

Income Tax ProvisionFor the three
 months ended June 30, 2010 and 2009, income tax expense was $8.2 million and $5.7
 million and the effective tax rate for these periods was 33.6% and 36.1%, respectively.
 The decrease in the effective tax rate for the three months ended June 30, 2010,
 as compared to the 2009 period, was primarily due to the decrease in the valuation
 allowance against capital loss carryforwards. The decrease in the valuation allowance
 was treated as a discrete item in the second quarter of 2010.

For the six months ended June 30, 2010 and
 2009, income tax expense was $15.8 million and $11.9 million and the effective tax
 rate for these periods was 32.6% and 35.4%, respectively. The decrease in the effective
 tax rate for the six months ended June 30, 2010, as compared to the 2009 period,
 was primarily due to an increase in the favorable permanent differences relating
 to a $2.6 million gain on tax exempt bank owned life insurance proceeds and the
 decrease in the valuation allowance related to capital loss carryforwards. The gain
 was treated as a discrete item in the first quarter of 2010 and the decrease in
 the valuation allowance was treated as a discrete item in the second quarter of
 2010.

The projected
 effective rate for the year ended December 31, 2010 is 33.7%.

45




Financial Condition

Financial Condition SummaryFrom December 31, 2009 to June 30, 2010, total assets and total liabilities
 increased $277.8 million and $248.6 million, respectively, due mainly to increases
 in loans, investments, deposits and borrowings. Stockholders equity increased
 $29.2 million.

Investment SecuritiesThe following table presents the amortized cost and fair value of investment
 securities at June 30, 2010 and December 31, 2009.

Table 7: Investment Securities

|                                                      |  | June 30, 2010 |           | December 31, 2009
|----------------------------------------------------- |  | ------------- | --------- | -----------------
|                                                      |  |               |           |                  
|                                                      |  | Amortized     |           |                  
|(In thousands)                                        |  | cost          |           |                  
|                                                     
|                                                      |  |               |           |                  
|Available
 for sale                                   |  |               |           |                  
|U.S.
 Treasury obligations                            |  | $             | -         |                  
|U.S.
 Government sponsored enterprise obligations     |  |               | 399,327   |                  
|Corporate
 obligations                                |  |               | 8,118     |                  
|Other
 bonds and obligations                          |  |               | 13,496    |                  
|Auction
 rate certificates                            |  |               | 12,050    |                  
|Marketable
 equity securities                         |  |               | 8,582     |                  
|Trust
 preferred equity securities                    |  |               | 48,223    |                  
|Private
 label residential mortgage-backed securities |  |               | 21,428    |                  
|Residential
 mortgage-backed securities               |  |               | 1,820,482 |                  
|                                                     
|Total
 available for sale                             |  |               | 2,331,706 |                  
|                                                     
|Held to
 maturity                                     |  |               |           |                  
|Residential
 mortgage-backed securities               |  |               | 313,520   |                  
|Other
 bonds                                          |  |               | 9,735     |                  
|                                                     
|Total
 held to maturity                               |  |               | 323,255   |                  
|                                                     
|Total
 securities                                     |  | $             | 2,654,961 |                  
|                                                     

At June 30,
 2010, the Company had total investments of $2.73 billion, or 31.3% of total assets.
 The increase of $158.0 million, from $2.57 billion at December 31, 2009 was primarily
 in U.S Government agency obligations and held to maturity residential mortgage-backed
 securities partially offset by a decrease in available-for-sale residential mortgage-backed
 securities. While the Company prefers lending as the primary use of its excess cash
 flows, the investment portfolio serves a secondary role in generating revenue while
 managing interest-rate risk and liquidity.

The available
 for sale and held to maturity securities portfolios are primarily composed of mortgage-backed
 securities. At June 30, 2010, mortgage-backed securities comprised 80.0% and 97.0%
 of the total available for sale and held to maturity securities portfolios, respectively,
 the majority of which are issued by Federal National Mortgage Association (FNMA) or (Fannie Mae) and Federal Home Loan Mortgage Corporation (FHLMC) or (Freddie Mac). The duration of the mortgage-backed
 securities portfolio was 1.53 years at June 30, 2010 compared to 1.62 years at December
 31, 2009.

The Companys underlying investment strategy has been to purchase FNMA and FHLMC short-term
 front sequential collateralized mortgage obligations and seasoned 15 and 20 year
 Government Sponsored Enterprise (GSE) fixed rate mortgage-backed securities.
 The Company has focused on the purchases of these securities due to their attractive
 spreads versus funding costs and for their monthly cash flows that provide the Company
 with liquidity. This strategy is also supplemented with select purchases of bullet,
 callable and step-up coupon agency debentures. The average life for mortgage-backed
 securities, when purchased, would range between two and four years and the maturity
 dates for Agency obligations would range between one and seven years depending upon
 the rate structure of the bond.

FASB guidance
 for the accounting of Investments - Debt and Equity Securities, requires
 the Company to designate its securities as held to maturity, available for sale
 or trading depending on the Companys intent regarding its investments at the
 time of purchase. The Company does not currently maintain a portfolio of trading
 securities. As of June 30, 2010, $2.40 billion, or 88.1% of the portfolio, was classified
 as available for sale and $323.3 million of the portfolio was classified as held
 to maturity. Securities available for sale are carried at estimated fair value.
 Additional information about fair value measurements can be found in Note 13 of
 the Notes to Unaudited Consolidated Financial Statements.

During the three months ended June 30, 2010,
 a pooled trust preferred security, which had a previous impairment charge during
 2009, was deemed to have an additional credit related OTTI loss in the amount of
 $552,000 based on a further decline in expected cash flows. The credit related impairment,
 which was reclassified from other comprehensive income as it was

46




previously recognized as non-credit related,
 was due to a cash flow analysis that indicated further credit related impairment.
 The Company received nine cash flow scenarios from the underwriter which were utilized
 by management to analyze this security for potential OTTI. The nine scenarios covered
 various default rates, recovery rates and prepayment options over different time
 periods. Two of the nine cash flow analyses indicated impairment over the life of
 the security. The driver of the indicated impairment was the recovery rate, which
 was modeled at 0% in these two cash flow scenarios. As the severity of the estimated
 loss in these two cash flow scenarios increased by a factor of five since the prior
 OTTI analysis in the first quarter of 2010 and due to the fact that the past history
 of the security indicates that there have not been any recoveries to date from securities
 that have defaulted, the Company recorded a credit-related impairment charge. The
 credit impairment represents the average loss of the two negative cash flow analyses.
 After the write-down, the pooled trust preferred security had an amortized cost
 and fair value of approximately $869,000 and $220,000, respectively. There is no
 intent to sell nor is it more likely than not that the Company will be required
 to sell this security.

The net unrealized
 gain on securities classified as available for sale as of June 30, 2010 was $71.6
 million compared to an unrealized gain of $45.8 million as of December 31, 2009.
 All investment categories except marketable equity securities experienced positive
 movement in the mark to market since December 31, 2009. The appreciation in the
 market value of securities available for sale was primarily due to the increase
 in the fair value of mortgage-backed securities due to the decrease in intermediate
 LIBOR/Swap rates and the slight tightening in mortgage spreads. Mortgage spreads
 tightened due to increased bank demand for mortgages due to renewed concerns regarding
 world-wide financial concerns. The net unrealized gain on the available for sale
 investment portfolio is primarily within the mortgage-backed securities, partially
 offset by unrealized losses on trust preferred equity securities. The changes in
 unrealized gains and losses on the investment portfolio were also due to credit
 spreads, liquidity and fluctuations in market interest rates during the period.

The net unrealized
 gain on residential mortgage-backed securities is primarily from agency mortgage-backed
 securities issued by FNMA and FHLMC resulting from the general decline in interest
 rates and the tightening in mortgage-backed security spreads since date of purchase.
 Although the Federal Reserve Bank mortgage-backed securities purchase program ended
 on March 31, 2010, mortgage rates and spreads continue to remain at relatively low
 levels.

The unrealized
 loss on private label residential mortgage-backed securities is approximately 50%
 concentrated in one BBB rated private-label mortgage-backed security which is substantially
 paid down, well seasoned and of an earlier vintage that has not been significantly
 affected by high delinquency levels or vulnerable to lower collateral coverage as
 seen in later issued pools. Widening in non-agency mortgage spreads since the date
 purchased is the primary factor for the unrealized losses reported on private label
 residential mortgage-backed securities. None of the securities are backed by subprime
 mortgage loans and none have suffered losses. One of the private issue securities
 is rated BBB and the remaining securities are AA through AAA rated. All are still
 paying principal and interest and are expected to continue to pay their contractual
 cash flows. Management reviewed potential impairment factors and issuer specific
 data and concluded that these private-label mortgage-backed securities are not other-than-temporarily
 impaired.

The unrealized
 losses on other bonds and obligations primarily relates to a position in an adjustable
 rate mortgage mutual fund that holds positions in non-agency mortgage-backed securities
 that are facing negative mark to market pressures due to widening spreads in non-agency
 mortgage products. Although the fund has experienced declines in credit ratings
 during 2009, it was not due to customer redemptions or forced selling of the investments.
 During 2009, the Company recorded a credit-related OTTI loss of $816,000 on this
 adjustable rate mortgage mutual fund due to a decrease in the credit quality of
 the security coupled with a loss recognized by the fund. As of June 30, 2010, the
 investment carries a market value to book value ratio of 82.43%, a weighted average
 underlying investment credit rating of A+ and it continues to pay normal monthly
 dividends. There is no intent to sell nor is it more likely than not that the Company
 will be required to sell these securities and management has therefore concluded
 that the fund experienced no further OTTI in the quarter ended June 30, 2010.

Trust preferred
 securities are comprised of two pooled trust preferreds with an amortized cost of
 $5.6 million, one of which is rated A and the other is rated CC at June 30, 2010,
 a slight downgrade from BB at December 31, 2009. During 2009, the Company recorded
 a credit related OTTI loss of $581,000 on the CC rated pooled trust preferred security
 based on a cash flow analysis and a subsequent credit-related impairment of $552,000
 during the second quarter ending June 30, 2010 as discussed above. The remaining
 $42.6 million of trust preferred securities are comprised of twelve individual
 names issues with the following ratings: $15.6 million rated A to AA-, $14.6
 million rated BBB- to BBB+ and $12.4 million rated BB. The unrealized losses reported
 for trust preferred securities relate to the financial and liquidity stresses in
 the fixed income markets and in the banking sector and are not reflective of individual
 stresses in the individual company names. The ratings on all of the issues with
 the exception of the CC rated pooled security have improved or remained the same
 since December 31, 2009. Additionally, there have not been any disruptions in the
 cash flows of these securities and all are currently paying the contractual principal
 and interest payments. A detailed review of the two pooled trust preferreds and
 the individual names trust preferred equity securities was completed
 by management. This review included an analysis of collateral reports, cash flows,
 stress default levels and financial ratios of the underlying issuers. Management
 reviewed the above factors and issuer specific data and

47




concluded
 that after the OTTI loss recorded on the CC rated pooled trust preferred security,
 these securities are not other-than-temporarily impaired.

The Company
 has no intent to sell nor is it more likely than not that the Company will be required
 to sell any of these securities within the time necessary to recover the unrealized
 losses which may be until maturity. The Company does not own or plan on investing
 in securities backed by subprime mortgage collateral.

Lending ActivitiesThe Company makes residential
 real estate loans secured by one-to-four family residences, commercial real estate
 loans, residential and commercial construction loans, commercial business loans,
 home equity loans and lines of credit and other consumer loans. Table 8 displays
 the balances of the Companys loan portfolio as of June 30, 2010 and December
 31, 2009.

Table 8: Loan Portfolio

|                                        |  | June 30, 2010 |           | December 31, 2009
|--------------------------------------- |  | ------------- | --------- | -----------------
|                                        |  |               |           |                  
|                                        |  |               |           |                  
|(Dollars in
 thousands)                 |  | Amount        |           |                  
|                                       
|Residential
 real estate                |  | $             | 2,472,730 |                  
|Residential
 real estate construction   |  |               | 18,431    |                  
|                                       
|Total
 residential real estate          |  |               | 2,491,161 |                  
|                                        |  |               |           |                  
|Commercial
 real estate                 |  |               | 1,192,934 |                  
|Commercial
 real estate construction    |  |               | 68,884    |                  
|                                       
|Total
 commercial real estate           |  |               | 1,261,818 |                  
|                                        |  |               |           |                  
|Commercial
 business                    |  |               | 473,329   |                  
|Home equity
 and equity lines of credit |  |               | 687,635   |                  
|Other consumer                          |  |               | 14,428    |                  
|                                       
|Total
 loans                            |  | $             | 4,928,371 |                  
|                                       

As shown in Table 8, gross loans were $4.93
 billion, up $166.3 million, at June 30, 2010 from December 31, 2009. The Company
 experienced increases in residential real estate, commercial real estate and business
 loans partially offset by home equity loans.

Residential real estate loans continue to
 represent the largest segment of the Companys loan portfolio as of June 30,
 2010, comprising 50.5% of total loans. The increase of $94.9 million from December
 31, 2009 was primarily due to origination volume partially offset by the net impact
 of prepayments. The Company had significant originations of both adjustable and
 fixed rate mortgages of $549.2 million during the first half of the year, with
 approximately $439.0 million originated for portfolio and the remainder was sold
 in the secondary market. The Company currently sells the majority of all originated
 fixed rate residential real estate loans with terms of 15 years or more. During
 the third quarter of 2009 the Company began to retain in its portfolio 30 year jumbo
 fixed rate residential mortgage originations and in 2010 the Company originated
 and retained $53.2 million of these mortgages. The residential portfolio increased
 in the first half of year due to continued strong mortgage activity resulting from
 relatively low market interest rates, competitive pricing and increased marketing
 campaigns. The residential real estate loan portfolio has a weighted average FICO
 score of 749 and a current estimated weighted loan to value ratio of 63%. Included
 in residential real estate is a purchased portfolio, which is made up of prime loans
 individually re-underwritten by the Company to our underwriting criteria, and includes
 adjustable-rate and 10 and 15 year fixed-rate residential real estate loans with
 property locations throughout the United States with no significant exposure in
 any particular state. At June 30, 2010 the Companys purchased portfolio had
 an outstanding balance of approximately $427.4 million with the largest concentration
 in our footprint of Connecticut and Massachusetts at 19.3%, followed by New York
 at 13.6% and California at 12.8%.

Commercial real estate loans increased $28.6
 million from December 31, 2009, as the Bank has experienced increased demand in
 refinancing commercial real estate loans. Mid-sized businesses continue to look
 to regional community banks for relationship banking and personalized lending services.
 The commercial construction portfolio of $68.9 million includes $22.0 million of
 loans to commercial borrowers for residential housing development, approximately
 $8.3 million of which are for condominium projects. The decrease in commercial construction
 is mainly the result of transfers of construction to permanent loans to the commercial
 real estate portfolio as well as a drop in residential housing development loans.

The Companys long term strategy continues
 to be that of building a larger percentage of the Companys assets in commercial
 loans including real estate and other business loans, such as asset-based lending.
 In the fourth quarter of 2009, the Company formed an asset-based lending business.
 Asset-based lending expands the Banks business lending offerings to include
 revolving lines of credit and term loans secured by accounts receivable, inventory,
 and other assets. An asset-based loan is

48




collateralized with a customers balance
 sheet assets, which are considered the primary source of loan repayment. This type
 of financing is particularly attractive to start-up and growth companies, as well
 as those in restructuring, turn-around, or other financially distressed situations
 that result in the inability to secure traditional commercial lending.

Commercial business loans increased $62.1
 million from December 31, 2009, primarily due to asset-based lending. As of June
 30th, the asset-based lending portfolio was $69.1 million or 1.4% of
 total loans. We remain an active commercial lender and will continue promoting strong
 business development efforts to obtain new business banking relationships, while
 maintaining strong credit quality and profitability. We believe that our status
 as a healthy regional community bank focused on relationship banking bodes well
 for us to retain customers and to be a potential source of credit for new businesses.

Home equity loans and lines of credit decreased
 $18.0 million from December 31, 2009 to June 30, 2010. The Company continues to
 offer competitive pricing and is committed to growing this loan segment while maintaining
 credit quality. However, as a result of the continuing interest rate environment,
 consumer demand has shifted to residential mortgages and away from home equity products,
 attributing to the year-to-date decline in the portfolio. The weighted average FICO
 score and current estimated weighted combined loan to value ratio for home equity
 loans and lines of credit is 749 and 68%, respectively. Lending has been from organic
 originations in the Companys market area, none of which is subprime.

Higher-Risk LoansThe loan portfolio segments that we consider to have the highest risk are
 construction loans to commercial developers for residential development and a small
 segment of our residential real estate loans. The Company has a carrying value of
 $22.0 million of commercial construction loans for residential development. All
 of these loans are collateralized and carry a reserve allocation of approximately
 $2.9 million. This segment has total delinquencies of $321 thousand, all of which
 are in the over 90 day category.

Within the residential portfolio, management
 uses an early warning technique to more closely monitor credit deterioration and
 potential nonperforming loans. The Company uses a matrix to identify where the concentration
 of outstanding loans fall in the risk continuum. This matrix is constructed using
 estimated current loan-to-value ranges (current balance LTV adjusted for estimated
 appreciation or depreciation in the appraised value) and the latest available FICO
 score ranges (rescored quarterly). The Company considers loans with an estimated
 current loan-to-value ratio above 80% and a FICO score less than 620 to be higher-risk.
 Once identified, the higher-risk loans are then reviewed by the Special Assets department
 to determine what, if any, action should be taken to mitigate possible loss exposure.
 At June 30, 2010, higher-risk loans comprised approximately $53.0 million, or 2.2%
 of the residential real estate portfolio.

Additionally, the Company also tracks loans
 that have a FICO score that has declined 20 points or more and are below 660. As
 of June 30, 2010 loans meeting this criteria represent approximately $56.3 million,
 or 2.26% of the residential portfolio.

Asset QualityLoans are placed on nonaccrual if collection of principal or interest in full
 is in doubt, if the loan has been restructured, or if any payment of principal or
 interest is past due 90 days or more. A loan may be returned to accrual status if
 it has demonstrated sustained contractual performance or if all principal and interest
 amounts contractually due are reasonably assured of repayment within a reasonable
 period.

As displayed in Table 9, nonperforming assets
 at June 30, 2010 increased to $70.9 million compared to $54.2 million at December
 31, 2009. The increase is primarily due to loans secured by residential one-to-four
 family loans and commercial real estate loans.

The increase in nonperforming residential
 loans of $15.5 million was due to current economic conditions including factors
 such as continued high unemployment rates and softness in the real estate market
 impacting customers ability to make loan payments. There are 190 loans in the residential
 nonperforming category totaling $46.7 million, representing 1.87% of the total residential
 portfolio, just over half of which have property locations in Connecticut and Massachusetts.
 The Company routinely updates FICO scores and LTV ratios and continues to originate
 loans with superior credit characteristics. Through continued heightened account
 monitoring, collections and workout efforts, the Bank is committed to mortgage solution
 programs to assist homeowners to remain in their homes. As has been its practice
 historically, the Company does not originate subprime loans. Included in nonperforming
 residential loans are approximately $3.6 million in restructured loans which have
 been modified from their original contractual terms.

The increase in nonperforming commercial
 real estate loans primarily relates to two loans totaling $6.9 million which are
 in the process of restructured workouts, partially offset by a decrease of $1.7
 million due to a note sale.

In the course of resolving nonperforming loans, the
 Bank may choose to restructure the contractual terms of certain real estate loans.
 Terms may be modified to fit the ability of the borrower to repay in line with their
 current financial status which may be

49




a reduction in interest rate to market rate
 or below, a change in the term, movement of the past due amounts to the back end
 of the loan or refinance. Loans are placed on nonaccrual status upon being restructured,
 even if they were not previously. The Banks policy to restore a restructured
 loan to performing status is dependent on the receipt of regular payments, generally
 for a period of six months.

While the economic data indicates the worst
 of the recession is over, if unfavorable economic and real estate market conditions
 persist or deteriorate further, there will be added stress on our loan portfolios.
 The Company believes, however, that its historical practice of prudent underwriting,
 the relatively modest size of its residential construction portfolio and strong
 average FICO scores combined with low weighted average loan to value ratios associated
 with its residential portfolio are significant advantages in keeping asset quality
 manageable. Nonperforming loans as a percent of total loans outstanding at June
 30, 2010 were 1.39%, compared to 1.06% at December 31, 2009.

Table 9: Nonperforming Assets

|                                                                      |  | June 30, |        | December 31,
|--------------------------------------------------------------------- |  | -------- | ------ | ------------
|(Dollars in thousands)                                                |  | 2010     |        | 2009        
|                                                                     
|Nonperforming loans (1)                                               |  |          |        |             
|Real
 estate loans                                                    |  |          |        |             
|Residential
 (one- to four-family)                                    |  | $        | 46,663 |             
|Commercial
 real estate loans                                         |  |          | 9,638  |             
|Commercial
 construction                                              |  |          | 321    |             
|                                                                     
|Total
 real estate loans                                              |  |          | 56,622 |             
|Commercial
 business                                                  |  |          | 9,093  |             
|Consumer
 loans                                                       |  |          |        |             
|Home
 equity and equity lines of credit                               |  |          | 2,386  |             
|Other
 consumer                                                       |  |          | 194    |             
|                                                                     
|Total
 consumer loans                                                 |  |          | 2,580  |             
|                                                                     
|Total
 nonperforming loans                                            |  |          | 68,295 |             
|Other real
 estate owned                                              |  |          | 2,648  |             
|                                                                     
|Total
 nonperforming assets                                           |  | $        | 70,943 |             
|                                                                     
|                                                                      |  |          |        |             
|Total
 nonperforming loans as a percentage of total loans (2)         |  |          | 1.39   | %           
|Total
 nonperforming assets as a percentage of total assets           |  |          | 0.81   |             
|                                                                     
|Troubled
 debt restructured loans included in nonaccruing loans above |  | $        | 4,073  |             

|(1) |  | Nonperforming
 loans, except guaranteed U.S. Government certificates totaling $1,000 and $477,000
 at June 30, 2010 and December 31, 2009, respectively, include all loans 90 days
 or more past due, restructured loans due to a weakening in the financial condition
 of the borrower and other loans which have been identified by the Company as presenting
 uncertainty with respect to the collectability of principal or interest. All of
 the Companys non-performing loans do not accrue interest.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) |  | Total loans
 are stated at their principal amounts outstanding, net of deferred loan fees and
 net unamortized premiums on acquired loans.                                                                                                                                                                                                                                                                                                                                                                  

Allowance for Loan LossesDeteriorating market conditions have adversely impacted the loan
 portfolios since the latter part of 2007. As displayed in Table 10 below, the Company
 recorded net charge-offs of $4.7 million during the three ended June 30, 2010, compared
 to net charge-offs of $4.1 million for the three months ended June 30, 2009. Net
 charge-offs of $1.3 million, $1.2 million, $832,000 and $1.2 million were recorded
 against the residential, commercial real estate, commercial construction and commercial
 business portfolios, respectively. The majority of the charge-offs in the residential
 category were adjustments based on current appraisals which continue to show the
 depression in home values while persistent adverse economic and housing pressures
 are affecting charge-off levels in the commercial real estate, commercial construction
 and commercial business portfolios. As a result of the net charge-offs and reserve
 requirements for impaired loan classifications, a provision for loan losses of $5.5
 million was recorded for the three months ended June 30, 2010 compared to $5.0 million
 for the three months ended June 30, 2009. For the six months ended June 30, 2010,
 net charge-offs were $7.8 million compared to $7.5 million for the six months ended
 June 30, 2009 and were primarily in the residential and commercial portfolios.

The Company has a loan loss allowance of
 $54.9 million, or 1.11% of total loans as compared to a loan loss allowance of $52.5
 million, or 1.10% of total loans at December 31, 2009. Management believes that
 the allowance for loan losses is adequate and consistent with asset quality indicators
 and that it represents the best estimate of probable losses inherent in the loan
 portfolio. To achieve this estimate, numerous factors are evaluated and applied
 to the allowance for loan loss calculation.

The allowance for loan losses to nonperforming
 loans ratio at June 30, 2010 was 80.45% compared to 103.87% at December 31, 2009
 and 93.86% at June 30, 2009. This ratio has declined because growth in the allowance
 is not proportionate to growth in

50




nonperforming
 loans as the result of the following: 1) the majority of the Companys nonperforming loans are secured by real estate
 collateral and while the entire loan is classified as nonperforming, only the amount
 of estimated losses would have been captured in the allowance for loan losses; 2)
 growth in nonperforming loans has been concentrated in residential real estate loans
 in which a significant loss in event of default is relatively low; 3) certain nonperforming
 loans have already been partially charged-off to the expected net realizable value; and 4) a portion of the allowance is to cover losses established
 under FASB ASC 450, Contingencies, for performing loans. The increase in
 total loans since December 31, 2009 has been concentrated in well secured residential
 mortgage and asset-based loans. Additionally, there has been a continued reduction
 in the construction loan portfolio.The increase in residential real estate nonperforming loans has been the main driver of the overall increase in
total nonperforming loans. Nonperforming loans increased $17.8 million, or 35.2%, since December 31,
2009, of which $15.5 million, or 87.3%, was in residential real estate loans. The residential portfolio presents
a low risk of significant loss due to the Companys conservative underwriting standards and low LTV ratios.
Additionally, during the quarter, the Company analyzed the majority of its nonperforming loans for specific
reserves and its on-going reappraisal process continued to support high collateral levels and coverage.
During the most recent quarter the loan portfolio experienced a moderate increase in nonperforming loans as
compared to prior periods. In addition, total delinquencies declined slightly from the previous quarter.
Criticized loans have declined and adversely classified loans have remained relatively flat since December 31,
2009.
The Company employs a formal quarterly process
 to assess the adequacy of the Companys allowance for loan losses. The process
 is designed to adequately capture inherent losses in the loan portfolio. The Company
 continues to aggressively address and dispose of impaired and adversely classified
 assets particularly as it relates to loans with a potentially higher risk of loss.
 Net charge-offs and overall loan portfolio performance continues to remain well
 within expected ranges.

Table 10: Schedule of Allowance for Loan
 Losses

|                                                  | At or For the Three Months |      | At or For the Six Months
|------------------------------------------------- | -------------------------- | ---- | ------------------------
|                                                  | Ended June 30,             |      | Ended June 30,          
|                                                  |                            |      |                         
|(Dollars in
 thousands)                           |                            | 2010 |                         
|                                                 
|Balance at beginning of period                    |                            | $    | 54,164                  
|Provision
 for loan losses                        |                            |      | 5,500                   
|Charge-offs                                       |                            |      |                         
|Residential
 real estate loans                    |                            |      | 1,293                   
|Commercial
 real estate loans                     |                            |      | 1,244                   
|Commercial
 construction loans                    |                            |      | 832                     
|Commercial
 business loans                        |                            |      | 1,459                   
|Consumer
 loans                                   |                            |      | 213                     
|                                                 
|Total
 charge-offs                                |                            |      | 5,041                   
|                                                 
|Recoveries                                        |                            |      |                         
|Residential
 real estate loans                    |                            |      | 8                       
|Commercial
 real estate loans                     |                            |      | -                       
|Commercial
 construction loans                    |                            |      | -                       
|Commercial
 business loans                        |                            |      | 276                     
|Consumer
 loans                                   |                            |      | 38                      
|                                                 
|Total
 recoveries                                 |                            |      | 322                     
|                                                 
|Net charge-offs                                   |                            |      | 4,719                   
|                                                 
|Balance at
 end of period                         |                            | $    | 54,945                  
|                                                 
|Net charge-offs
 to average loans (annualized)    |                            |      | 0.39                    
|Allowance
 for loan losses to total loans         |                            |      | 1.11                    
|Allowance
 for loan losses to nonperforming loans |                            |      | 80.45                   
|Net charge-offs
 to allowance for loan losses     |                            |      | 8.59                    
|Total recoveries
 to total charge-offs            |                            |      | 6.39                    

Loans Held for SaleThe Company currently sells the majority of its originated fixed rate
 residential real estate loans with terms of 15 years or more. Loans held for sale
 were $13.4 million at June 30, 2010, a decrease of $1.3 million from $14.7 million
 at December 31, 2009. The decrease is primarily due to a combination of market rates
 and the Company retaining a higher percentage of residential mortgage originations
 in the first half of 2010. During the year, the Company originated approximately
 $110.4 million mortgage loans for sale. The Company originates both fixed-rate mortgage
 loans and small business loans (SBA) for sale in the secondary market.

Goodwill and Identifiable Intangible
 AssetsAt June 30, 2010, the Company had intangible assets of
 $558.6 million, a decrease of $3.9 million, from $562.5 million at December 31,
 2009. The decrease is due to year-to-date amortization expense for core deposit
 and customer relationships.Identifiable intangible assets are amortized
 on a straight-line or accelerated basis, over their estimated lives. Management
 assesses the recoverability of intangible assets subject to amortization whenever
 events or changes in circumstances indicate that

51




their carrying
 value may not be recoverable. If the carrying amount exceeds fair value, an impairment
 charge is recorded to income.Goodwill is not amortized, but instead is reviewed
 for impairment on an annual basis and more frequently if circumstances exist that
 indicates a possible reduction in the fair value of the business below its carrying
 value. For purposes of goodwill impairment evaluation, the Bank is identified as
 the reporting unit. The Company engaged an external third party to assist with the
 annual test for goodwill impairment during the first quarter of 2010. The analysis
 performed evaluated the fair value of the reporting unit using a combination of
 four valuation methodologies including; the Public Market Peers approach, the Comparable
 Transactions approach, the Control Premium approach and a Discounted Cash Flow approach.
 Based on the analysis, the Company concluded that the reporting unit was not at
 risk of failing Step 1 of the impairment test; therefore, an impairment charge was
 not deemed necessary. No events or circumstances subsequent to the analysis through
 June 30, 2010 indicate that the carrying value of the Companys goodwill may
 not be recoverable.

Sources of FundsCash flows from deposits, loan and mortgage-backed securities repayments,
 securities sales proceeds and maturities, borrowings and earnings are the primary
 sources of the Companys funds available for use in its lending and investment
 activities and in meeting its operational needs. While scheduled loan and securities
 repayments are a relatively stable source of funds, deposit flows and loan and investment
 security prepayments are influenced by prevailing interest rates and local and economic
 conditions and are inherently uncertain. See Note 8 of Notes to Unaudited Consolidated
 Financial Statements contained elsewhere within this Report for borrowings information.
The Company attempts to control the flow of funds in its deposit accounts
 according to its need for funds and the cost of alternative sources of funding.
 A Loan and Deposit Pricing Committee meets weekly to determine pricing and marketing
 initiatives. It influences the flow of funds primarily by the pricing of deposits,
 which is affected to a large extent by competitive factors in its market area and
 asset/liability management strategies.

Deposits
The Company receives retail and commercial deposits through its main office and 87
 additional banking offices throughout Connecticut (76 locations) and Massachusetts
 (12 locations). Customers can also access their accounts through ATMs, internet
 banking and telephone banking. Customer deposits generated through the NewAlliance
 banking network are the largest source of funds used to support asset growth.

Table 11: Deposits

|                |  | June 30, |           | December 31,
|--------------- |  | -------- | --------- | ------------
|(In thousands)  |  | 2010     |           |             
|               
|Savings         |  | $        | 1,798,881 |             
|Money market    |  |          | 915,510   |             
|NOW             |  |          | 406,069   |             
|Demand          |  |          | 568,414   |             
|Time            |  |          | 1,447,872 |             
|               
|Total
 deposits |  | $        | 5,136,746 |             
|               

As displayed
 in Table 11, deposits increased $112.7 million compared to December 31, 2009. The
 Companys strategy has been to increase core deposits and reduce rates paid
 on interest bearing deposits, particularly on time deposits, in order to improve
 the net interest margin and the interest rate spread while continuing to build core
 relationships. Through well-designed product offerings, the Company has been able
 to grow core deposits by $146.3 million, particularly through the Companys
 money market products. Money market deposits have shown significant increases and
 have grown approximately $125.0 million since year end due to the premium money
 market product which offers competitive pricing with a tiered rate structure. The
 Company has executed several marketing programs, including telephone and direct
 mail campaigns to retain valued, higher-balance deposit accounts through the cross-sell
 strategy of offering our best banking product  Premium Alliance
 Checking and its companion accounts  Premium Savings and Premium Money Market.
 Partially offsetting the growth in core deposits was a decrease in time deposit
 accounts of approximately $34.0 million, as the Company repriced maturing CDs
 at reduced rates causing retention of time deposits to drop. However, the Company
 was able to retain a portion of maturing time deposit accounts through the free
 savings and premium money market products that offer competitive interest rates.

52




Borrowings
NewAlliance also uses various types of short-term and long-term borrowings in meeting
 funding needs. While customer deposits remain the primary source for funding loan
 originations, management uses short-term and long-term borrowings as a supplementary
 funding source for loan growth and other liquidity needs when the cost of these
 funds are favorable compared to alternative funding, including deposits.
The Company is a member of the FHLB of Boston which is part of the Federal Home Loan
 Bank System. Members are required to own capital stock in the FHLB and borrowings
 are collateralized by certain home mortgages or securities of the U.S. Government
 and its agencies.The following table summarizes the Companys recorded
 borrowings at June 30, 2010.

Table 12: Borrowings


|                                                                |  |  | June 30, |           | December 31,
|--------------------------------------------------------------- |  |  | -------- | --------- | ------------
|(In thousands)                                                  |  |  | 2010     |           |             
|                                                               
|FHLB advances
 (1)                                              |  |  | $        | 1,900,561 |             
|Repurchase
 agreements                                          |  |  |          | 100,951   |             
|Mortgage loans
 payable                                         |  |  |          | 1,085     |             
|Junior subordinated
 debentures issued to affiliated trusts (2) |  |  |          | 21,135    |             
|                                                               
|Total
 borrowings                                               |  |  | $        | 2,023,732 |             
|                                                               

|(1) | Includes
 fair value adjustments on acquired borrowings, in accordance with purchase accounting
 standards of $2.4 million and $3.1 million at June 30, 2010 and December 31, 2009,
 respectively. The acquisition fair value adjustments (premiums) are being amortized
 as an adjustment to interest expense on borrowings over their remaining terms using
 the level yield method.         
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                
|(2) | The trusts
 were organized to facilitate the issuance of "trust preferred" securities. The Company
 acquired these subsidiaries when it acquired Alliance Bancorp of New England, Inc.
 and Westbank Corporation, Inc. The affiliated trusts are wholly-owned subsidiaries
 of the Company and the payments of these securities are irrevocably and unconditionally
 guaranteed by the Company.

Borrowings
 were $2.02 billion at June 30, 2010, an increase of $133.8 million from the balance
 recorded at December 31, 2009, and were mainly in FHLB advances. This increase represents
 the Company taking advantage of reduced rates offered by the FHLB for advances that
 were competitive with current market deposit rates. Combined with the growth in
 our core deposits, the advances assist the Company with the growth in our loan portfolio,
 to invest in securities and meet other liquidity needs, while effectively managing
 interest rate risk. At June 30, 2010, all of the Companys outstanding FHLB
 advances were at fixed rates ranging from 0.22% to 8.17%.

Stockholders EquityTotal stockholders equity equaled $1.46 billion at June 30,
 2010, an increase of $29.2 million compared to $1.43 billion at December 31, 2009.
 The increase was primarily due to earnings of $32.7 million and the increase in
 the fair market value of available-for-sale investment securities of $16.7 million,
 net of tax. The increase in equity was partially offset by the acquisition of treasury
 stock totaling $11.3 million and $14.0 million for the payment of cash dividends
 declared on our common stock during the six months ended June 30, 2010. For information
 regarding our compliance with applicable capital requirements, see Liquidity
 and Capital Position below.Dividends declared during the six months
 ended June 30, 2010 and 2009 were $0.14 per share. On July 27, 2010, we declared
 a $0.07 per share cash dividend payable on August 19, 2010 to shareholders of record
 on August 9, 2010. This will be the Companys 25th consecutive quarterly dividend
 payment. Book value per share amounted to $13.93 and $13.53 at June 30, 2010 and
 December 31, 2009, respectively, and tangible book value amounted to $8.62 and $8.23
 at the same dates, respectively.

Management Of Market And Interest
 Rate Risk

GeneralMarket
 risk is the exposure to losses resulting from changes in interest rates, foreign
 currency exchange rates, commodity prices and equity prices. The Company has no
 foreign currency or commodity price risk. Credit risk related to investment securities
 is mitigated as the majority are government agency securities. There is no direct
 subprime mortgage exposure in the investment portfolio. The chief market risk factor
 affecting financial condition and operating results is interest rate risk. Interest
 rate risk is the exposure of current and future earnings and capital arising from
 adverse movements in interest rates and spreads. This risk is managed by periodic
 evaluation of the interest rate risk inherent in certain balance sheet accounts,
 determination of the level of risk considered appropriate given the Companys
 capital and liquidity requirements, business strategy, performance objectives

53




and operating environment and maintenance
 of such risks within guidelines approved by the Board of Directors. Through such
 management, the Company seeks to reduce the vulnerability of its net earnings to
 changes in interest rates. The Asset/Liability Committee, comprised of numerous
 senior executives, is responsible for managing interest rate risk. On a quarterly
 basis, the Board of Directors reviews the Companys gap position and interest
 rate sensitivity exposure described below and Asset/Liability Committee minutes
 detailing the Companys activities and strategies, the effect of those strategies
 on the Companys operating results, interest rate risk position and the effect
 changes in interest rates would have on the Companys net interest income.
 The extent of movement of interest rates is an uncertainty that could have a negative
 impact on earnings.The principal strategies used to manage interest rate
 risk include (i) emphasizing the origination, purchase and retention of adjustable
 rate loans, and the origination and purchase of loans with maturities matched with
 those of the deposits and borrowings funding the loans, (ii) investing in debt securities
 with relatively short maturities and/or average lives and (iii) classifying a significant
 portion of its investment portfolio as available for sale so as to provide sufficient
 flexibility in liquidity management. By its strategy of limiting the Banks
 risk to rising interest rates, the Bank is also limiting the benefit of falling
 interest rates.The Company employs two approaches to interest rate risk measurement;
 gap analysis and income simulation analysis.

Gap AnalysisThe matching of assets and liabilities may be analyzed by examining the extent
 to which such assets and liabilities are interest rate sensitive and
 by monitoring a banks interest rate sensitivity gap. An asset
 or liability is deemed to be interest rate sensitive within a specific time period
 if it will mature or reprice within that time period. The interest rate sensitivity
 gap is defined as the difference between the amount of interest-earning assets
 maturing or repricing within a specific time period and the amount of interest-bearing
 liabilities maturing or repricing within that same time period. At June 30, 2010,
 the Companys cumulative one-year interest rate gap (which is the difference
 between the amount of interest-earning assets maturing or repricing within one year
 and interest-bearing liabilities maturing or repricing within one year), was positive
 $418.3 million, or 4.80% of total assets. The Banks approved policy limit
 is plus or minus 20%. A gap is considered positive when the amount of interest rate
 sensitive assets exceeds the amount of interest rate sensitive liabilities. A gap
 is considered negative when the amount of interest rate sensitive liabilities exceeds
 the amount of interest rate sensitive assets. During a period of rising interest
 rates, a negative gap would tend to adversely affect net interest income while a
 positive gap would tend to result in an increase in net interest income. Conversely,
 during a period of falling interest rates, a negative gap would tend to result in
 an increase in net interest income while a positive gap would tend to adversely
 affect net interest income.

Income Simulation AnalysisIncome simulation analysis considers the maturity and repricing characteristics
 of assets and liabilities, as well as the relative sensitivities of these balance
 sheet components over a range of interest rate scenarios. Tested scenarios include
 instantaneous rate shocks, rate ramps over a six-month or one-year period, static
 rates, non-parallel shifts in the yield curve and a forward rate scenario. The simulation
 analysis is used to measure the exposure of net interest income to changes in interest
 rates over a specified time horizon, usually a three-year period. Simulation analysis
 involves projecting a future balance sheet structure and interest income and expense
 under the various rate scenarios. The Companys internal guidelines on interest
 rate risk specify that for a range of interest rate scenarios, the estimated net
 interest margin over the next 12 months should decline by less than 12% as compared
 to the forecasted net interest margin in the base case scenario. However, in practice,
 interest rate risk is managed well within these 12% guidelines.For the base
 case rate scenario the yield curve as of June 30, 2010 was utilized. This yield
 curve was utilized due to the recent excessive volatility in the rate markets as
 well as due to the comments from various Federal Reserve Bank (FRB)
 officials that interest rates would likely remain flat for an extended period. As
 of June 30, 2010, the Companys estimated exposure as a percentage of estimated
 net interest income for the next twelve-month period as compared to the forecasted
 net interest income in the base case scenario are as follows:

|                                                 | Percentage change in     
|------------------------------------------------ | -------------------------
|                                                 | estimated net interest   
|                                                 | income over twelve months
|                                                
|100 basis
 point upward shock in interest rates  |                          
|                                                 |                          
|25 basis point
 downward shock in interest rates |                          
|                                                

As of June 30, 2010, a downward rate shock
 of 25 basis points was a realistic representation of the risk of falling rates as
 the FRB has reduced the overnight lending rate target to a range between 0.00% and
 0.25%. For an increase in rates, an upward rate shock of 100 basis points is also
 a relevant representation of potential risk given the recent beginnings of an economic
 rebound due to the past reductions in the federal funds rate, the benefits of the
 government stimulus package and the expansion of the FRBs balance sheet.

54




Based on the
 scenarios above, net interest income would increase slightly in the 12-month period
 after an upward movement in rates, and would decrease slightly after a downward
 movement in rates. Computation of prospective effects of hypothetical interest rate
 changes are based on a number of assumptions including the level of market interest
 rates, the degree to which non-maturity deposits react to changes in market rates,
 the expected prepayment rates on loans and investments, the degree to which early
 withdrawals occur on time deposits and other deposit flows. As a result, these computations
 should not be relied upon as indicative of actual results. Further, the computations
 do not reflect any actions that management may undertake in response to changes
 in interest rates.

Liquidity and Capital PositionLiquidity is the ability to meet current and future short-term
 financial obligations. The Company further defines liquidity as the ability to respond
 to the needs of depositors and borrowers as well as maintaining the flexibility
 to take advantage of investment opportunities. The Companys primary sources
 of funds consist of deposit inflows, loan repayments and sales, maturities, paydowns
 and sales of investment and mortgage-backed securities, borrowings from the Federal
 Home Loan Bank and repurchase agreements.The Companys most liquid
 assets are cash and due from banks, short-term investments and debt securities.
 The levels of these assets are dependent on the Companys operating, financing,
 lending and investment activities during any given period. At June 30, 2010, cash
 and due from banks, short-term investments and debt securities maturing within one
 year amounted to $380.1 million, or 4.4% of total assets.The Company manages
 liquidity by determining its cash position daily. The Investment Department compiles
 reports detailing the Companys cash activity and cash balances occurring at
 its various correspondents and through its various funding sources. The Investment
 Department then settles all correspondent and bank accounts by either investing
 excess funds or borrowing to cover the projected shortfall.Factors affecting
 liquidity include loan origination volumes, loan prepayment rates, maturity structure
 of existing loans, core deposit growth levels, time deposit maturity structure and
 retention, investment portfolio cash flows, the market value of investment securities
 that can be used to collateralize FHLB advances and repurchase agreements. The liquidity
 position is influenced by general interest rate levels, economic conditions and
 competition. For example, as interest rates decline, payments of principal from
 the loan and mortgage-backed securities portfolio accelerate, as borrowers are more
 willing to prepay. Additionally, the market value of the securities portfolio generally
 increases as rates decline, thereby increasing the amount of collateral available
 for funding purposes.The Company has used borrowings from the Federal Home
 Loan Bank of Boston to fund loan growth while managing interest rate risk and liquidity.
 At June 30, 2010, total borrowings from the Federal Home Loan Bank amounted to $1.90
 billion, exclusive of $2.4 million in purchase accounting adjustments, and the Company
 had the immediate capacity to increase that total to $2.23 billion. Additional borrowing
 capacity of approximately $1.53 billion would be readily available by pledging eligible
 investment securities as collateral. Depending on market conditions and the Companys liquidity and gap position, the Company may continue to borrow from the Federal
 Home Loan Bank or initiate borrowings through the repurchase agreement market. At
 June 30, 2010 the Companys repurchase agreement lines of credit with four
 large broker dealers totaled $200.0 million, $175.0 million of which was available
 on that date. Agreement terms vary based on the collateral submitted.NewAlliances main source of liquidity at the parent company level is dividends from NewAlliance
 Bank. The main uses of liquidity are payments of dividends to common stockholders,
 repurchase of NewAlliances common stock, the payment of principal and interest
 to holders of trust preferred securities, and help fund acquisitions. There are
 certain restrictions on the payment of dividends. See Note 15 of Notes to Consolidated
 Financial Statements contained elsewhere within this report for further information
 on dividend restrictions.At June 30, 2010, the Company had commitments to
 originate loans, unused outstanding lines of credit and standby letters of credit
 totaling $993.4 million. Commitments generally have fixed expiration dates or other
 termination clauses, therefore, total commitment amounts do not necessarily represent
 future cash requirements. Management anticipates that it will have sufficient funds
 available to meet its current loan commitments. Time deposits maturing within one
 year from June 30, 2010 amount to $941.4 million. FHLB advances maturing within
 one year from June 30, 2010 amount to $518.7 million and interest payments of approximately
 $15.2 million are payable within that same time frame.Management believes
 that the cash and due from banks, short term investments and debt securities maturing
 within one year, coupled with the borrowing line at the Federal Home Loan Bank and
 the available repurchase agreement lines at selected broker dealers, provide for
 sufficient liquidity to meet its operating needs.

55




In October 2009, the Company filed a shelf
 registration with the SEC, which facilitates increased flexibility to seize market
 opportunities as they present themselves.At June 30, 2010, the Companys
 Tier 1 leverage ratio, a primary measure of regulatory capital was $895.1 million,
 or 11.2% of average assets, which is above the threshold level of $400.7 million,
 or 5.0% to be considered well-capitalized. The Tier 1 risk-based capital
 ratio stood at 20.0% and the Total risk-based capital ratio stood at 21.2%. The
 Bank also exceeded all of its regulatory capital requirements with leverage capital
 of $775.1 million, or 9.7% of average assets, which is above the required level
 of $320.2 million or 4.0%. The Tier 1 risk-based capital ratio was 17.3% and the
 Total risk-based capital ratio was 18.5%. These ratios qualify the Bank as a well
 capitalized institution under federal capital guidelines.Item
 3. Quantitative and Qualitative Disclosures About Market Risk

Quantitative and qualitative disclosures
 about the Companys market risk appears under Item 2, Managements
 Discussion and Analysis of Financial Condition and Results of Operations,
 under the caption Management of Market and Interest Rate Risk on pages
 53 through 55.

Item 4. Controls and Procedures

The Companys management, including
 our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness
 of our disclosure controls and procedures (as defined in Rule 13(a)-15(e) or Rule
 15(d)-15(e) under the Exchange Act) as of June 30, 2010. Based upon that evaluation,
 the Chief Executive Officer and Chief Financial Officer concluded that our disclosure
 controls and procedures are effective.Disclosure controls and procedures
 are our controls and other procedures that are designed to ensure that the information
 required to be disclosed by us in our reports filed or submitted under the Securities
 Exchange Act of 1934 (the Exchange Act) is recorded, processed, summarized
 and reported within the time periods specified in the Securities and Exchange Commissions rules and forms. Disclosure controls and procedures include, without limitation,
 controls and procedures designed to ensure that information required to be disclosed
 by us in our reports filed under the Exchange Act is accumulated and communicated
 to our management, including the principal executive officer and principal financial
 officer, as appropriate to allow timely decisions regarding required disclosure
 in the second quarter 2010.In addition, based on that evaluation, no change
 in the Companys internal control over financial reporting occurred during
 the quarter ended June 30, 2010 that has materially affected, or is reasonably likely
 to materially affect, the Companys internal control over financial reporting.

Item 4T. Controls and Procedures

Not applicable.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

There are
 no material legal proceedings or other litigation. See the caption Legal Proceedings under Footnote 12 Commitments and Contingencies in Part I, Item
 I, Financial Statements (Unaudited) of this Form 10-Q.

Item 1A. Risk Factors

There have
 been no material changes in our risk factors from those disclosed in our 2009 Annual
 Report on form 10K.

Item 2. Unregistered Sales of
 Equity Securities and Use of Proceeds

(a) None.(b) Not applicable.(c) The following table sets forth information about
 the Companys stock repurchases for the three months ended June 30, 2010.

56




|                  |     | (a) Total Numberof SharesPurchased | (b) AveragePrice Paid perShare (includes
commission) | (c) Total Number ofShares Purchased as Part
of Publicly AnnouncedPlans or Programs | (d) Maximum Number (orApproximate Dollar Value)
of Shares that may Yet BePurchased Under the Plansor Programs
|----------------- | --- | ---------------------------------- | ---------------------------------------------------- | ---------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------
|Period            |     |                                    |                                                      |                                                                                    |                                                                                                              
|April 1-30,
 2010 |     | 0                                  | $               
          -                         | 0                                                                                  | 2,303,813
 shares                                                                                            
|May 1-31,
 2010   |     | 500,000                            | $          
          11.71                          | 500,000                                                                            | 1,803,813
 shares                                                                                            
|June 1-30,
 2010  | (1) | 385,013                            | $          
          11.34                          | 381,875                                                                            | 1,421,938
 shares                                                                                            
|Total             |     | 885,013                            | $          
          11.55                          | 881,875                                                                            |                                                                                                              

On January 31, 2006, the Companys
 second stock repurchase plan was announced and provides for the repurchase of up
 to 10.0 million shares of common stock of the Company. There is no set expiration
 date for this plan.

|(1) | Includes
 3,138 shares of common stock withheld by the Company to satisfy tax withholding
 requirements on the vesting of shares under the Companys benefit plans.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

Item 3. Defaults Upon Senior Securities

None.

Item 4. (Removed and Reserved)

None.

Item 5. Other Information

None.

Item 6. Exhibits

ExhibitNumber

|3.1    |                                                                                                                                                                                                                                                                                           | Amended
 and Restated Certificate of Incorporation of NewAlliance Bancshares, Inc. Incorporated
 herein by reference is Exhibit 3.1 filed with the Companys Quarterly Report
 on Form 10-Q, filed August 13, 2004.
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.2    | Amended
 and Restated Bylaws of NewAlliance Bancshares, Inc. Incorporated herein by reference
 is Exhibit 3.2 filed with the Companys Current Report on Form 8-K, filed November
 2, 2007.                                                                                              
|4.1    | See Exhibit
 3.1, Amended and Restated Certificate of Incorporation and Exhibit 3.2, Bylaws of
 NewAlliance Bancshares, Inc.                                                                                                                                                             
|10.1   | Intentionally
 omitted.                                                                                                                                                                                                                                                                  
|10.2   | Amended
 and Restated NewAlliance Bank Supplemental Executive Retirement Plan. Incorporated
 herein by reference is Exhibit 10.2 filed with the Companys Quarterly Report
 on Form 10-Q, filed November 7, 2008.                                                                        
|10.3   | NewAlliance
 Amended and Restated Employee Stock Ownership Plan Supplemental Executive Retirement
 Plan. Incorporated herein by reference is Exhibit 10.3 filed with the Companys
 Quarterly Report on Form 10-Q, filed November 7, 2008.                                               
|10.4   | The NewAlliance
 Bank Amended and Restated 401(k) Supplemental Executive Retirement Plan. Incorporated
 herein by reference is Exhibit 10.4 filed with the Companys Quarterly Report
 on Form 10-Q, filed November 7, 2008.                                                             
|10.5   | NewAlliance
 Bank Executive Incentive Plan approved by shareholders on April 17, 2008, as amended.
 Incorporated herein by reference is Exhibit 10.5 filed with the Companys Quarterly
 Report on Form 10-Q, filed August 7, 2009.                                                      
|10.6   | Employee
 Change of Control Severance Plan. Incorporated by reference is Exhibit 10.6 filed
 with the Companys Quarterly Report on Form 10-Q, filed November 8, 2007.                                                                                                                   
|10.7.1 | Amended
 and Restated Employment Agreement among NewAlliance Bancshares, Inc., NewAlliance
 Bank and Peyton R. Patterson, effective December 15, 2009. Incorporated herein by
 reference is Exhibit 10.7.1 filed with the Companys Annual Report on Form
 10-K, filed February 26, 2010.
|10.7.2 | Intentionally
 omitted.                                                                                                                                                                                                                                                                  
|10.7.3 | Amended
 and Restated Employment Agreement among NewAlliance Bancshares, Inc., NewAlliance
 Bank and Gail                                                                                                                                                                                
|       | E.D. Brathwaite,
 effective December 15, 2009. Incorporated herein by reference is Exhibit 10.7.1
 filed with the Companys Annual Report on Form 10-K, filed February 26, 2010.                                                                                                         

57




|10.7.4  |                                                                                                                                                                                                                                                                                                | Intentionally
 omitted.
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------
|10.7.5  | Intentionally
 omitted.                                                                                                                                                                                                                                                                       
|10.7.6  | Intentionally
 omitted.                                                                                                                                                                                                                                                                       
|10.7.7  | Intentionally
 omitted.                                                                                                                                                                                                                                                                       
|10.7.8  | Amended
 and Restated Employment Agreement between NewAlliance Bank and Donald T. Chaffee,
 effective December 15, 2009. Incorporated herein by reference is Exhibit 10.7.8
 filed with the Companys Annual Report on Form 10-K, filed February 26, 2010.                                    
|10.7.9  | Amended
 and Restated Employment Agreement between NewAlliance Bank and Paul A. McCraven,
 effective December 15, 2009. Incorporated herein by reference is Exhibit 10.7.9
 filed with the Companys Annual Report on Form 10-K, filed February 26, 2010.                                     
|10.7.10 | Amended
 and Restated Employment Agreement between NewAlliance Bank and Koon-Ping Chan, effective
 December 15, 2009. Incorporated herein by reference is Exhibit 10.7.10 filed with
 the Companys Annual Report on Form 10-K, filed February 26, 2010.                                      
|10.7.11 | Amended
 and Restated Employment Agreement between NewAlliance Bank and Mark Gibson, effective
 December 15, 2009. Incorporated herein by reference is Exhibit 10.7.11 filed with
 the Companys Annual Report on Form 10-K, filed February 26, 2010.                                         
|10.7.12 | Amended
 and Restated Employment Agreement among NewAlliance Bank, NewAlliance Bancshares,
 Inc. and Cecil Eugene Kirby, Jr., effective December 15, 2009. Incorporated herein
 by reference is Exhibit 10.7.12 filed with the Companys Annual Report on Form
 10-K, filed February 26, 2010.
|10.7.13 | Employment
 Agreement among NewAlliance Bank, NewAlliance Bancshares, Inc. and Glenn I. MacInnes,
 dated as of October 12, 2009. Incorporated herein by reference is Exhibit 10.7.13
 filed with the Companys Current Report on Form 8-K, filed October 14, 2009.                            
|10.8.1  | Form of
 Stock Option Agreement for conversion awards (for outside directors). Incorporated
 herein by reference is Exhibit 10.8.1 filed with the Companys Quarterly Report
 on Form 10-Q, filed August 9, 2005.                                                                             
|10.8.2  | Form of
 Stock Option Agreement for conversion awards (for employees, including senior officers).
 Incorporated herein by reference is Exhibit 10.8.2 filed with the Companys
 Quarterly Report on Form 10-Q, filed August 9, 2009.                                                          
|10.9.1  | Form of
 Restricted Stock Award Agreement for conversion awards (for outside directors).
 Incorporated herein by reference is Exhibit 10.9.1 filed with the Companys
 Quarterly Report on Form 10-Q, filed August 9, 2005.                                                                   
|10.9.2  | Form of
 Restricted Stock Award Agreement for conversion awards (for employees, including
 senior officers). Incorporated herein by reference is Exhibit 10.9.2 filed with
 the Companys Quarterly Report on Form 10-Q, filed August 9, 2005.                                                
|10.10   | NewAlliance
 Bancshares, Inc. 2005 Long-Term Compensation Plan. Incorporated herein by reference
 is Exhibit 4.3 filed with the Companys Registration Statement on Form S-8,
 filed November 4, 2005.                                                                                        
|10.11   | (Intentionally
 omitted)                                                                                                                                                                                                                                                                      
|10.12   | Form of
 Indemnification Agreement for Directors and Certain Executive Officers. Incorporated
 herein by reference is Exhibit 10.12 filed with the Companys Annual Report
 on Form 10-K, filed March 1, 2007.                                                                                
|10.13   | General
 Severance Plan. Incorporated herein by reference is Exhibit 10.13 filed with the
 Companys Annual Report on Form 10-K, filed February 27, 2009.                                                                                                                                     
|10.14   | Form of
 Performance Share Award Agreement (for senior officers). Incorporated herein by
 reference is Exhibit 10.14 filed with the Company Current Report on Form 8-K, filed
 June 1, 2009.                                                                                                  
|10.15   | Form of
 Restricted Stock Award Agreement (for senior officers). Incorporated herein by reference
 is Exhibit 10.15 filed with the Company Current Report on Form 8-K, filed June 1,
 2009.                                                                                                   
|10.16   | Form of
 Stock Option Award Agreement (for senior officers). Incorporated herein by reference
 is Exhibit 10.16 filed with the Company Current Report on Form 8-K, filed June 1,
 2009.                                                                                                       
|10.17   | Form of
 Stock Option Agreement for annual awards (for outside directors). Incorporated herein
 by reference is Exhibit 10.17 filed with the Companys Annual Report on Form
 10-K, filed February 26, 2010.                                                                                  
|10.18   | Form of
 Restricted Stock Agreement for annual awards (for outside directors). Incorporated
 herein by reference is Exhibit 10.18 filed with the Companys Annual Report
 on Form 10-K, filed February 26, 2010.                                                                              
|14      | Code of
 Ethics for Senior Financial Officers. Incorporated herein by reference is Exhibit
 14 filed with the Companys Annual Report on Form 10-KT, filed March 30, 2004.                                                                                                                    
|21      | Subsidiaries
 of NewAlliance Bancshares, Inc. and NewAlliance Bank. Incorporated herein by reference
 is Exhibit 21 filed with the Companys Annual Report on Form 10-K, filed March
 1, 2007.                                                                                                
|23.1    | Consent
 of PricewaterhouseCoopers LLP. Incorporated herein by reference is Exhibit 23.1
 filed with the Companys Annual Report on Form 10-K, filed February 26, 2010.                                                                                                                       
|31.1    | Certification
 of Peyton R. Patterson pursuant to the requirements of Section 13 or 15(d) of the
 Securities Exchange Act of 1934 (filed herewith).                                                                                                                                           
|31.2    | Certification
 of Glenn I. MacInnes pursuant to the requirements of Section 13 or 15(d) of the
 Securities Exchange Act of 1934 (filed herewith).                                                                                                                                             
|32.1    | Certification
 of Peyton R. Patterson pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
 Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                                                             

58




|32.2 |  | Certification
 of Glenn I. MacInnes pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
 Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

59




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.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                            
| | NewAlliance
 Bancshares, Inc.                                                                                                                                                              

| | By:   | /s/ Glenn I. MacInnes                                
| | ----- | -----------------------------------------------------
| |       | Glenn I. MacInnes                                    
| |       | Executive
 Vice President and Chief Financial Officer
| |       |                                                      
| | Date: | August 4,
 2010                                      

60