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
March 31, 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) |  |  | 105,964,553                | 
| | ----------------------------- |  |  | -------------------------- | 
| |                               |  |  |                            | 
| | Class                         |  |  | Outstanding at May 5, 2010 | 




TABLE OF CONTENTS

|Part I  FINANCIAL INFORMATION |          | 
|------------------------------ | -------- | 
|                               |          | 
|                               |          | 
|                               |          | 
|                               | Item 1.  | 
|                               |          | 
|                               |          | 
|                               |          | 
|                               |          | 
|                               |          | 
|                               |          | 
|                               |          | 
|                               |          | 
|                               |          | 
|                               |          | 
|                               |          | 
|                               | Item 2.  | 
|                               |          | 
|                               | Item 3.  | 
|                               |          | 
|                               | Item 4.  | 
|                               |          | 
|                               | Item 4T. | 
|                               |          | 
|                               |          | 
|Part II  OTHER INFORMATION    |          | 
|                               |          | 
|                               | Item 1.  | 
|                               |          | 
|                               | Item 1A. | 
|                               |          | 
|                               | Item 2.  | 
|                               |          | 
|                               | Item 3.  | 
|                               |          | 
|                               | Item 4.  | 
|                               |          | 
|                               | Item 5.  | 
|                               |          | 
|                               | Item 6.  | 

SIGNATURES

2





NewAlliance Bancshares, Inc.Consolidated
 Balance Sheets

|                                                                                                                          |  | March 31, |           |   | December 31,
|------------------------------------------------------------------------------------------------------------------------- |  | --------- | --------- | - | ------------
|(In thousands,
 except per share data) (Unaudited)                                                                        |  | 2010      |           |   | 2009        
|                                                                                                                         
|Assets                                                                                                                    |  |           |           |   |             
|Cash
 and due from banks                                                                                                  |  | $         | 100,020   |   |             
|Short
 term investments                                                                                                   |  |           | 60,000    |   |             
|                                                                                                                         
|Cash
 and cash equivalents                                                                                                |  |           | 160,020   |   |             
|Investment
 securities available for sale, at fair value (note 3)                                                         |  |           | 2,261,915 |   |             
|Investment
 securities held to maturity (note 3)                                                                          |  |           | 270,839   |   |             
|Loans
 held for sale (includes $9,289 at March 31, 2010 and $12,908 at December 31, 2009
 measured at fair value)         |  |           | 9,479     |   |             
|Loans,
 net (note 4)                                                                                                      |  |           | 4,737,984 |   |             
|Federal
 Home Loan Bank of Boston stock                                                                                   |  |           | 120,821   |   |             
|Premises
 and equipment, net                                                                                              |  |           | 57,387    |   |             
|Cash
 surrender value of bank owned life insurance                                                                        |  |           | 134,207   |   |             
|Goodwill
 (note 5)                                                                                                        |  |           | 527,167   |   |             
|Identifiable
 intangible assets (note 5)                                                                                  |  |           | 33,406    |   |             
|Other
 assets (note 6)                                                                                                    |  |           | 187,678   |   |             
|                                                                                                                         
|Total
 assets                                                                                                             |  | $         | 8,500,903 |   |             
|                                                                                                                         
|                                                                                                                          |  |           |           |   |             
|Liabilities                                                                                                               |  |           |           |   |             
|Deposits
 (note 7)                                                                                                        |  |           |           |   |             
|Non-interest
 bearing                                                                                                     |  | $         | 533,841   |   |             
|Savings,
 interest-bearing checking and money market                                                                      |  |           | 3,127,184 |   |             
|Time                                                                                                                      |  |           | 1,393,912 |   |             
|                                                                                                                         
|Total
 deposits                                                                                                           |  |           | 5,054,937 |   |             
|Borrowings
 (note 8)                                                                                                      |  |           | 1,915,370 |   |             
|Other
 liabilities                                                                                                        |  |           | 88,584    |   |             
|                                                                                                                         
|Total
 liabilities                                                                                                        |  |           | 7,058,891 |   |             
|                                                                                                                          |  |           |           |   |             
|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 March
 31, 2010 and December 31, 2009 |  |           | 1,215     |   |             
|Additional
 paid-in capital                                                                                               |  |           | 1,245,501 |   |             
|Unallocated
 common stock held by ESOP                                                                                    |  |           | (87,807   | ) |             
|Unearned
 restricted stock compensation                                                                                   |  |           | (10,861   | ) |             
|Treasury
 stock, at cost (15,521 shares at March 31, 2010 and 15,435 shares at December 31,
 2009)                        |  |           | (212,614  | ) |             
|Retained
 earnings                                                                                                        |  |           | 496,411   |   |             
|Accumulated
 other comprehensive income (note 16)                                                                         |  |           | 10,167    |   |             
|                                                                                                                         
|Total
 stockholders equity                                                                                               |  |           | 1,442,012 |   |             
|                                                                                                                         
|Total
 liabilities and stockholders equity                                                                               |  | $         | 8,500,903 |   |             
|                                                                                                                         

See accompanying notes to consolidated financial
 statements.

3





NewAlliance
 Bancshares, Inc.Consolidated Statements of Income

|                                                      |  | Three Months Ended |       
|----------------------------------------------------- |  | ------------------ | ------
|                                                      |  | March 31,          |       
|                                                      |  |                    |       
|(In thousands,
 except per share data) (Unaudited)    |  | 2010               |       
|                                                     
|Interest
 and dividend income                         |  |                    |       
|Residential
 real estate loans                        |  | $                  | 29,684
|Commercial
 real estate loans                         |  |                    | 18,253
|Commercial
 business loans                            |  |                    | 5,194 
|Consumer
 loans                                       |  |                    | 8,137 
|Investment
 securities                                |  |                    | 26,100
|Federal
 funds sold and other short-term investments  |  |                    | 31    
|                                                     
|Total
 interest and dividend income                   |  |                    | 87,399
|                                                     
|                                                      |  |                    |       
|Interest
 expense                                     |  |                    |       
|Deposits                                              |  |                    | 13,882
|Borrowings                                            |  |                    | 17,876
|                                                     
|Total
 interest expense                               |  |                    | 31,758
|                                                     
|Net
 interest income before provision for loan losses |  |                    | 55,641
|                                                      |  |                    |       
|Provision
 for loan losses                            |  |                    | 4,800 
|                                                     
|Net
 interest income after provision for loan losses  |  |                    | 50,841
|                                                     
|                                                      |  |                    |       
|Non-interest
 income                                  |  |                    |       
|Depositor
 service charges                            |  |                    | 6,707 
|Loan
 and servicing income, net                       |  |                    | 317   
|Trust
 fees                                           |  |                    | 1,602 
|Investment
 management, brokerage and insurance fees  |  |                    | 1,514 
|Bank
 owned life insurance                            |  |                    | 3,462 
|Net
 gain on sale of securities                       |  |                    | -     
|Mortgage
 origination activity and loan sale income   |  |                    | 728   
|Other                                                 |  |                    | 1,070 
|                                                     
|Total
 non-interest income                            |  |                    | 15,400
|                                                     
|                                                      |  |                    |       
|Non-interest
 expense                                 |  |                    |       
|Salaries
 and employee benefits (notes 9 & 10)        |  |                    | 22,221
|Occupancy                                             |  |                    | 4,621 
|Furniture
 and fixtures                               |  |                    | 1,345 
|Outside
 services                                     |  |                    | 5,149 
|Advertising,
 public relations, and sponsorships      |  |                    | 1,530 
|Amortization
 of identifiable intangible assets       |  |                    | 1,953 
|FDIC
 insurance premiums                              |  |                    | 1,857 
|Other                                                 |  |                    | 3,524 
|                                                     
|Total
 non-interest expense                           |  |                    | 42,200
|                                                     
|                                                      |  |                    |       
|Income
 before income taxes                           |  |                    | 24,041
|                                                      |  |                    |       
|Income tax
 provision (note 11)                       |  |                    | 7,608 
|                                                     
|Net income                                            |  | $                  | 16,433
|                                                     
|                                                      |  |                    |       
|Basic
 earnings per share (note 17)                   |  | $                  | 0.17  
|Diluted
 earnings per share (note 17)                 |  |                    | 0.17  
|Weighted-average
 shares outstanding (note 17)        |  |                    |       
|Basic                                                 |  |                    | 99,020
|Diluted                                               |  |                    | 99,058
|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 Three
 Months Ended March 31, 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 (Loss) |   |  |   | 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 ($0.07 per share)               |  |             |   |  |   |           |  |  |   |            |   |  |   |             |   |  |   |              |   |  |   |          |   |  |   | (6,996   | ) |  |   |               |   |  |   | (6,996        | )
|Allocation
 of ESOP shares, net of tax             |  |             |   |  |   |           |  |  |   | (104       | ) |  |   | 914         |   |  |   |              |   |  |   |          |   |  |   |          |   |  |   |               |   |  |   | 810           |  
|Treasury shares
 acquired (note 15)                |  | (86         | ) |  |   |           |  |  |   |            |   |  |   |             |   |  |   |              |   |  |   | (1,032   | ) |  |   |          |   |  |   |               |   |  |   | (1,032        | )
|Restricted stock expense                           |  |             |   |  |   |           |  |  |   |            |   |  |   |             |   |  |   | 1,528        |   |  |   |          |   |  |   |          |   |  |   |               |   |  |   | 1,528         |  
|Stock option expense                               |  |             |   |  |   |           |  |  |   | 116        |   |  |   |             |   |  |   |              |   |  |   |          |   |  |   |          |   |  |   |               |   |  |   | 116           |  
|Comprehensive income:                              |  |             |   |  |   |           |  |  |   |            |   |  |   |             |   |  |   |              |   |  |   |          |   |  |   |          |   |  |   |               |   |  |   |               |  
|Net
 income                                        |  |             |   |  |   |           |  |  |   |            |   |  |   |             |   |  |   |              |   |  |   |          |   |  |   | 16,433   |   |  |   |               |   |  |   | 16,433        |  
|Other comprehensive loss, net of tax (note 16)     |  |             |   |  |   |           |  |  |   |            |   |  |   |             |   |  |   |              |   |  |   |          |   |  |   |          |   |  |   | (3,800        | ) |  |   | (3,800        | )
|                                                  
|Total
 comprehensive income                        |  |             |   |  |   |           |  |  |   |            |   |  |   |             |   |  |   |              |   |  |   |          |   |  |   |          |   |  |   |               |   |  |   | 12,633        |  
|                                                  
|Balance March 31, 2010                             |  | 105,965     |   |  | $ | 1,215     |  |  | $ | 1,245,501  |   |  | $ | (87,807     | ) |  | $ | (10,861      | ) |  | $ | (212,614 | ) |  | $ | 496,411  |   |  | $ | 10,167        |   |  | $ | 1,442,012     |  
|                                                  

See accompanying notes to consolidated financial
 statements.

5





NewAlliance
 Bancshares, Inc.Consolidated Statements of Cash Flows

|                                                                                                 |  | Three Months Ended |         
|------------------------------------------------------------------------------------------------ |  | ------------------ | --------
|                                                                                                 |  | March 31,          |         
|                                                                                                 |  |                    |         
|(In thousands)
 (Unaudited)                                                                      |  | 2010               |         
|                                                                                                
|Cash flows
 from operating activities                                                            |  |                    |         
|Net income                                                                                       |  | $                  | 16,433  
|Adjustments
 to reconcile net income to net cash provided by operating activities                |  |                    |         
|Provision
 for loan losses                                                                       |  |                    | 4,800   
|Loss
 on OREO                                                                                    |  |                    | 224     
|Restricted
 stock compensation expense                                                           |  |                    | 1,528   
|Stock
 option compensation expense                                                               |  |                    | 116     
|ESOP
 expense                                                                                    |  |                    | 810     
|Amortization
 of identifiable intangible assets                                                  |  |                    | 1,953   
|Net
 amortization/accretion of fair market adjustments from net assets acquired                  |  |                    | (667    
|Net
 amortization/accretion of investment securities                                             |  |                    | 2,184   
|Deferred
 income taxes                                                                           |  |                    | 1,999   
|Depreciation
 and amortization of premises and equipment                                         |  |                    | 1,502   
|Net
 gain on securities                                                                          |  |                    | -       
|Mortgage
 origination activity and loan sale income                                              |  |                    | (728    
|Proceeds
 from sales of loans held for sale                                                      |  |                    | 63,986  
|Loans
 originated for sale                                                                       |  |                    | (58,078 
|Gain
 on sale of fixed assets                                                                    |  |                    | -       
|Net
 (gain) loss on limited partnerships                                                         |  |                    | (331    
|Increase
 in cash surrender value of bank owned life insurance                                   |  |                    | (830    
|Decrease
 (increase) in other assets                                                             |  |                    | 2,049   
|Increase
 in other liabilities                                                                   |  |                    | 3,194   
|                                                                                                
|Net
 cash provided by operating activities                                                       |  |                    | 40,144  
|                                                                                                
|Cash flows
 from investing activities                                                            |  |                    |         
|Purchase
 of securities available for sale                                                       |  |                    | (177,901
|Purchase
 of securities held to maturity                                                         |  |                    | (61,860 
|Proceeds
 from maturity, sales, calls and principal reductions of securities available for
 sale |  |                    | 160,275 
|Proceeds
 from maturity, calls and principal reductions of securities held to maturity           |  |                    | 31,850  
|Proceeds
 from sales of fixed assets                                                             |  |                    | -       
|Net
 (increase) decrease in loans held for investment                                            |  |                    | (34,300 
|Proceeds
 from sales of other real estate owned                                                  |  |                    | 1,108   
|Proceeds
 from bank owned life insurance                                                         |  |                    | 6,776   
|Purchase
 of premises and equipment                                                              |  |                    | (1,785  
|                                                                                                
|Net
 cash used by investing activities                                                           |  |                    | (75,837 
|                                                                                                
|Cash flows
 from financing activities                                                            |  |                    |         
|Net
 increase in customer deposit balances                                                       |  |                    | 30,909  
|Net
 decrease in short-term borrowings                                                           |  |                    | (9,946  
|Proceeds
 from long-term borrowings                                                              |  |                    | 248,100 
|Repayments
 of long-term borrowings                                                              |  |                    | (212,249
|Book
 under/(over) tax benefit of stock-based compensation                                       |  |                    | -       
|Acquisition
 of treasury shares                                                                  |  |                    | (1,032  
|Dividends
 paid                                                                                  |  |                    | (6,996  
|                                                                                                
|Net
 cash provided by financing activities                                                       |  |                    | 48,786  
|                                                                                                
|Net
 increase in cash and cash equivalents                                                       |  |                    | 13,093  
|                                                                                                
|Cash
 and equivalents, beginning of period                                                       |  |                    | 146,927 
|                                                                                                
|Cash
 and equivalents, end of period                                                             |  | $                  | 160,020 
|                                                                                                
|Supplemental
 information                                                                        |  |                    |         
|Cash
 paid for                                                                                   |  |                    |         
|Interest
 on deposits and borrowings                                                             |  | $                  | 32,216  
|Income
 taxes paid, net                                                                          |  |                    | 1,935   
|Noncash
 transactions                                                                            |  |                    |         
|Loans
 transferred to other real estate owned                                                    |  |                    | 1,267   

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 Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |  | The 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 March 31, 2010 which require recognition or disclosure in the financial
 statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|2. |  | Recent
 Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |  | 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.

7





NewAlliance
 Bancshares, Inc.Notes to Unaudited Consolidated Financial Statements



---

|   |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|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:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

| |                                                       |  | March 31, 2010 |           | December 31, 2009
| | ----------------------------------------------------- |  | -------------- | --------- | -----------------
| |                                                       |  |                |           |                  
| |                                                       |  |                |           |                  
| |                                                       |  | Amortized      |           |                  
| | (In thousands)                                        |  | cost           |           |                  
| |                                                      
| | Available
 for sale                                   |  |                |           |                  
| | U.S.
 Treasury obligations                            |  | $              | -         |                  
| | U.S.
 Government sponsored enterprise obligations     |  |                | 305,006   |                  
| | Corporate
 obligations                                |  |                | 8,128     |                  
| | Other
 bonds and obligations                          |  |                | 14,625    |                  
| | Auction
 rate certificates                            |  |                | 22,200    |                  
| | Marketable
 equity securities                         |  |                | 8,574     |                  
| | Trust
 preferred equity securities                    |  |                | 48,757    |                  
| | Private
 label residential mortgage-backed securities |  |                | 22,382    |                  
| | Residential
 mortgage-backed securities               |  |                | 1,792,402 |                  
| |                                                      
| | Total
 available for sale                             |  |                | 2,222,074 |                  
| |                                                      
| | Held to
 maturity                                     |  |                |           |                  
| | Residential
 mortgage-backed securities               |  |                | 260,669   |                  
| | Other
 bonds                                          |  |                | 10,170    |                  
| |                                                      
| | Total
 held to maturity                               |  |                | 270,839   |                  
| |                                                      
| | Total
 securities                                     |  | $              | 2,492,913 |                  
| |                                                      

| |  | 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. 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.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | 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 March 31, 2010 and December 31, 2009. Of the                                                                                                                                                                                                                                                                                                              

8





NewAlliance
 Bancshares, Inc.Notes to Unaudited Consolidated Financial Statements



---

| |  | securities
 summarized, 24 issues have unrealized losses for less than twelve months and 42
 have unrealized losses for twelve months or more at March 31, 2010. This compares
 to a total of 72 issues that had an unrealized loss at December 31, 2009.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                                       |  | March 31, 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
| |                                                       |  |                   
| |                                                       |  | 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              |  | $                 
| |                                                      

| |  | Management
 believes that no individual unrealized loss as of March 31, 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
 March 31, 2010.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | The unrealized
 losses reported on government agency residential mortgage-backed securities and
 U.S. Government sponsored enterprise obligations is due to changes in market interest
 rates since the date purchased. All of these securities are still paying principal
 and interest and are expected to continue to pay their contractual cash flows. The
 Company does not have any commercial mortgage-backed securities. Management reviewed
 the above factors and issuer specific data and concluded that these securities are
 not other-than-temporarily impaired.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | 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                                                                                                                                                                                                                                                                                                                                                                                                

9





NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| |  | recognized
 by the fund. As of March 31, 2010, the investment carries a market value to book
 value ratio of 81.32%, 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 March 31, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | The unrealized
 losses on auction rate certificates relate to certificates issued by an investment
 banking firm and are pools of government-guaranteed student loans that are issued
 by state student loan departments. In the first half of 2008, the auction process
 for auction rate certificates began to freeze resulting from the problems in the
 credit markets. These securities are currently rated AAA and are still paying their
 contractual cash flows and are expected to continue to pay their contractual cash
 flows. Management has concluded that no other-than-temporary impairment exists as
 of March 31, 2010. In 2008, the underwriter entered into a settlement agreement
 with several state regulatory agencies, whereby they have agreed to repurchase these
 certificates from both their retail and institutional customers at par. The institutional
 buy-back of these securities is scheduled on or around June 30, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | Trust preferred
 securities are comprised of two pooled trust preferreds with an amortized cost of $6.1
 million, one of which is rated A and the other is rated CC at March 31, 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. The remaining $42.7 million of trust preferred securities
 are comprised of twelve individual names issues with the following ratings: $15.6
 million rated A to AA-, $9.7 million rated BBB to BBB+ and $17.4 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
 is 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.
 The Company does not believe that these securities will incur reduced contractual
 cash flows and therefore does not believe that any further OTTI exists on the CC
 rated pooled security nor are the remaining trust preferred securities 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | For the
 three months ended March 31, 2010 and 2009, there were no other-than-temporary impairment
 charges recorded by the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | As of March
 31, 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     |           |                 
| |                                        
| | March 31,
 2010                         |  |                    |           |                 
| | Due
 in one year or less                |  | $                  | 142,675   |                 
| | Due
 after one year through five years  |  |                    | 85,494    |                 
| | Due
 after five years through ten years |  |                    | 119,199   |                 
| | Due
 after ten years                    |  |                    | 51,348    |                 
| |                                         |  |                    |           |                 
| | Residential
 mortgage-backed securities |  |                    | 1,814,784 |                 
| |                                        
| | Total
 debt securities                  |  | $                  | 2,213,500 |                 
| |                                        

| |  | Securities
 with a fair value of $709.2 million and $673.8 million at March 31, 2010 and December
 31, 2009, respectively, were pledged to secure public deposits, repurchase agreements
 and Federal Home Loan Bank of Boston (FHLB) borrowings.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10





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 months ended March 31, 2010 and 2009.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                 

|   |  |                                                                |  | Debt Securities              |   | Equity Securities
|-- |  | -------------------------------------------------------------- |  | ---------------------------- | - | -----------------
|   |  |                                                                |  |                              |   |                  
|   |  |                                                                |  |                              |   |                  
|   |  |                                                                |  | Three Months Ended March 31,
|   |  |                                                                |  |                             
|   |  | (In thousands)                                                 |  | 2010                         |   | 2009             
|   |  |                                                               
|   |  | Realized gains                                                 |  | $                            | - |                  
|   |  | Realized losses                                                |  |                              | - |                  
|   |  |                                                               
|   |  |                                                                |  |                              |   |                  
|4. |  | Loans                                                          |  |                              |   |                  
|   |  |                                                                |  |                              |   |                  
|   |  | The composition of the Companys loan portfolio is as follows:
|   |  |                                                                |  |                              |   |                  
|   |  | (In thousands)                                                 |  |                              |   |                  
|   |  |                                                               
|   |  | Residential
 real estate                                       |  |                              |   |                  
|   |  | Commercial
 real estate                                        |  |                              |   |                  
|   |  | Construction                                                   |  |                              |   |                  
|   |  | Residential                                                    |  |                              |   |                  
|   |  | Commercial                                                     |  |                              |   |                  
|   |  | Commercial
 business                                           |  |                              |   |                  
|   |  | Consumer                                                       |  |                              |   |                  
|   |  | Home equity and equity lines of credit                         |  |                              |   |                  
|   |  | Other                                                          |  |                              |   |                  
|   |  |                                                               
|   |  | Total
 consumer                                                |  |                              |   |                  
|   |  |                                                               
|   |  | Total
 loans                                                   |  |                              |   |                  
|   |  | Allowance
 for loan losses                                     |  |                              |   |                  
|   |  |                                                               
|   |  | Total
 loans, net                                              |  |                              |   |                  
|   |  |                                                               

| |  | As of March
 31, 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 entirely 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.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | 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
| | --------------------------------- |  | --------------------------
| |                                   |  | Ended March 31,           
| |                                   |  |                           
| | (In thousands)                    |  | 2010                      
| |                                  
| | Balance at
 beginning of period   |  | $                         
| | Provisions
 charged to operations |  |                           
| | Charge-offs                       |  |                           
| | Residential
 real estate loans    |  |                           
| | Commercial
 real estate loans     |  |                           
| | Commercial
 construction loans    |  |                           
| | Commercial
 business loans        |  |                           
| | Consumer
 loans                   |  |                           
| |                                  
| | Total
 charge-offs                |  |                           
| |                                  
| | Recoveries                        |  |                           
| | Residential
 real estate loans    |  |                           
| | Commercial
 real estate loans     |  |                           
| | Commercial
 construction loans    |  |                           
| | Commercial
 business loans        |  |                           
| | Consumer
 loans                   |  |                           
| |                                  
| | Total
 recoveries                 |  |                           
| |                                  
| | Net charge-offs                   |  |                           
| |                                  
| | Balance at
 end of period         |  | $                         
| |                                  

11





NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| | 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:                                                                                                                                                                                                                                                                                                             

|   |  | (In thousands)                                                                                                |  | March 31,2010 |        | December 31,2009
|-- |  | ------------------------------------------------------------------------------------------------------------- |  | ------------- | ------ | ----------------
|   |  |                                                                                                              
|   |  | Nonaccrual
 loans                                                                                             |  | $             | 64,894 |                 
|   |  | Other real
 estate owned                                                                                      |  |               | 3,348  |                 
|   |  |                                                                                                              
|   |  | Total nonperforming
 assets                                                                                   |  | $             | 68,242 |                 
|   |  |                                                                                                              
|   |  | Troubled debt
 restructured loans included in nonaccrual loans above                                          |  | $             | 3,271  |                 
|   |  |                                                                                                              
|   |  |                                                                                                               |  |               |        |                 
|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 |        |              | $    
| | Amortization
 expense                                |  |          | -       |        |              | (8,501 | )      |              |      
| |                                                     
| | Balance, December
 31, 2009                          |  |          | 527,167 |        |              | 35,359 |        |              |      
| | Amortization
 expense                                |  |          | -       |        |              | (1,953 | )      |              |      
| |                                                     
| | Balance, March
 31, 2010                             |  | $        | 527,167 |        | $            | 33,406 |        |              | $    
| |                                                     
| |                                                      |  |          |         |        |              |        |        |              |      
| | Estimated
 amortization expense for the year ending: |  |          |         |        |              |        |        |              |      
| | Remaining
 2010                                      |  |          |         |        | $            | 5,858  |        |              | $    
| | 2011                                                 |  |          |         |        |              | 7,556  |        |              |      
| | 2012                                                 |  |          |         |        |              | 7,556  |        |              |      
| | 2013                                                 |  |          |         |        |              | 7,461  |        |              |      
| | 2014                                                 |  |          |         |        |              | 3,617  |        |              |      
| | 2015                                                 |  |          |         |        |              | 982    |        |              |      
| | Thereafter                                           |  |          |         |        |              | 376    |        |              |      
| |                                                     

| | 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 March 31, 2010:                                                                                                         
| |                                                                                                                                                                                                                                                          

| |                                          |  |          |        |              |   |           |         |   |       
| | ---------------------------------------- |  | -------- | ------ | ------------ | - | --------- | ------- | - | ------
| |                                          |  | Original |        |              |   |           | Balance
| |                                          |  | Recorded |        | Cumulative   |   | March 31,
| | (In thousands)                           |  | Amount   |        | Amortization |   | 2010     
| |                                         
| | Core deposit
 and customer relationships |  | $        | 86,908 |              | $ | 53,502    |         | $ | 33,406
| |                                         

12





NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

|6. |  | Other Assets                                               |  |   |           |  |   |              
|-- |  | ---------------------------------------------------------- |  | - | --------- |  | - | -------------
|   |  |                                                            |  |   |           |  |   |              
|   |  | Selected components
 of other assets are as follows:       |  |   |           |  |   |              
|   |  |                                                            |  |   | March 31, |  |   | December
 31,
|   |  | (In thousands)                                             |  |   | 2010      |  |   | 2009         
|  
|   |  | Deferred tax
 asset, net                                   |  | $ | 14,201    |  | $ | 14,078       
|   |  | Accrued interest
 receivable                               |  |   | 32,292    |  |   | 33,078       
|   |  | Investments
 in limited partnerships and other investments |  |   | 8,186     |  |   | 8,003        
|   |  | Receivables
 arising from securities transactions          |  |   | 89,690    |  |   | 14,165       
|   |  | Prepaid FDIC
 assessments                                  |  |   | 24,306    |  |   | 26,001       
|   |  | All other                                                  |  |   | 19,003    |  |   | 18,616       
|  
|   |  | Total
 other assets                                        |  | $ | 187,678   |  | $ | 113,941      
|  
|   |  |                                                            |  |   |           |  |   |              
|7. |  | Deposits                                                   |  |   |           |  |   |              
|   |  |                                                            |  |   |           |  |   |              
|   |  | A summary of deposits by account type is as follows:      

|   |  |                                                                 |  |  |   |           |  |   |              
|-- |  | --------------------------------------------------------------- |  |  | - | --------- |  | - | -------------
|   |  |                                                                 |  |  |   |           |  |   |              
|   |  |                                                                 |  |  |   | March 31, |  |   | December
 31,
|   |  | (In thousands)                                                  |  |  |   | 2010      |  |   | 2009         
|   |  |                                                                
|   |  | Savings                                                         |  |  | $ | 1,807,008 |  | $ | 1,817,787    
|   |  | Money market                                                    |  |  |   | 934,376   |  |   | 790,453      
|   |  | NOW                                                             |  |  |   | 385,800   |  |   | 400,176      
|   |  | Demand                                                          |  |  |   | 533,841   |  |   | 534,180      
|   |  | Time                                                            |  |  |   | 1,393,912 |  |   | 1,481,446    
|   |  |                                                                
|   |  | Total deposits                                                  |  |  | $ | 5,054,937 |  | $ | 5,024,042    
|   |  |                                                                
|   |  |                                                                 |  |  |   |           |  |   |              
|   |  |                                                                 |  |  |   |           |  |   |              
|8. |  | Borrowings                                                      |  |  |   |           |  |   |              
|   |  |                                                                 |  |  |   |           |  |   |              
|   |  | The following is a summary of the Companys borrowed funds:    
|   |  |                                                                 |  |  |   |           |  |   |              
|   |  |                                                                 |  |  |   | March 31, |  |   | December
 31,
|   |  | (In thousands)                                                  |  |  |   | 2010      |  |   | 2009         
|   |  |                                                                
|   |  | FHLB advances
 (1)                                              |  |  | $ | 1,790,960 |  | $ | 1,755,533    
|   |  | Repurchase
 agreements                                          |  |  |   | 102,149   |  |   | 112,095      
|   |  | Mortgage loans
 payable                                         |  |  |   | 1,126     |  |   | 1,165        
|   |  | Junior subordinated
 debentures issued to affiliated trusts (2) |  |  |   | 21,135    |  |   | 21,135       
|   |  |                                                                
|   |  | Total borrowings                                                |  |  | $ | 1,915,370 |  | $ | 1,889,928    
|   |  |                                                                
|   |  |                                                                 |  |  |   |           |  |   |              

| | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | Includes
 fair value adjustments on acquired borrowings, in accordance with purchase accounting
 standards of $2.7 million and $3.1 million at March 31, 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.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                
| | 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 hybrid
 adjustable rate mortgage-backed securities. At March 31, 2010 and December 31, 2009,
 the Bank was in compliance with the FHLB collateral requirements. At March 31, 2010,
 the Company could immediately borrow an additional $276.7 million from the FHLB,
 inclusive of a line of credit of approximately $20.0 million. Additional borrowing
 capacity of approximately $1.45 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 $84.8 million as of March 31, 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 $40.0 million and $106.5 million, respectively, as of March
 31, 2010. Repurchase agreement lines of credit with three large broker-dealers totaled $225.0
 million at March 31, 2010, with availability of $200.0 million. At March 31, 2010,
 all of the Companys $1.79 billion outstanding

13





NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

|   |  | FHLB advances were at fixed rates
 ranging from 1.39% to 8.17%. The weighted average rate for all FHLB advances at
 March 31, 2010 was 3.85%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|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
 March 31, 2010 and 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

| |                                                   |  |                   |        |                  |  |          |        |   |  | Supplemental |      |                      |   |      |  |   |      |  
| | ------------------------------------------------- |  | ----------------- | ------ | ---------------- |  | -------- | ------ | - |  | ------------ | ---- | -------------------- | - | ---- |  | - | ---- | -
| |                                                   |  |                   |        |                  |  |          |        |   |  | Executive    |      | Other Postretirement
| |                                                   |  | Qualified Pension |        | Retirement Plans |  | Benefits
| |                                                   |  |                   |        |                  |  |         
| | (In thousands)                                    |  |                   | 2010   |                  |  |          | 2009   |   |  |              | 2010 |                      |   | 2009 |  |   | 2010 |  
| |                                                  
| | Service cost
 - benefits earned during the period |  | $                 | 853    |                  |  | $        | 809    |   |  | $            | 139  |                      | $ | 113  |  | $ | 62   |  
| | Interest cost
 on projected benefit obligation    |  |                   | 1,471  |                  |  |          | 1,430  |   |  |              | 173  |                      |   | 195  |  |   | 80   |  
| | Expected return
 on plan assets                   |  |                   | (1,693 | )                |  |          | (1,741 | ) |  |              | -    |                      |   | -    |  |   | -    |  
| | Amortization:                                     |  |                   |        |                  |  |          |        |   |  |              | -    |                      |   |      |  |   | -    |  
| | Transition                                        |  |                   | -      |                  |  |          | -      |   |  |              | -    |                      |   | -    |  |   | 13   |  
| | Prior service
 cost                               |  |                   | 14     |                  |  |          | 13     |   |  |              | 2    |                      |   | 2    |  |   | -    |  
| | Loss (gain)                                       |  |                   | 324    |                  |  |          | 204    |   |  |              | -    |                      |   | -    |  |   | (40  | )
| |                                                  
| | Net
 periodic benefit cost                        |  | $                 | 969    |                  |  | $        | 715    |   |  | $            | 314  |                      | $ | 310  |  | $ | 115  |  
| |                                                  
| |                                                   |  |                   |        |                  |  |          |        |   |  |              |      |                      |   |      |  |   |      |  

| |  | 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 March 31,
 2010, the loan had an outstanding balance of $96.9 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 months ended March
 31, 2010 and 2009 was approximately $753,000 and $710,000. 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 March 31, 2010 were as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

| |                                                                    
| | -------------------------------------------------------------------
| | Shares released
 for allocation                                    
| | Unreleased
 shares                                                 
| |                                                                    
| | Total
 ESOP shares                                                 
| |                                                                    
| | Market value
 of unreleased shares at March 31, 2010 (in thousands)

14





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 March 31, 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 9.6 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 3.9% 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 months ended March 31, 2010 and 2009 was $116,000
 and $54,000, respectively, or after tax expense of approximately $75,000 and $35,000,
 respectively. Under the terms of the LTCP, additional awards are likely to be granted,
 which will increase the amount of expense in future periods.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | There were
 no options granted to employees during the three months ended March 31, 2010 and
 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | A summary
 of option activity as of March 31, 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                                                                                             |  | -         |   |  |   | -         |  |             |   |                  |   |          
| | Exercised                                                                                           |  | -         |   |  |   | -         |  |             |   |                  |   |          
| | Forfeited/cancelled                                                                                 |  | (19,885   | ) |  |   | 12.92     |  |             |   |                  |   |          
| | Expired                                                                                             |  | (5,976    | ) |  |   | 14.43     |  |             |   |                  |   |          
| |                                                                                                    
| | Options outstanding
 at March 31, 2010                                                              |  | 7,858,940 |   |  | $ | 14.30     |  | 5.53        |   |                  | $ | 127      
| |                                                                                                    
| | Options exercisable
 at March 31, 2010                                                              |  | 7,275,647 |   |  | $ | 14.40     |  | 5.26        |   |                  | $ | 15       
| |                                                                                                    
| |                                                                                                     |  |           |   |  |   |           |  |             |   |                  |   |          
| | The following
 table summarizes the nonvested options during the three months ended March 30, 2010. |  |           |   |  |   |           |  |             |   |                  |   |          
| |                                                                                                     |  |           |   |  |   |           |  |             |   |                  |   |          
| |                                                                                                     |  |           |   |  |   |           |  |             |   | Weighted-average
| |                                                                                                     |  |           |   |  |   |           |  |             |   | Grant-Date      
| |                                                                                                     |  |           |   |  |   |           |  | Shares      |   | Fair Value      
| |                                                                                                    
| | Nonvested
 at January 1, 2010                                                                       |  |           |   |  |   |           |  | 631,154     |   |                  | $ | 2.38     
| | Granted                                                                                             |  |           |   |  |   |           |  | -           |   |                  |   | -        
| | Vested                                                                                              |  |           |   |  |   |           |  | (27,976     | ) |                  |   | 2.27     
| | Forfeited
 / Cancelled                                                                              |  |           |   |  |   |           |  | (19,885     | ) |                  |   | 2.36     
| |                                                                                                    
| | Nonvested
 at March 31, 2010                                                                        |  |           |   |  |   |           |  | 583,293     |   |                  | $ | 2.39     
| |                                                                                                    
| |                                                                                                     |  |           |   |  |   |           |  |             |   |                  |   |          

| |  | Restricted
 Stock and Performance-Based Restricted Stock Awards                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | To date,
 approximately 3.8 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 three months ended March 31, 2010, the Company granted approximately
 11,000 restricted stock awards.

15





NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| |  | Performance-based
 restricted stock shares were awarded to executive management and other key members
 of senior management during 2009. The vesting for these performance-based awards
 is conditional upon fulfillment of a market condition and on meeting a service period.
 The actual number of performance shares to be earned will be based on performance
 criteria over a three-year performance period which began May 29, 2009 and ending
 May 31, 2012. 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, 2012. 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 restricted
 stock compensation expense for the three months ended March 31, 2010 and 2009 was
 approximately $1.5 million and $1.7 million or after tax expense of approximately $1.2 million and $1.4 million, respectively. The Company anticipates that it will
 record expense of approximately $6.1 million, $4.4 million and $421,000 in calendar
 years 2010 through 2012, 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 three months ended March 31, 2010.                                                                                                                                                                                                                                                                                                                                                                                             

|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |           |   |  | Weighted-average
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | - |  | ----------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |           |   |  | Grant-Date      
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | Shares    |   |  | Fair Value      
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |  | Nonvested
 at January 1, 2010                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | 1,225,063 |   |  | $               
|    |  | Granted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | 10,684    |   |  |                 
|    |  | Vested                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | (375,592  | ) |  |                 
|    |  | Forfeited
 / Cancelled                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | (52,322   | ) |  |                 
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |  | Nonvested
 at March 31, 2010                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | 807,833   |   |  | $               
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |           |   |  |                 
|11. |  | Income
 Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |           |   |  |                 
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |           |   |  |                 
|    |  | The Company had 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 $14.2 million and $14.1 million at March 31, 2010 and December 31, 2009, respectively.
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |           |   |  |                 
|    |  | As of March 31, 2010 and December 31, 2009, the Company has a valuation allowance
 of $1.4 million and $1.5 million, respectively, for the tax effect of capital loss
 carryforwards associated with realized and unrealized capital losses on capital
 assets, of which $443,000 and $462,000, respectively, was recorded as an adjustment
 to other comprehensive income.                                                                                                                                                                                                                       
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |           |   |  |                 
|    |  | The components
 of income tax expense are summarized as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |           |   |  |                 

| |                                                 |  | Three Months Ended
| | ----------------------------------------------- |  | ------------------
| |                                                 |  | March 31,         
| |                                                 |  |                   
| | (In thousands)                                  |  |                   
| |                                                
| | Current tax
 expense                            |  |                   
| | Federal                                         |  | $                 
| | State                                           |  |                   
| |                                                
| | Total
 current                                  |  |                   
| |                                                
| | Deferred tax
 expense, net of valuation reserve |  |                   
| | Federal                                         |  |                   
| | State                                           |  |                   
| |                                                
| | Total
 deferred                                 |  |                   
| |                                                
| | Total
 income tax expense                       |  | $                 
| |                                                

16





NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| | 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:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                      
| |                                                                                                                                                                                      
| |                                                                                                                                                                                      
| |                                                                                                                                                                                      
| | (In thousands)                                                                                                                                                                       
| |                                                                                                                                                                                      
| | Deferred tax
 asset allocated to:                                                                                                                                                    
| | Stockholders equity, tax effect of net unrealized gain on investment securities available
 for sale, net of valuation allowance                                                     
| | Income                                                                                                                                                                               
| |                                                                                                                                                                                      
| | Total
 change in deferred tax assets, net                                                                                                                                            
| |                                                                                                                                                                                      
| |                                                                                                                                                                                      

| | 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:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                           
| |                                                                                                                                                                                           
| | (In thousands)                                                                                                                                                                            
| |                                                                                                                                                                                           
| | 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 March 31, 2010 are $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 March 31, 2010, the Company
 has accrued approximately $413,000 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. In the
 second quarter of 2009, the IRS commenced an examination of the 2006 and 2007 tax
 years for the Company. As of March 31, 2010, the IRS has not proposed any significant
 adjustments to Westbanks or 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 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

| |                                           |  | March 31, |         | December 31,
| | ----------------------------------------- |  | --------- | ------- | ------------
| | (In thousands)                            |  | 2010      |         | 2009        
| |                                          
| | Loan origination
 commitments             |  | $         | 167,469 |             
| | Unadvanced
 portion of construction loans |  |           | 52,730  |             
| | Standby letters
 of credit                |  |           | 6,274   |             
| | Unadvanced
 portion of lines of credit    |  |           | 681,042 |             
| |                                          
| | Total commitments                         |  | $         | 907,515 |             
| |                                          

17





NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| |  | Other Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | As of March
 31, 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | 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 March
 31, 2010, mortgage loans held for sale pursuant to forward loan sale commitments
 had a fair value of $9.2 million, which includes a negative fair value adjustment
 of $50,000. For the three months ended March 31, 2010 and 2009, gains from fair value
 changes of $171,000 and $131,000, respectively, were recorded in non-interest income
 as mortgage origination activity and loan sale income.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

18





NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| | 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 March 31, 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 March 31, 2010.
| |                                                                                                                                                                                                                                                                                                                                                                                         

| |                                         |  | March 31, 2010
| | --------------------------------------- |  | --------------
| |                                         |  |               
| |                                         |  |               
| |                                         |  |               
| |                                         |  |               
| |                                         |  |               
| | (In thousands)                          |  |               
| |                                        
| | 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        |  |               
| |                                        

| |                                         |  | December 31, 2009
| | --------------------------------------- |  | -----------------
| |                                         |  |                  
| |                                         |  |                  
| |                                         |  |                  
| |                                         |  |                  
| |                                         |  |                  
| | (In thousands)                          |  |                  
| |                                        
| | 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   |  |                  
| |                                        

| | 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.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                      
| |                                                                                                                                                                                      
| |                                                                                                                                                                                      
| |                                                                                                                                                                                      
| |                                                                                                                                                                                      
| |                                                                                                                                                                                      
| | (In thousands)                                                                                                                                                                       
| |                                                                                                                                                                                      
| |                                                                                                                                                                                      
| | 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                                                                                                                                                            
| |                                                                                                                                                                                      

19





NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| |  | 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 98.9% 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 March 31, 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 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 obtained a
 price from the market maker that factored in credit risk and liquidity premiums
 to determine a current fair value market price. 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | 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 $2.0 million
 and an individual name trust preferred security of $3.2 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 AA 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.

20





NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| | 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 undesignated 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 March
 31, 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):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

| |                               |  |  | March 31, 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 Basis                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | The following
 tables detail the financial instruments carried at fair value on a nonrecurring
 basis as of March 31, 2010 and December 31, 2009 and indicate the fair value hierarchy
 of the valuation techniques utilized by the Company to determine the fair value:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

| |                          |  | March 31, 2010
| | ------------------------ |  | --------------
| |                          |  |               
| |                          |  |               
| |                          |  |               
| |                          |  |               
| |                          |  |               
| | (In thousands)           |  |               
| |                         
| | Loan Servicing
 Rights   |  | $             
| | Other Real
 Estate Owned |  |               
| | Impaired Loans           |  |               
| |                         

| |                                                                                                             |  | December 31, 2009
| | ----------------------------------------------------------------------------------------------------------- |  | -----------------
| |                                                                                                             |  |                  
| |                                                                                                             |  |                  
| |                                                                                                             |  |                  
| |                                                                                                             |  |                  
| |                                                                                                             |  |                  
| | (In thousands)                                                                                              |  |                  
| |                                                                                                            
| | 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
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

21





NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| |  | 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 Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | The 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.                                                                                                                                                                                                                                                                                                                                                                              
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

22





NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| | The following are the carrying amounts and estimated fair values of the Companys
 financial assets and liabilities as of March 31, 2010:
| | -----------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                          
| |                                                                                                                                          
| |                                                                                                                                          
| | (In thousands)                                                                                                                           
| |                                                                                                                                          
| | Financial
 Assets                                                                                                                        
| | Cash
 and due from banks                                                                                                                 
| | Short-term
 investments                                                                                                                  
| | Investment
 securities                                                                                                                   
| | Loans
 held for sale                                                                                                                     
| | Loans,
 net                                                                                                                              
| | Federal
 Home Loan Bank of Boston stock                                                                                                  
| | Accrued
 income receivable                                                                                                               
| | Derivative
 assets                                                                                                                       
| | Financial
 Liabilities                                                                                                                   
| | Interest
 and non-interest bearing checking, savings and money market accounts                                                           
| | Time
 deposits                                                                                                                           
| | Borrowed
 funds                                                                                                                          
| |                                                                                                                                          

|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 March 31,
 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.
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |  | The following
 table summarizes the Companys derivative positions at March 31.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| |                                                                                                             |  | 2010 |              | 2009
| | ----------------------------------------------------------------------------------------------------------- |  | ---- | ------------ | ----
| |                                                                                                             |  |      |              |     
| |                                                                                                             |  |      | Notional
 or |     
| |                                                                                                             |  |      | Principal    |     
| | (In thousands)                                                                                              |  |      | Amount       |     
| |                                                                                                            
| | Interest Rate
 Lock Commitments                                                                             |  | $    | 18,487       |     
| | Forward Sales
 Commitments                                                                                  |  |      | 25,610       |     
| |                                                                                                            
| |                                                                                                             |  |      |              |     
| | (1) An immaterial portion of these amounts was attributable to changes in instrument-specific
 credit risk.

23





NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| | 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                                                                                                 
| |                                                                                                                                       
| |                                                                                                                                       
| |                                                                                                                                       
| |                                                                                                                                       
| |                                                                                                                                       
| |                                                                                                                                       
| | (In thousands)                                                                                                                        
| |                                                                                                                                       
| | Derivatives
 not designated as hedging instruments                                                                                    
| | Interest
 rate contracts                                                                                                              
| |                                                                                                                                       
| | Total
 derivatives not designated as hedging instruments                                                                              
| |                                                                                                                                       
| |                                                                                                                                       
| | Effect of Derivative Instruments on the Statement of Income                                                                           

| |                                                          |  |                                        |  | For the Three Months Ended         
| | -------------------------------------------------------- |  | -------------------------------------- |  | -----------------------------------
| |                                                          |  |                                        |  | March 31,                          
| |                                                          |  |                                        |  |                                    
| |                                                          |  |                                        |  |                                    
| |                                                          |  |                                        |  |                                    
| |                                                          |  |                                        |  |                                    
| |                                                          |  | Location
 of Gain or (Loss) Recognized |  | Amount of Gain or (Loss)           
| | (In thousands)                                           |  | in Income on
 Derivatives              |  | Recognized in Income on Derivatives
| |                                                         
| | Derivatives
 not designated as hedging instruments       |  |                                        |  |                                    
| | Interest
 rate contracts                                 |  | Non-interest income                    |  | $                                  
| |                                                         
| | Total
 derivatives not designated as hedging instruments |  |                                        |  | $                                  
| |                                                         
| |                                                          |  |                                        |  |                                    
| |                                                          |  |                                        |  |                                    

|15. |  | Stockholders Equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |  | At March
 31, 2010 and December 31, 2009, stockholders equity amounted to $1.44 billion
 and $1.43 billion, respectively, representing 16.9% and 17.0% of total assets, respectively.
 The Company paid cash dividends totaling $0.07 per share on common stock during the
 three months ended March 31, 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
 Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |  | On 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 7,696,187 million
 shares of common stock at a weighted average price of $12.95 per share as of March
 31, 2010. There were no shares repurchased for the year to date period ending March
 31, 2010. There is no set expiration date for this repurchase plan.                                                                                                                                                                                                     
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |  | 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 three months ended March 31, 2010, approximately 85,500 shares were returned
 to the Company for this purpose.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

24





NewAlliance
 Bancshares, Inc. Notes to Unaudited Consolidated Financial
 Statements



---

| |  | 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 March 31, 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 |                   |  |           
| |                                          
| | NewAlliance
 Bank                         |  |        |         |  |          |   |  |                   |             |  |       |                   |  |           
| | March
 31, 2010                           |  |        |         |  |          |   |  |                   |             |  |       |                   |  |           
| | Tier
 1 Capital (to Average Assets)       |  | $      | 755,144 |  | 9.6      | % |  | $                 | 313,959     |  | 4.0   | %                 |  | $         
| | Tier
 1 Capital (to Risk Weighted Assets) |  |        | 755,144 |  | 16.8     |   |  |                   | 179,503     |  | 4.0   |                   |  |           
| | Total
 Capital (to Risk Weighted Assets)  |  |        | 809,425 |  | 18.0     |   |  |                   | 359,007     |  | 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.             |  |        |         |  |          |   |  |                   |             |  |       |                   |  |           
| | March
 31, 2010                           |  |        |         |  |          |   |  |                   |             |  |       |                   |  |           
| | Tier
 1 Capital (to Average Assets)       |  | $      | 891,432 |  | 11.3     | % |  | $                 | 314,336     |  | 4.0   | %                 |  | $         
| | Tier
 1 Capital (to Risk Weighted Assets) |  |        | 891,432 |  | 19.8     |   |  |                   | 179,868     |  | 4.0   |                   |  |           
| | Total
 Capital (to Risk Weighted Assets)  |  |        | 945,713 |  | 21.0     |   |  |                   | 359,736     |  | 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
| | -------------------------------------------------------------- |  | ------------------
| |                                                                |  | March 31,         
| |                                                                |  |                   
| | (In thousands)                                                 |  |                   
| |                                                               
| | Net income                                                     |  | $                 
| | Other comprehensive
 income, before tax                        |  |                   
| | Unrealized
 gains on securities                                |  |                   
| | Unrealized
 holding (losses) gains, arising during the period  |  |                   
| | Reclassification
 adjustment for gains, included in net income |  |                   
| |                                                               
| | Other comprehensive
 (loss) income, before tax                 |  |                   
| | Income tax
 benefit (expense), net of valuation allowance      |  |                   
| |                                                               
| | Other comprehensive
 (loss) income, net of tax                 |  |                   
| |                                                               
| | Comprehensive
 income                                          |  | $                 
| |                                                               

25





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
|    |  |                                                                                                                   |  | March 31,         
|    |  |                                                                                                                   |  |                   
|    |  | (In thousands,
 except per share data)                                                                            |  |                    | 2010   |  |   | 2009  
|    |  |                                                                                                                  
|    |  | Net income                                                                                                        |  | $                  | 16,433 |  | $ | 11,590
|    |  | Average common
 shares outstanding for basic EPS                                                                  |  |                    | 99,020 |  |   | 99,254
|    |  | Effect of
 dilutive stock options and unvested stock awards                                                       |  |                    | 38     |  |   | 16    
|    |  |                                                                                                                  
|    |  | Average common
 and common-equivalent shares for dilutive EPS                                                     |  |                    | 99,058 |  |   | 99,270
|    |  | Net income
 per common share:                                                                                     |  |                    |        |  |   |       
|    |  | Basic                                                                                                             |  | $                  | 0.17   |  | $ | 0.12  
|    |  | Diluted                                                                                                           |  |                    | 0.17   |  |   | 0.12  
|    |  |                                                                                                                  

26





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 Emergency Economic Stabilization Act of 2008
 (EESA) are expected to continue to have a profound effect on the financial
 services industry and could dramatically change the competitive environment of the
 Company;
| |  |  | 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 OperationsThe 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.

27




| |  | 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 $8.50 billion and stockholders equity of $1.44 billion at March
 31, 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 87 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 ObjectivesNewAlliance 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 ConsiderationsNewAlliance 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. Please refer to NewAlliances Annual

28




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.

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:

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.

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.

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.

29




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.
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.

Operating Results

Executive OverviewThe Company reported earnings
 for the first quarter of 2010 of $16.4 million, or $0.17 per diluted share compared
 to $11.6 million, or $0.12 per diluted share for the first quarter in 2009. The
 gain of approximately $2.6 million related to the receipt of tax-exempt life insurance
 proceeds positively impacted earnings and contributed $0.03 per diluted share for
 the quarter ended March 31, 2010. The Companys first quarter results can be
 attributed to its continued business momentum characterized by strong revenues,
 increasing net interest margin, balance sheet growth and disciplined expense control.
 Excluding the insurance proceeds, current quarter earnings surpassed previous year
 earnings by $2.2 million. This increase resulted from an increase in

30




net interest income partially offset by
 expense increases primarily related to income taxes, salaries and employee benefits,
 FDIC insurance premiums, provision for loan losses, as well as a net decrease in
 non-interest income.

The Companys net interest margin for
 the three months ended March 31, 2010 was 2.97%, an increase of 39 basis points
 over the prior year quarter. In addition to growth in the average balance of interest-earning
 assets, the reduction of 92 basis points in the Companys cost of funds, particularly
 deposits, was the foremost driver of the increase in net interest income and the
 margin. This reduction was 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. Core deposit generation continues
 to be strong for the Company, posting an increase of $118.4 million from December
 31, 2009 and $677.7 million from March 31, 2009. The increase in total deposits
 from year end 2009 and March 31st a year ago was $30.9 million and $392.9
 million, respectively. Total loans have also increased from December 31, 2009 by
 $30.1 million and loan originations remain high. While loan originations are essentially
 at prior year levels, the mix of originations has shifted to include more commercial
 and commercial related loans. The Company anticipates continued revenue and balance
 sheet growth with an increase in business volume as a key focus for 2010.

The asset quality of our loan portfolio
 has remained strong throughout this prolonged period of economic turmoil. Despite
 positive economic indicators and improvements, unemployment remains high and consumers
 and businesses continue to struggle causing continued pressure on the housing crisis.
 The Company has been adversely impacted by theses trends but not to the severity
 experienced nationally. The allowance for loan losses to total loans ratio was 1.13%
 and 1.10% and the ratio of nonperforming loans to total loans was 1.35% and 1.10%
 at March 31, 2010 and December 31, 2009, respectively. Although net charge-offs
 for the three months ended March 31, 2010 increased slightly from the fourth quarter
 2009, there was a decrease from the three months ended March 31, 2009. Net charge-offs
 to total average loans were 0.26% and 0.27% for the three months ended March 31,
 2010 and 2009. A provision for loan losses of $4.8 million was recorded for the
 current quarter compared to $4.1 million for the quarter ended March 31, 2009. Exercising
 rigorous risk management and prudent credit practices are fundamental to our ongoing
 success in managing asset quality.

Selected financial data, ratios and per
 share data are provided in Table 1.

Table 1: Selected Data

|                                                      |  | Three Months Ended |           
|----------------------------------------------------- |  | ------------------ | ----------
|                                                      |  | March 31,          |           
|                                                      |  |                   
|(Dollars in
 thousands, except share data)            |  |                    | 2010      
|                                                     
|Condensed Income Statement                            |  |                    |           
|Interest and
 dividend income                         |  | $                  | 87,399    
|Interest expense                                      |  |                    | 31,758    
|                                                     
|Net interest
 income before provision for loan losses |  |                    | 55,641    
|Provision
 for loan losses                            |  |                    | 4,800     
|                                                     
|Net interest
 income after provision for loan losses  |  |                    | 50,841    
|Non-interest
 income                                  |  |                    | 15,400    
|Operating
 expenses                                   |  |                    | 42,200    
|                                                     
|Income before
 income taxes                           |  |                    | 24,041    
|Income tax
 provision                                 |  |                    | 7,608     
|                                                     
|Net income                                            |  | $                  | 16,433    
|                                                     
|Weighted average
 shares outstanding                  |  |                    |           
|Basic                                                 |  |                    | 99,020,399
|Diluted                                               |  |                    | 99,057,937
|Earnings per
 share                                   |  |                    |           
|Basic                                                 |  | $                  | 0.17      
|Diluted                                               |  |                    | 0.17      
|                                                     
|Financial Ratios                                      |  |                    |           
|Return on
 average assets (1)                         |  |                    | 0.78      
|Return on
 average equity (1)                         |  |                    | 4.57      
|Net interest
 margin (1)                              |  |                    | 2.97      
|Dividend payout
 ratio                                |  |                    | 41.18     
|Average equity
 to average assets ratio               |  |                    | 13.41     
|                                                      |  |                    |           
|Non-GAAP Ratios                                       |  |                    |           
|Efficiency
 ratio (2)                                 |  |                    | 59.35     
|Tangible common
 equity ratio (3)                     |  |                    | 11.10     
|                                                      |  |                    |           
|Per share data                                        |  |                    |           
|Book value
 per share                                 |  | $                  | 13.61     
|Tangible book
 value per share                        |  |                    | 8.32      
|                                                     

31




|(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 AnalysisTable 2 below sets
 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 3 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.

32




|Table 2: Average Balance Sheets for the Three Months Ended March 31, 2010 and 2009
|----------------------------------------------------------------------------------
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|(Dollars in
 thousands)                                                           
|                                                                                  
|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                                           
|                                                                                  
|                                                                                  

33




|Table 3:
 Rate/Volume Analysis                   |  |  |                     |         |   |  |   |        |   |  |   |         |  
|------------------------------------------------ |  |  | ------------------- | ------- | - |  | - | ------ | - |  | - | ------- | -
|                                                 |  |  |                     |         |   |  |   |        |   |  |   |         |  
|                                                 |  |  | Three Months Ended  |        
|                                                 |  |  | March 31, 2010      |        
|                                                 |  |  | Compared to         |        
|                                                 |  |  | Three Months Ended  |        
|                                                 |  |  | March 31, 2009     
|                                                 |  |  |                    
|                                                 |  |  | Increase (Decrease) |         |   |  |   |       
|                                                 |  |  |                     | Due to  |   |  |   |        |  
|                                                 |  |  |                     |         |   |  |   |       
|(In thousands)                                   |  |  |                     | Rate    |   |  |   | Volume |   |  |   | Net     |  
|                                                
|Interest-earning
 assets                         |  |  |                     |         |   |  |   |        |   |  |   |         |  
|Loans                                            |  |  |                     |         |   |  |   |        |   |  |   |         |  
|Residential
 real estate                         |  |  | $                   | (2,642  | ) |  | $ | (2,268 | ) |  | $ | (4,910  | )
|Commercial
 real estate                          |  |  |                     | 174     |   |  |   | 462    |   |  |   | 636     |  
|Commercial
 business                             |  |  |                     | (96     | ) |  |   | (421   | ) |  |   | (517    | )
|Consumer                                         |  |  |                     | (326    | ) |  |   | (244   | ) |  |   | (570    | )
|                                                
|Total
 loans                                     |  |  |                     | (2,890  | ) |  |   | (2,471 | ) |  |   | (5,361  | )
|Fed
 funds sold and other short-term investments |  |  |                     | (194    | ) |  |   | 61     |   |  |   | (133    | )
|Federal
 Home Loan Bank of Boston stock          |  |  |                     | -       |   |  |   | -      |   |  |   | -       |  
|Securities                                       |  |  |                     | (4,279  | ) |  |   | 2,417  |   |  |   | (1,862  | )
|                                                
|Total
 securities, short-term investments        |  |  |                     |         |   |  |   |        |   |  |   |         |  
|and
 federal home loan bank stock                |  |  |                     | (4,473  | ) |  |   | 2,478  |   |  |   | (1,995  | )
|                                                
|Total
 interest-earning assets                   |  |  | $                   | (7,363  | ) |  | $ | 7      |   |  | $ | (7,356  | )
|                                                
|Interest-bearing
 liabilities                    |  |  |                     |         |   |  |   |        |   |  |   |         |  
|Deposits                                         |  |  |                     |         |   |  |   |        |   |  |   |         |  
|Money
 market                                    |  |  | $                   | (1,081  | ) |  | $ | 1,415  |   |  | $ | 334     |  
|NOW                                              |  |  |                     | 11      |   |  |   | 15     |   |  |   | 26      |  
|Savings                                          |  |  |                     | (4,274  | ) |  |   | 996    |   |  |   | (3,278  | )
|Time                                             |  |  |                     | (3,832  | ) |  |   | (2,208 | ) |  |   | (6,040  | )
|                                                
|Total interest bearing deposits                  |  |  |                     | (9,176  | ) |  |   | 218    |   |  |   | (8,958  | )
|Repurchase
 agreements                           |  |  |                     | (35     | ) |  |   | (154   | ) |  |   | (189    | )
|FHLB
 advances and other borrowings              |  |  |                     | (1,891  | ) |  |   | (3,966 | ) |  |   | (5,857  | )
|                                                
|Total
 interest-bearing liabilities              |  |  | $                   | (11,102 | ) |  | $ | (3,902 | ) |  | $ | (15,004 | )
|                                                
|                                                 |  |  |                     |         |   |  |   |        |   |  |   |         |  
|Increase in
 net interest income                 |  |  | $                   | 3,739   |   |  | $ | 3,909  |   |  | $ | 7,648   |  
|                                                
|                                                 |  |  |                     |         |   |  |   |        |   |  |   |         |  

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
 3, net interest income increased $7.6 million for the three months ended March 31,
 2010 compared to the three months ended March 31, 2009. This increase was 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; b) the average balance of interest-earning assets outpacing the growth in
 interest-bearing liabilities by $82.2 million and c) the shift in the mix of interest-bearing
 liabilities from higher cost time deposits and borrowings to core deposits which
 was a factor in reducing the cost of funds by 92 basis points. The net interest
 margin increased 39 basis points to 2.97% from 2.58% for the three months ended
 March 31, 2010 and 2009, respectively.

Interest and dividend income
 decreased $7.4 million to $87.4 million at March 31, 2010 compared to $94.8 million
 at March 31, 2009 comprising primarily of a decrease due to rate. Interest earning
 assets have increased $45.2 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 $5.4 million due to a decrease of $2.9 million due to
 rate and $2.5 million due to a decrease in the average balance. The decline in rate
 of 23 basis points was primarily in organic residential mortgage loans as homeowners
 took advantage of refinancing opportunities at lower rates primarily 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 $14.8 million from March 2009.

The investment securities
 portfolio interest and dividend income decreased $1.9 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 $4.3 million resulting from a

34




decrease of 71 bps in the
 average yield due to the market interest rate declines. Although yields on the securities
 portfolio have declined, the growth in the portfolio has partially offset that decline.
 The average portfolio growth of $211.0 million was primarily in mortgage-backed
 securities and increased interest income by $2.4 million. The growth in average
 deposits, specifically core deposits was the main driver the for the Companys
 purchases of the mortgage-backed securities since March 31, 2009.The cost of
 funds for the three months ended March 31, 2010 decreased $15.0 million, or 32.1%
 to $31.8 million, compared to $46.8 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 $11.1 million and $3.9 million, respectively.

The Companys continued
 strategy during this period has been to reduce deposit costs through our approach
 of disciplined pricing while maintaining a focus on the continued growth of core
 interest and non-interest-bearing deposits. While the average deposit balances increased
 $409.0 million, deposit costs declined $9.0 million. The Company experienced a decrease
 of $9.2 million in deposit interest expense due to a reduction of 101 basis points
 on the average rate paid. Deposit interest expense increased approximately $200,000
 due to the increase of the average balance of interest-bearing deposits of $409.0
 million. This net decrease in deposit interest expense of $9.0 million was primarily
 in time deposits, which decreased $6.0 million due to declines in the average balances
 and average rate paid of $311.2 million and 99 basis points, respectively. 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 by a total of $763.1 million. The main driver
 of core deposit growth has been savings and money market accounts with an average
 balance increase of $260.4 million and $439.6 million, respectively. Additionally,
 when combined with the decline in the average rate paid of 98 basis points on savings
 and 80 basis points on money market, interest expense decreased by $3.0 million
 during this period for these products.

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 $5.9 million due to the decline in the average balance and the average
 rate paid on FHLB advances of $393.8 million and 34 basis points, respectively.
 The Company was able to replace maturing advances with new advances at substantially
 lower rates or payoff maturing advances.

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 $4.8 million for the three months ended March 31, 2010. The primary
 factors that influenced managements decision to record this provision were
 the increase in non-performing loans since December 31, 2009 of $14.4 million, or 28.5%, continuing trends
 in delinquencies, net charge-offs of $3.1 million for the quarter and to support
 estimated credit losses embedded in the portfolio. A provision for loan losses of
 $4.1 million was recorded for the three months ended March 31, 2009 based on the
 level of delinquencies, net charge-offs and nonperforming loans at that time.

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
 41.

At March 31, 2010, the allowance
 for loan losses was $54.2 million, which represented 1.13% of total loans and 83.47%
 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.

35




|Table 4:
 Non-Interest Income                      |  |                    |        |  |        |        |   |  |   |        |   |  |         |   | 
|-------------------------------------------------- |  | ------------------ | ------ |  | ------ | ------ | - |  | - | ------ | - |  | ------- | - | 
|                                                   |  | Three Months Ended |        |  |        |        |   |  |   |        |  
|                                                   |  | March 31,          |        |  | Change
|                                                   |  |                    |        |  |       
|(Dollars in thousands)                             |  |                    | 2010   |  |        | 2009   |   |  |   | Amount |   |  | Percent |   | 
|                                                  
|Depositor
 service charges                         |  | $                  | 6,707  |  | $      | 5,953  |   |  | $ | 754    |   |  | 13      | % | 
|Loan and servicing
 income                         |  |                    | 317    |  |        | (181   | ) |  |   | 498    |   |  | (275    | ) | 
|Trust fees                                         |  |                    | 1,602  |  |        | 1,259  |   |  |   | 343    |   |  | 27      |   | 
|Investment
 management, brokerage & insurance fees |  |                    | 1,514  |  |        | 2,250  |   |  |   | (736   | ) |  | (33     | ) | 
|Bank owned
 life insurance                         |  |                    | 3,462  |  |        | 871    |   |  |   | 2,591  |   |  | 297     |   | 
|Net gain on
 securities                            |  |                    | -      |  |        | 1,866  |   |  |   | (1,866 | ) |  | (100    | ) | 
|Mortgage origination
 activity & loan sale income  |  |                    | 728    |  |        | 2,019  |   |  |   | (1,291 | ) |  | (64     | ) | 
|Other                                              |  |                    | 1,070  |  |        | 226    |   |  |   | 844    |   |  | 373     |   | 
|                                                  
|Total
 non-interest income                         |  | $                  | 15,400 |  | $      | 14,263 |   |  | $ | 1,137  |   |  | 8       | % | 
|                                                  

Non-Interest IncomeAs displayed in Table 4, non-interest income increased $1.1 million to
 $15.4 million for the three months ended March 31, 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 other income.
 These increases were offset by a decrease in net security gains, investment management,
 brokerage and insurance fees 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 this type of 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 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 three months ended March 2010, average assets under management were consistently
 ahead of 2009, 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 offset by a decline in the
 average yield earned as a result of current market interest rates.                                                                                                                                                                                                                                                                                    
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  |  | Other income
 increased due primarily to a current year net gain of $330,000 recorded on limited
 partnerships due to the increase in the carrying value of certain limited partnerships.
 This increase compares to a net loss on limited partnerships of approximately $750,000
 for the three months ended March 31, 2009.                                                                                                                                                                                                           
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  |  | Net gain
 on securities decreased $1.9 million due to prior year gains recorded on the sale
 of mortgage backed securities. There were no investment security sales during the
 first quarter of 2010.                                                                                                                                                                                                                                                                                                                                  
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  |  | Investment
 management, brokerage and insurance fee income decreased due to market conditions
 as well as customer preference for deposit products over other investment alternatives.                                                                                                                                                                                                                                                                                                                                                  
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  |  | 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 March 31, 2010 compared
 to March 31, 2009. Mortgage origination activity has slowed compared to the same
 period a year ago due to the surge of customer originations, predominately refinancings,
 brought about by the historically low interest rates that took place throughout
 2009.

36




|Table 5: Non-Interest Expense                    |  |                    |        |        |  |   |        |  |  |   |        |   |  |  |         |  
|------------------------------------------------ |  | ------------------ | ------ | ------ |  | - | ------ |  |  | - | ------ | - |  |  | ------- | -
|                                                 |  | Three Months Ended |        |        |  |   |        |  |  |   |       
|                                                 |  | March 31,          |        | Change
|                                                 |  |                    |        |        | 
|(Dollars in thousands)                           |  |                    | 2010   |        |  |   | 2009   |  |  |   | Amount |   |  |  | Percent |  
|                                                
|Salaries and
 employee benefits                  |  | $                  | 22,221 |        |  | $ | 21,231 |  |  | $ | 990    |   |  |  | 5       | %
|Occupancy                                        |  |                    | 4,621  |        |  |   | 4,755  |  |  |   | (134   | ) |  |  | (3      | )
|Furniture
 and fixtures                          |  |                    | 1,345  |        |  |   | 1,475  |  |  |   | (130   | ) |  |  | (9      | )
|Outside services                                 |  |                    | 5,149  |        |  |   | 5,350  |  |  |   | (201   | ) |  |  | (4      | )
|Advertising,
 public relations, and sponsorships |  |                    | 1,530  |        |  |   | 1,134  |  |  |   | 396    |   |  |  | 35      |  
|Amortization
 of identifiable intangible assets  |  |                    | 1,953  |        |  |   | 2,128  |  |  |   | (175   | ) |  |  | (8      | )
|FDIC insurance
 premiums                         |  |                    | 1,857  |        |  |   | 945    |  |  |   | 912    |   |  |  | 97      |  
|Other                                            |  |                    | 3,524  |        |  |   | 3,363  |  |  |   | 161    |   |  |  | 5       |  
|                                                
|Total
 non-interest expense                      |  | $                  | 42,200 |        |  | $ | 40,381 |  |  | $ | 1,819  |   |  |  | 5       | %
|                                                

Non-Interest ExpenseAs displayed in Table 5, non-interest expense increased $1.8 million
 to $42.2 million for the three months ended March 31, 2010 from $40.4 million for
 the same period a year ago. The main driver of the increase was FDIC insurance premiums
 expense, salaries and employee benefits and advertising, public relations, and sponsorships.
 This increase was partially offset by decreases in outside services.

| |  |  | FDIC insurance
 premium expense increased $912,000 primarily due to an increase of approximately
 one basis point in the base assessment rate for the first quarter of 2010, compared
 to the first quarter of 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. FDIC insurance expense may continue to be volatile
 as the FDIC is in the process of determining how to best handle its liquidity needs
 and the estimated costs associated with continuing failing financial institutions
 and the affect they have on the FDICs deposit insurance fund.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |  | Salaries
 and employee benefits rose as a result of general merit increases, increased salary
 and employee incentive accruals primarily for additions to the management team,
 a decrease in capitalized salaries primarily due to the decline in the number of
 residential loan originations and increased expense for the Companys pension
 plans due to changes in assumptions 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 a new marketing campaign. This campaign includes expenses associated
 with TV commercials, radio, print and online advertising, branch merchandising and
 collateral pieces, a redesigned website and select sponsorships and is expected
 to continue throughout the remainder of the year.                                                                                                                                                                                                                                                                                                                                                             
| |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |  | Outside
 services expense decreased due to consulting costs that were incurred in the first
 quarter of 2009 relating to a performance optimization project.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

Income Tax ProvisionFor the three months ended
 March 31, 2010 and 2009, income tax expense was $7.6 million and $6.2 million and
 the effective tax rate for these periods was 31.65% and 34.8%, respectively. The
 decrease in the effective tax rate for the three months ended March 31, 2010 as
 compared to the 2009 period was primarily due to an increase, in the first quarter
 of 2010 in the favorable permanent difference relating to a $2.6 million gain related
 to tax exempt bank owned life insurance proceeds. This gain was treated as a discrete
 item in the first quarter of 2010.

The projected effective
 rate for the year ended December 31, 2010 is 34.1%.

37




Financial Condition

Financial Condition SummaryFrom December 31, 2009 to March 31, 2010,
 total assets and total liabilities increased $66.6 million and $59.5 million, respectively,
 due mainly to increases in loans, other assets, deposits and borrowings, partially
 offset by decreases in investments. Stockholders equity increased $7.1 million.

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

|Table 6: Investment Securities                        |  |                |           |                   |  |   |           |  |   |           |  |   |          
|----------------------------------------------------- |  | -------------- | --------- | ----------------- |  | - | --------- |  | - | --------- |  | - | ---------
|                                                      |  | March 31, 2010 |           | December 31, 2009
|                                                      |  |                |           |                  
|                                                      |  |                | Amortized |                   |  |   | Fair      |  |   | Amortized |  |   | Fair     
|(In thousands)                                        |  |                | cost      |                   |  |   | value     |  |   | cost      |  |   | value    
|                                                     
|                                                      |  |                |           |                   |  |   |           |  |   |           |  |   |          
|Available
 for sale                                   |  |                |           |                   |  |   |           |  |   |           |  |   |          
|U.S.
 Treasury obligations                            |  | $              | -         |                   |  | $ | -         |  | $ | 597       |  | $ | 597      
|U.S.
 Government sponsored enterprise obligations     |  |                | 305,006   |                   |  |   | 305,831   |  |   | 198,692   |  |   | 199,730  
|Corporate
 obligations                                |  |                | 8,128     |                   |  |   | 8,578     |  |   | 8,139     |  |   | 8,517    
|Other
 bonds and obligations                          |  |                | 14,625    |                   |  |   | 13,266    |  |   | 14,625    |  |   | 13,234   
|Auction
 rate certificates                            |  |                | 22,200    |                   |  |   | 19,826    |  |   | 27,550    |  |   | 24,795   
|Marketable
 equity securities                         |  |                | 8,574     |                   |  |   | 8,834     |  |   | 8,567     |  |   | 8,783    
|Trust
 preferred equity securities                    |  |                | 48,757    |                   |  |   | 33,532    |  |   | 48,754    |  |   | 33,296   
|Private
 label residential mortgage-backed securities |  |                | 22,382    |                   |  |   | 20,215    |  |   | 23,871    |  |   | 20,856   
|Residential
 mortgage-backed securities               |  |                | 1,792,402 |                   |  |   | 1,851,833 |  |   | 1,951,297 |  |   | 2,018,047
|                                                     
|Total
 available for sale                             |  |                | 2,222,074 |                   |  |   | 2,261,915 |  |   | 2,282,092 |  |   | 2,327,855
|                                                     
|Held to
 maturity                                     |  |                |           |                   |  |   |           |  |   |           |  |   |          
|Residential
 mortgage-backed securities               |  |                | 260,669   |                   |  |   | 271,238   |  |   | 230,596   |  |   | 240,956  
|Other
 bonds                                          |  |                | 10,170    |                   |  |   | 10,449    |  |   | 10,170    |  |   | 10,375   
|                                                     
|Total
 held to maturity                               |  |                | 270,839   |                   |  |   | 281,687   |  |   | 240,766   |  |   | 251,331  
|                                                     
|Total
 securities                                     |  | $              | 2,492,913 |                   |  | $ | 2,543,602 |  | $ | 2,522,858 |  | $ | 2,579,186
|                                                     

At March 31, 2010, the Company had total
 investments of $2.53 billion, or 29.8%, of total assets. The decrease of $35.9 million,
 from $2.57 billion at December 31, 2009 was primarily in available-for-sale residential mortgage-backed
 securities partially offset by an increase in U.S. Government agency obligations and held to maturity 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 March
 31, 2010, mortgage-backed securities comprised 82.8% and 96.2% 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 1.88 years at March 31, 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 March 31, 2010,
 $2.26 billion, or 89.3% of the portfolio, was classified as available for sale and
 $270.8 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.

38




The net unrealized gain on securities classified
 as available for sale as of March 31, 2010 was $39.8 million compared to an unrealized
 gain of $45.8 million as of December 31, 2009. The depreciation in the market value
 of securities available for sale was primarily due to the decrease in the fair value
 of mortgage-backed securities due to general market conditions and the level of
 interest rates as cash flows from the investment portfolio and new investment purchases
 have been at reduced rates. The net unrealized gain on the available for sale investment
 portfolio that is primarily within the mortgage-backed securities is partially offset
 by unrealized losses on trust preferred equity securities, auction rate certificates
 and privately issued mortgage-backed securities. The changes in unrealized gains
 and losses on the investment portfolio are primarily 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 due to 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 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. All are still paying principal and interest
 and are expected to continue to pay their contractual cash flows. 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 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 March 31, 2010, the investment
 carries a market value to book value ratio of 81.32%, 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 March 31, 2010.

The unrealized losses on auction rate certificates
 relate to certificates issued by an investment banking firm and are pools of government-guaranteed
 student loans that are issued by state student loan departments. In the first half
 of 2008, the auction process for auction rate certificates began to freeze resulting
 from the problems in the credit markets. These securities are currently rated AAA
 and are still paying their contractual cash flows and are expected to continue to
 pay their contractual cash flows. Management has concluded that no other-than-temporary
 impairment exists as of March 31, 2010. In 2008, the underwriter entered into a
 settlement agreement with several state regulatory agencies, whereby they have agreed
 to repurchase these certificates from both their retail and institutional customers
 at par. The institutional buy-back of these securities is scheduled on or around
 June 30, 2010.

Trust preferred securities are comprised
 of two pooled trust preferreds with an amortized cost of $6.1 million, one of which
 is A rated and the other is rated CC at March 31, 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. The remaining $42.7 million are comprised of twelve individual
 names issues with the following ratings: $15.6 million rated A to AA-, $9.7
 million rated BBB to BBB+ and $17.4 million rated BB. The unrealized losses reported
 for trust preferred equity securities relate to the financial and liquidity stresses
 in the fixed income markets and in the banking sector and is 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 trust preferred 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.
 This review included an analysis of collateral reports, cash flows, stress default
 levels and financial ratios of the underlying issuers. The Company does not believe
 that these securities will incur reduced contractual cash flows and therefore does
 not believe that any further OTTI exists on the CC rated pooled security nor are
 the remaining trust preferred securities other-than-temporarily impaired.

Management has performed a review of all
 investments with unrealized losses and determined that no investments had credit
 related other-than-temporary impairment during the quarter ended March 31, 2010.
 The Company has no intent to sell nor is it

39




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 7 displays
 the balances of the Companys loan portfolio as of March 31, 2010 and December
 31, 2009.

|Table 7:
 Loan Portfolio                |  |   |                |  |          |                   |  |   |           |  |  |  |          |  
|--------------------------------------- |  | - | -------------- |  | -------- | ----------------- |  | - | --------- |  |  |  | -------- | -
|                                        |  |   | March 31, 2010 |  |          | December 31, 2009 | 
|                                        |  |   |                |  |          |                  
|                                        |  |   |                |  | Percent  |                   |  |   |           |  |  |  | Percent  |  
|(Dollars in
 thousands)                 |  |   | Amount         |  | of Total |                   |  |   |           |  |  |  | of Total |  
|                                       
|Residential
 real estate                |  | $ | 2,376,655      |  | 49.6     | %                 |  | $ | 2,382,514 |  |  |  | 50.0     | %
|Residential
 real estate construction   |  |   | 14,920         |  | 0.3      |                   |  |   | 13,789    |  |  |  | 0.3      |  
|                                       
|Total
 residential real estate          |  |   | 2,391,575      |  | 49.9     |                   |  |   | 2,396,303 |  |  |  | 50.3     |  
|                                        |  |   |                |  |          |                   |  |   |           |  |  |  |          |  
|Commercial
 real estate                 |  |   | 1,178,064      |  | 24.6     |                   |  |   | 1,100,880 |  |  |  | 23.1     |  
|Commercial
 real estate construction    |  |   | 93,113         |  | 1.9      |                   |  |   | 132,370   |  |  |  | 2.8      |  
|                                       
|Total
 commercial real estate           |  |   | 1,271,177      |  | 26.5     |                   |  |   | 1,233,250 |  |  |  | 25.9     |  
|                                        |  |   |                |  |          |                   |  |   |           |  |  |  |          |  
|Commercial
 business                    |  |   | 415,458        |  | 8.7      |                   |  |   | 411,211   |  |  |  | 8.6      |  
|Home equity
 and equity lines of credit |  |   | 699,753        |  | 14.6     |                   |  |   | 705,673   |  |  |  | 14.9     |  
|Other consumer                          |  |   | 14,185         |  | 0.3      |                   |  |   | 15,608    |  |  |  | 0.3      |  
|                                       
|Total
 loans                            |  | $ | 4,792,148      |  | 100.0    | %                 |  | $ | 4,762,045 |  |  |  | 100.0    | %
|                                       

As shown in Table 7, gross loans were $4.79
 billion, up $30.1 million, at March 31, 2010 from year-end 2009. The Company experienced
 increased business loan demand partially offset by higher levels of residential
 mortgage prepayments which offset originations.

Residential real estate loans continue to
 represent the largest segment of the Companys loan portfolio as of March 31,
 2010, comprising 49.9% of total loans. The decrease of $4.7 million from December
 31, 2009 was primarily due to the net impact of prepayments versus origination volume.
 The Company had significant originations of both adjustable and fixed rate mortgages
 of $217.3 million during the quarter, approximately $160.0 million was 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.
 Even though the portfolio decreased in the first quarter the Company anticipates
 that mortgage activity will remain strong due to relatively low market interest
 rates and increased marketing campaigns, although not at 2009 levels. The residential
 real estate loan portfolio has a weighted average FICO score of 747 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 March
 31, 2010 the Companys purchased portfolio had an outstanding balance of approximately
 $462.0 million with the largest concentration in our footprint of Connecticut and
 Massachusetts at 19.2%, followed by New York at 13.8% and California at 12.9%.

Commercial real estate loans and commercial
 business loans increased $42.2 million. In 2009, loan growth was slowed due to economic
 conditions and elevated levels of stress on businesses. In 2010, the Bank 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 $93.1 million includes
 $26.5 million of loans to commercial borrowers for residential housing development,
 approximately $10.0 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 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

40




financially distressed situations that result
 in the inability to secure traditional commercial lending. 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
 $5.9 million from December 31, 2009 to March 31, 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 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 747 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
 $26.5 million of commercial construction loans for residential development. All
 of these loans are collateralized and carry a reserve allocation of approximately
 $3.5 million. This segment has total delinquencies of $2.0 million, all of which
 are in the over 90 day category.Within the residential portfolio, management
 uses two main early warning techniques to more closely monitor credit deterioration.
 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 March 31, 2010, higher-risk
 loans comprised approximately $53.0 million, or 2.3% of the residential real estate
 portfolio. The Company also tracks loans that have a FICO score that has declined
 20 points or more and are below 660. As of March 31, 2010 loans meeting this criteria
 represent approximately $69.0 million, or 2.9% 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 8, nonperforming assets
 at March 31, 2010 increased to $68.2 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 $8.7 million was due to current economic conditions including
 factors such as continued high unemployment rates and softness in the real estate
 market impacting customer ability to make loan payments. There are 184 loans in
 the residential nonperforming category totaling $39.9 million, representing 1.67%
 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 $2.8
 million in restructured loans which have been modified from their original contractual
 terms.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 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 loan to performing status includes
 the receipt of regular payments, generally for a period of six months.

The increase in nonperforming commercial
 real estate loans primarily relates to a loan for $4.7 million which is in the process
 of a restructured workout.

41




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 March
 31, 2010 were 1.35%, compared to 1.06% at December 31, 2009.

|Table 8: Nonperforming Assets                                         |  |   |           |   |  |   |              |  
|--------------------------------------------------------------------- |  | - | --------- | - |  | - | ------------ | -
|                                                                      |  |   | March 31, |   |  |   | December 31,
|(Dollars in
 thousands)                                               |  |   | 2010      |   |  |   | 2009        
|                                                                     
|Nonperforming
 loans (1)                                              |  |   |           |   |  |   |              |  
|Real
 estate loans                                                    |  |   |           |   |  |   |              |  
|Residential
 (one- to four- family)                                   |  | $ | 39,873    |   |  | $ | 31,140       |  
|Commercial
 real estate loans                                         |  |   | 9,827     |   |  |   | 6,136        |  
|Commercial
 construction                                              |  |   | 3,284     |   |  |   | 2,459        |  
|                                                                     
|Total
 real estate loans                                              |  |   | 52,984    |   |  |   | 39,735       |  
|Commercial
 business                                                  |  |   | 9,510     |   |  |   | 8,497        |  
|Consumer
 loans                                                       |  |   |           |   |  |   |              |  
|Home
 equity and equity lines of credit                               |  |   | 2,179     |   |  |   | 2,187        |  
|Other
 consumer                                                       |  |   | 221       |   |  |   | 88           |  
|                                                                     
|Total
 consumer loans                                                 |  |   | 2,400     |   |  |   | 2,275        |  
|                                                                     
|Total
 nonperfroming loans                                            |  |   | 64,894    |   |  |   | 50,507       |  
|Other real
 estate owned                                              |  |   | 3,348     |   |  |   | 3,705        |  
|                                                                     
|Total
 nonperforming assets                                           |  | $ | 68,242    |   |  | $ | 54,212       |  
|                                                                     
|                                                                      |  |   |           |   |  |   |              |  
|Total
 nonperforming loans as a percentage of total loans (2)         |  |   | 1.35      | % |  |   | 1.06         | %
|Total
 nonperforming assets as a percentage of total assets           |  |   | 0.80      |   |  |   | 0.64         |  
|                                                                      |  |   |           |   |  |   |              |  
|Troubled
 debt restructured loans included in nonaccruing loans above |  | $ | 3,271     |   |  | $ | 3,294        |  

|(1) |  | Nonperforming
 loans, except guaranteed U.S. Government certificates totaling $2.9 million, 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 9 below, the Company
 recorded net charge-offs of $3.1 million, during the three months ended March 31,
 2010, compared to net charge-offs of $3.4 million for the three months ended March
 31, 2009. Net charge-offs of $1.1 million, $750,000, $901,000 and $277,000 were
 recorded against the residential, commercial real estate, commercial business and
 consumer 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 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 $4.8 million was recorded for
 the three months ended March 31, 2010 compared to $4.1 million for the three months
 ended March 31, 2009.

The Company has a loan loss allowance of
 $54.2 million, or 1.13% 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 directionally 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. Management continues to
 assess loss factors based on recent economic events and incorporates that into the
 calculation.

The allowance for loan losses to nonperforming
 loans ratio at March 31, 2010 was 83.47% compared to 103.87% at December 31, 2009
 and 101.02% at March 31, 2009. This ratio has declined because growth in the allowance
 is not proportionate to growth in nonperforming loans as the result of the following
 1) classification of nonperforming loans is a backward looking indicator, often
 loans with credit weaknesses are identified and allocated higher levels of reserves
 if appropriate before becoming nonperforming, 2) 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, 3) the growth in nonperforming loans
 this year was concentrated in residential real estate loans in which the loss in
 event of default is traditionally low, 4) certain nonperforming loans have already
 been partially charged-off to the expected

42




net realizable value and 5) a portion of
 the allowance is to cover losses established under FASB ASC 450, Contingencies, for
 performing loans. 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.

|Table 9:
 Schedule of Allowance for Loan Losses   |  |                            |        |   |  |   |        |  
|------------------------------------------------- |  | -------------------------- | ------ | - |  | - | ------ | -
|                                                  |  | At or For the Three Months
|                                                  |  | Ended March 31,           
|                                                  |  |                           
|(Dollars in
 thousands)                           |  |                            | 2010   |   |  |   | 2009   |  
|                                                 
|Balance at beginning of period                    |  | $                          | 52,463 |   |  | $ | 49,911 |  
|Provision
 for loan losses                        |  |                            | 4,800  |   |  |   | 4,100  |  
|Charge-offs                                       |  |                            |        |   |  |   |        |  
|Residential
 real estate loans                    |  |                            | 1,052  |   |  |   | 500    |  
|Commercial
 real estate loans                     |  |                            | 750    |   |  |   | 503    |  
|Commercial
 construction loans                    |  |                            | 121    |   |  |   | 1,781  |  
|Commercial
 business loans                        |  |                            | 947    |   |  |   | 805    |  
|Consumer
 loans                                   |  |                            | 320    |   |  |   | 159    |  
|                                                 
|Total
 charge-offs                                |  |                            | 3,190  |   |  |   | 3,748  |  
|                                                 
|Recoveries                                        |  |                            |        |   |  |   |        |  
|Residential
 real estate loans                    |  |                            | 3      |   |  |   | 34     |  
|Commercial
 real estate loans                     |  |                            | -      |   |  |   | -      |  
|Commercial
 construction loans                    |  |                            | -      |   |  |   | -      |  
|Commercial
 business loans                        |  |                            | 45     |   |  |   | 207    |  
|Consumer
 loans                                   |  |                            | 43     |   |  |   | 131    |  
|                                                 
|Total
 recoveries                                 |  |                            | 91     |   |  |   | 372    |  
|                                                 
|Net charge-offs                                   |  |                            | 3,099  |   |  |   | 3,376  |  
|                                                 
|Balance at
 end of period                         |  | $                          | 54,164 |   |  | $ | 50,635 |  
|                                                 
|                                                  |  |                            |        |   |  |   |        |  
|Net charge-offs
 to average loans (annualized)    |  |                            | 0.26   | % |  |   | 0.27   | %
|Allowance
 for loan losses to total loans         |  |                            | 1.13   |   |  |   | 1.03   |  
|Allowance
 for loan losses to nonperforming loans |  |                            | 83.47  |   |  |   | 101.02 |  
|Net charge-offs
 to allowance for loan losses     |  |                            | 5.72   |   |  |   | 6.67   |  
|Total recoveries
 to total charge-offs            |  |                            | 2.85   |   |  |   | 9.93   |  

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. During the third quarter of 2009, the Company allocated an
 initial pool of $50.0 million for the retention of 30 year jumbo fixed rate residential
 mortgage originations in its portfolio. Loans held for sale were $9.5 million at
 March 31, 2010, a decrease of $5.2 million from $14.7 million at December 31, 2009.
 The decrease is primarily due to a combination of higher market rates and the Company
 retaining a higher percentage of residential mortgage originations in the first
 quarter of 2010. During the year, the Company funded approximately $57.2 million
 in mortgage loans originated 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 March 31, 2010, the Company
 had intangible assets of $560.6 million, a decrease of $1.9 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 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 March 31, 2010 indicate that the carrying value of the Companys goodwill may not be recoverable.

43




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.

DepositsThe Company receives retail
 and commercial deposits through its main office and 86 other banking offices throughout
 Connecticut (75 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 10:
 Deposits |  |  |   |           |  |  |   |              | 
|------------------- |  |  | - | --------- |  |  | - | ------------ | 
|                    |  |  |   | March 31, |  |  |   | December 31,
|(In thousands)      |  |  |   | 2010      |  |  |   | 2009        
|                   
|Savings             |  |  | $ | 1,807,008 |  |  | $ | 1,817,787    | 
|Money market        |  |  |   | 934,376   |  |  |   | 790,453      | 
|NOW                 |  |  |   | 385,800   |  |  |   | 400,176      | 
|Demand              |  |  |   | 533,841   |  |  |   | 534,180      | 
|Time                |  |  |   | 1,393,912 |  |  |   | 1,481,446    | 
|                   
|Total
 deposits     |  |  | $ | 5,054,937 |  |  | $ | 5,024,042    | 
|                   

As displayed in Table 10,
 deposits increased $30.9 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 $118.4 million, particularly through the Companys money market products.
 The decline in savings deposits of $10.8 million during the quarter was primarily
 due to a decrease in escrow deposits which is attributable to timing of customer
 tax installments. Money market deposits have shown significant increases and have
 grown approximately $144.0 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 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 $87.5 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.

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.

44




The following table summarizes the Companys recorded borrowings at March 31, 2010.

|Table 11:
 Borrowings                                           |  |  |   |           |  |  |   |               | 
|--------------------------------------------------------------- |  |  | - | --------- |  |  | - | ------------- | 
|                                                                |  |  |   | March 31, |  |  |   | December
 31, | 
|(In thousands)                                                  |  |  |   | 2010      |  |  |   | 2009          | 
|                                                               
|FHLB advances
 (1)                                              |  |  | $ | 1,790,960 |  |  | $ | 1,755,533     | 
|Repurchase
 agreements                                          |  |  |   | 102,149   |  |  |   | 112,095       | 
|Mortgage loans
 payable                                         |  |  |   | 1,126     |  |  |   | 1,165         | 
|Junior subordinated
 debentures issued to affiliated trusts (2) |  |  |   | 21,135    |  |  |   | 21,135        | 
|                                                               
|Total
 borrowings                                               |  |  | $ | 1,915,370 |  |  | $ | 1,889,928     | 
|                                                               

|(1) |  | Includes
 fair value adjustments on acquired borrowings, in accordance with purchase accounting
 standards of $2.7 million and $3.1 million at March 31, 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 $1.92 billion
 at March 31, 2010, an increase of $25.4 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 March 31, 2010, all of the Companys outstanding FHLB advances
 were at fixed rates ranging from 1.39% to 8.17%.

Stockholders EquityTotal stockholders
 equity equaled $1.44 billion at March 31, 2010, an increase of $7.1 million compared
 to $1.43 billion at December 31, 2009. The increase was primarily due to earnings
 of $16.4 million and restricted stock expense of $1.5 million. The increase in equity
 was partially offset by a decrease in the fair market value of available for sale
 investment securities of $3.8 million, net of tax and $7.0 million for the payment
 of cash dividends declared on our common stock during the three months ended March
 31, 2010. For information regarding our compliance with applicable capital requirements,
 see Liquidity and Capital Position below.

Dividends declared for the first quarters of 2010 and 2009 were $0.07 per share. On April 27, 2010, we declared
 a $0.07 per share cash dividend payable on May 20, 2010 to shareholders of record
 on May 10, 2010. This will be the Companys 24th consecutive quarterly dividend
 payment. Book value per share amounted to $13.61 and $13.53 at March 31, 2010 and
 December 31, 2009, respectively, and tangible book value amounted to $8.32 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 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)

45




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 March 31, 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 $301.2 million, or positive 3.54% 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 March 31, 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 officials that interest rates would likely remain flat
 for an extended period. As of March 31, 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 inestimated net interestincome over twelve months
|------------------------------------------------ |  | --------------------------------------------------------------------
|                                                
|100 basis point upward shock in interest rates   |  | 3.49                                                                
|                                                
|25 basis point
 downward shock in interest rates |  | -1.42                                                               
|                                                

As of March 31, 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.

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.

46




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 March 31, 2010, cash and due
 from banks, short-term investments and debt securities maturing within one year
 amounted to $391.9 million, or 4.6% 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 March 31, 2010, total borrowings from the Federal Home Loan
 Bank amounted to $1.79 billion, exclusive of $2.7 million in purchase accounting
 adjustments, and the Company had the immediate capacity to increase that total to
 $2.08 billion. Additional borrowing capacity of approximately $1.45 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 March 31, 2010 the Companys repurchase
 agreement lines of credit with three large broker dealers totaled $225.0 million,
 $200.0 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 March 31, 2010, the Company had commitments
 to originate loans, unused outstanding lines of credit and standby letters of credit
 totaling $907.5 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 March 31, 2010 amount to $847.1 million. FHLB advances maturing within
 one year from March 31, 2010 amount to $512.1 million and interest payments of approximately
 $68.9 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.

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 March 31, 2010, the Companys Tier
 1 leverage ratio, a primary measure of regulatory capital was $891.4 million, or
 11.3%, which is above the threshold level of $392.9 million, or 5.0% to be considered
 well-capitalized. The Tier 1 risk-based capital ratio stood at 19.8%
 and the Total risk-based capital ratio stood at 21.0%. The Bank also exceeded all
 of its regulatory capital requirements with leverage capital of $755.1 million,
 or 9.6% of average assets, which is above the required level of $314.0 million or
 4.0%. The Tier 1 risk-based capital ratio was 16.8% and the Total risk-based capital
 ratio was 18.0%. These ratios qualify the Bank as a well capitalized
 institution under federal capital guidelines.

47




Item 3. Quantitative and Qualitative
 Disclosures About Market RiskQuantitative 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
 45 through 47.

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 March 31, 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 first
 quarter 2010.In addition, based on that evaluation, no change in the Companys internal control over financial reporting occurred during the quarter ended
 March 31, 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 March 31, 2010.

48




|                    |     | (a) Total
 Number of SharesPurchased | (b) Average
 Price Paid perShare (includescommission) | (c) Total
 Number of SharesPurchased as Part ofPublicly Announced Plansor Programs | (d) Maximum
 Number(or Approximate Dollar Value) ofShares that may Yet BePurchased Under the
 Plansor Programs
|------------------- | --- | ------------------------------------ | ----------------------------------------------------- | ---------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------
|Period              |     |                                      |                                                       |                                                                                    |                                                                                                               
|January 1-31, 2010  | (1) | 78,561                               | $          
        12.01                             | 0                                                                                  | 2,303,813 shares                                                                                              
|February 1-28, 2010 |     | 0                                    | $          
                -                         | 0                                                                                  | 2,303,813 shares                                                                                              
|March 1-31, 2010    | (1) | 7,350                                | $             
     12.00                             | 0                                                                                  | 2,303,813 shares                                                                                              
|Total               |     | 85,911                               | $             
     12.01                             | 0                                                                                  |                                                                                                               

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) Shares represent 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

|Exhibit |  |  |                                                                                                                                                                                                                                                                                           
|------- |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |  |  |                                                                                                                                                                                                                                                                                           
|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.

49




|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) (2009 awards). 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) (2009 awards). 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) (2009 awards). 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).                                                                                                                             
|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).                                                                                                                               

50




|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:                                                                                                                                                                                     
|           |                                                                                                                                                                                         
|           |                                                                                                                                                                                         
|           |                                                                                                                                                                                         
|           |                                                                                                                                                                                         
|           | Date:                                                                                                                                                                                   

51