UNITED STATESSECURITIES
 AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended
June 30, 2008.

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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definition of accelerated filer and large accelerated filer 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) |  |  | 107,058,509                   | 
| | ----------------------------- |  |  | ----------------------------- | 
| | Class                         |  |  | Outstanding at August 1, 2008 | 




TABLE OF CONTENTS

Part I  FINANCIAL INFORMATION


Page No.


|                            |          |  |                                                                                                  |  |    | 
|--------------------------- | -------- |  | ------------------------------------------------------------------------------------------------ |  | -- | 
|                            | Item 1.  |  | Financial Statements (Unaudited)                                                                 |  |    | 
|                            |          |  |                                                                                                  |  |    | 
|                            |          |  | Consolidated Balance Sheets at June 30, 2008 and December 31, 2007                               |  | 3  | 
|                            |          |  |                                                                                                  |  |    | 
|                            |          |  | Consolidated Statements of Income for the three and six months ended June 30, 2008 and 2007      |  | 4  | 
|                            |          |  |                                                                                                  |  |    | 
|                            |          |  | Consolidated Statement of Changes in Stockholders Equity for the six months ended June 30, 2008 |  | 5  | 
|                            |          |  |                                                                                                  |  |    | 
|                            |          |  | Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007            |  | 6  | 
|                            |          |  |                                                                                                  |  |    | 
|                            |          |  | Notes to Unaudited Consolidated Financial Statements                                             |  | 7  | 
|                            |          |  |                                                                                                  |  |    | 
|                            | Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations            |  | 22 | 
|                            |          |  |                                                                                                  |  |    | 
|                            | Item 3.  |  | Quantitative and Qualitative Disclosures about Market Risk                                       |  | 41 | 
|                            |          |  |                                                                                                  |  |    | 
|                            | Item 4.  |  | Controls and Procedures                                                                          |  | 41 | 
|                            |          |  |                                                                                                  |  |    | 
|                            | Item 4T. |  | Controls and Procedures                                                                          |  | 41 | 
|                            |          |  |                                                                                                  |  |    | 
|Part II  OTHER INFORMATION
|                            |          |  |                                                                                                  |  |    | 
|                            | Item 1.  |  | Legal Proceedings                                                                                |  | 41 | 
|                            |          |  |                                                                                                  |  |    | 
|                            | Item 1A. |  | Risk Factors                                                                                     |  | 42 | 
|                            |          |  |                                                                                                  |  |    | 
|                            | Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                                      |  | 45 | 
|                            |          |  |                                                                                                  |  |    | 
|                            | Item 3.  |  | Defaults Upon Senior Securities                                                                  |  | 45 | 
|                            |          |  |                                                                                                  |  |    | 
|                            | Item 4.  |  | Submission of Matters to a Vote of Security Holders                                              |  | 45 | 
|                            |          |  |                                                                                                  |  |    | 
|                            | Item 5.  |  | Other Information                                                                                |  | 45 | 
|                            |          |  |                                                                                                  |  |    | 
|                            | Item 6.  |  | Exhibits                                                                                         |  | 45 | 
|                            |          |  |                                                                                                  |  |    | 
|                            |          |  |                                                                                                  |  |    | 

SIGNATURES

2




New Alliance Bancshares, Inc.


Consolidated Balance Sheets


|(In thousands,
 except per share data) (Unaudited)                                                                       | June 30,2008 |           | December 31,2007
|------------------------------------------------------------------------------------------------------------------------ | ------------ | --------- | ----------------
|                                                                                                                        
|Assets                                                                                                                   |              |           |                 
|Cash and due from banks, noninterest bearing                                                                             | $            | 112,287   |                 
|Short-term
 investments                                                                                                  |              | 52,000    |                 
|                                                                                                                        
|Cash
 and cash equivalents                                                                                               |              | 164,287   |                 
|Investment
 securities available for sale (note 5)                                                                       |              | 2,006,502 |                 
|Investment
 securities held to maturity (note 5)                                                                         |              | 314,113   |                 
|Loans
 held for sale                                                                                                     |              | 3,350     |                 
|Loans,
 net (note 6)                                                                                                     |              | 4,901,669 |                 
|Premises
 and equipment, net                                                                                             |              | 60,898    |                 
|Cash
 surrender value of bank owned life insurance                                                                       |              | 134,878   |                 
|Goodwill
 (note 7)                                                                                                       |              | 527,643   |                 
|Identifiable
 intangible assets (note 7)                                                                                 |              | 48,588    |                 
|Other
 assets (note 8)                                                                                                   |              | 100,328   |                 
|                                                                                                                        
|Total
 assets                                                                                                            | $            | 8,262,256 |                 
|                                                                                                                        
|Liabilities                                                                                                              |              |           |                 
|Deposits
 (note 9)                                                                                                       |              |           |                 
|Non-interest
 bearing                                                                                                    | $            | 500,673   |                 
|Savings,
 interest-bearing checking and money market                                                                     |              | 2,168,256 |                 
|Time                                                                                                                     |              | 1,662,071 |                 
|                                                                                                                        
|Total
 deposits                                                                                                          |              | 4,331,000 |                 
|Borrowings
 (note 10)                                                                                                    |              | 2,454,606 |                 
|Other
 liabilities                                                                                                       |              | 69,540    |                 
|                                                                                                                        
|Total
 liabilities                                                                                                       |              | 6,855,146 |                 
|                                                                                                                         |              |           |                 
|Commitments
 and contingencies (note 14)                                                                                 |              |           |                 
|                                                                                                                         |              |           |                 
|Stockholders Equity                                                                                                     |              |           |                 
|Preferred
 stock, $0.01 par value; authorized 38,000 shares; none issued                                                 |              | -         |                 
|Common
 stock, $0.01 par value; authorized 190,000 shares; issued 121,486 shares at June
 30, 2008 and December 31, 2007 |              | 1,215     |                 
|Additional
 paid-in capital                                                                                              |              | 1,244,216 |                 
|Unallocated
 common stock held by ESOP                                                                                   |              | (94,209   | )               
|Unearned
 restricted stock compensation                                                                                  |              | (21,785   | )               
|Treasury
 stock, at cost (13,531 shares at June 30, 2008 and 12,634 shares at December 31,
 2007)                        |              | (189,483  | )               
|Retained
 earnings                                                                                                       |              | 461,597   |                 
|Accumulated
 other comprehensive income (note 16)                                                                        |              | 5,559     |                 
|                                                                                                                        
|Total
 stockholders equity                                                                                              |              | 1,407,110 |                 
|                                                                                                                        
|Total
 liabilities and stockholders equity                                                                              | $            | 8,262,256 |                 
|                                                                                                                        

See accompanying notes to consolidated financial statements.

3




New Alliance Bancshares, Inc.


Consolidated Statements of Income


|                                                      | Three Months EndedJune 30, |             | Six Months EndedJune 30,
|----------------------------------------------------- | -------------------------- | ----------- | ------------------------
|                                                      |                            |             |                         
|(In thousands, except share data) (Unaudited)         |                            | 2008        |                         
|                                                     
|Interest
 and dividend income                         |                            |             |                         
|Residential
 real estate loans                        | $                          | 34,512      |                         
|Commercial
 real estate loans                         |                            | 18,291      |                         
|Commercial
 business loans                            |                            | 6,819       |                         
|Consumer
 loans                                       |                            | 9,547       |                         
|Investment
 securities                                |                            | 29,821      |                         
|Short-term
 investments                               |                            | 190         |                         
|                                                     
|Total
 interest and dividend income                   |                            | 99,180      |                         
|                                                     
|Interest
 expense                                     |                            |             |                         
|Deposits                                              |                            | 24,805      |                         
|Borrowings                                            |                            | 26,127      |                         
|                                                     
|Total
 interest expense                               |                            | 50,932      |                         
|                                                     
|Net
 interest income before provision for loan losses |                            | 48,248      |                         
|                                                      |                            |             |                         
|Provision
 for loan losses                            |                            | 3,700       |                         
|                                                     
|Net
 interest income after provision for loan losses  |                            | 44,548      |                         
|                                                     
|Non-interest
 income                                  |                            |             |                         
|Depositor
 service charges                            |                            | 6,708       |                         
|Loan
 and servicing income                            |                            | 264         |                         
|Trust
 fees                                           |                            | 1,678       |                         
|Investment
 management, brokerage & insurance fees    |                            | 1,844       |                         
|Bank
 owned life insurance                            |                            | 1,291       |                         
|Net
 gain (loss) on securities                        |                            | 87          |                         
|Net
 gain on sale of loans                            |                            | 656         |                         
|Other                                                 |                            | 1,991       |                         
|                                                     
|Total
 non-interest income                            |                            | 14,519      |                         
|                                                     
|Non-interest
 expense                                 |                            |             |                         
|Salaries
 and employee benefits (notes 11 & 12)       |                            | 22,935      |                         
|Occupancy                                             |                            | 4,320       |                         
|Furniture
 and fixtures                               |                            | 1,654       |                         
|Outside
 services                                     |                            | 4,471       |                         
|Advertising,
 public relations, and sponsorships      |                            | 2,036       |                         
|Amortization
 of identifiable intangible assets       |                            | 2,364       |                         
|Merger
 related charges                               |                            | 23          |                         
|Other                                                 |                            | 3,514       |                         
|                                                     
|Total
 non-interest expense                           |                            | 41,317      |                         
|                                                     
|Income (loss) before income taxes                     |                            | 17,750      |                         
|                                                      |                            |             |                         
|Income tax
 provision (note 13)                       |                            | 5,968       |                         
|                                                     
|Net income (loss)                                     | $                          | 11,782      |                         
|                                                     
|                                                      |                            |             |                         
|Basic earnings (loss) per share (note 17)             | $                          | 0.12        |                         
|Diluted earnings (loss) per share (note 17)           |                            | 0.12        |                         
|Weighted-average
 shares outstanding (note 17)        |                            |             |                         
|Basic                                                 |                            | 100,112,529 |                         
|Diluted                                               |                            | 100,282,161 |                         
|Dividends
 per share                                  | $                          | 0.07        |                         
|                                                      |                            |             |                         
|                                                      |                            |             |                         

See accompanying notes to consolidated financial statements.

4




New Alliance Bancshares, Inc.


Consolidated Statement of Changes in Stockholders Equity


|For the Six
 Months Ended June 30, 2008(In thousands, except per share data) (unaudited) | CommonSharesOutstanding |         | Par ValueCommonStock |  | AdditionalPaid-inCapital |       | UnallocatedCommonStock Heldby ESOP |  | UnearnedCompensation |           | TreasuryStock |  | RetainedEarnings |         | AccumulatedOtherComprehensiveIncome |  | TotalStockholdersEquity
|---------------------------------------------------------------------------------------- | ----------------------- | ------- | -------------------- |  | ------------------------ | ----- | ---------------------------------- |  | -------------------- | --------- | ------------- |  | ---------------- | ------- | ----------------------------------- |  | ------------------------
|                                                                                        
|Balance December
 31, 2007                                                               |                         | 108,852 |                      |  | $                        | 1,215 |                                    |  | $                    | 1,242,100 |               |  | $                | (96,039 | )                                   |  | $                       
|                                                                                         |                         |         |                      |  |                          |       |                                    |  |                      |           |               |  |                  |         |                                     |  |                         
|Dividends
 declared ($0.135 per share)                                                   |                         |         |                      |  |                          |       |                                    |  |                      |           |               |  |                  |         |                                     |  |                         
|Allocation
 of ESOP shares, net of tax                                                   |                         |         |                      |  |                          |       |                                    |  |                      | (166      | )             |  |                  | 1,830   |                                     |  |                         
|Treasury shares
 acquired (note 15)                                                      |                         | (897    | )                    |  |                          |       |                                    |  |                      |           |               |  |                  |         |                                     |  |                         
|Restricted
 stock expense                                                                |                         |         |                      |  |                          |       |                                    |  |                      |           |               |  |                  |         |                                     |  |                         
|Excess tax
 benefit of stock-based compensation                                          |                         |         |                      |  |                          |       |                                    |  |                      | 107       |               |  |                  |         |                                     |  |                         
|Stock option
 expense                                                                    |                         |         |                      |  |                          |       |                                    |  |                      | 2,175     |               |  |                  |         |                                     |  |                         
|Adoption of EITF 06-4, net of tax (Note 2)                                               |                         |         |                      |  |                          |       |                                    |  |                      |           |               |  |                  |         |                                     |  |                         
|                                                                                         |                         |         |                      |  |                          |       |                                    |  |                      |           |               |  |                  |         |                                     |  |                         
|Comprehensive
 income:                                                                   |                         |         |                      |  |                          |       |                                    |  |                      |           |               |  |                  |         |                                     |  |                         
|Net
 income                                                                              |                         |         |                      |  |                          |       |                                    |  |                      |           |               |  |                  |         |                                     |  |                         
|Other
 comprehensive loss, net of tax (note 16)                                          |                         |         |                      |  |                          |       |                                    |  |                      |           |               |  |                  |         |                                     |  |                         
|                                                                                        
|Total comprehensive
 income                                                              |                         |         |                      |  |                          |       |                                    |  |                      |           |               |  |                  |         |                                     |  |                         
|                                                                                        
|Balance June
 30, 2008                                                                   |                         | 107,955 |                      |  | $                        | 1,215 |                                    |  | $                    | 1,244,216 |               |  | $                | (94,209 | )                                   |  | $                       
|                                                                                        

See accompanying notes to consolidated financial statements.

5




New Alliance Bancshares, Inc.


Consolidated Statements of Cash Flows


|                                                                                                 | Six Months EndedJune 30,
|------------------------------------------------------------------------------------------------ | ------------------------
|                                                                                                 |                         
|(In thousands)
 (Unaudited)                                                                      |                         
|                                                                                                
|Cash flows
 from operating activities                                                            |                         
|Net income                                                                                       | $                       
|Adjustments
 to reconcile net income to net cash provided by operating activities                |                         
|Provision
 for loan losses                                                                       |                         
|Gain
 on sale of OREO                                                                            |                         
|Restricted
 stock compensation expense                                                           |                         
|Stock
 option compensation expense                                                               |                         
|ESOP
 expense                                                                                    |                         
|Amortization
 of identifiable intangible assets                                                  |                         
|Net
 amortization/accretion of fair market adjustments from net assets acquired                  |                         
|Net
 amortization/accretion of investment securities                                             |                         
|Change
 in deferred income taxes                                                                 |                         
|Depreciation
 and amortization                                                                   |                         
|Net
 gain on securities                                                                          |                         
|Impairment
 of investment portfolio                                                              |                         
|Net
 gain on sales of performing loans                                                           |                         
|Proceeds
 from sales of loans held for sale                                                      |                         
|Loans
 originated for sale                                                                       |                         
|Net
 loss on sale of fixed assets                                                                |                         
|Gain
 on limited partnerships                                                                    |                         
|Increase
 in cash surrender value of bank owned life insurance                                   |                         
|(Increase)
 decrease in other assets                                                             |                         
|Decrease
 in other liabilities                                                                   |                         
|                                                                                                
|Net
 cash provided by operating activities                                                       |                         
|                                                                                                
|Cash flows
 from investing activities                                                            |                         
|Purchase
 of securities available for sale                                                       |                         
|Purchase
 of securities held to maturity                                                         |                         
|Proceeds
 from maturity, sales, calls and principal reductions of securities available for
 sale |                         
|Proceeds
 from maturity, calls and principal reductions of securities held to maturity           |                         
|Proceeds
 from sales of fixed assets                                                             |                         
|Net
 increase in loans held for investment                                                       |                         
|Net
 cash acquired in acquisitions                                                               |                         
|Proceeds
 from sales of other real estate owned                                                  |                         
|Purchase
 of premises and equipment                                                              |                         
|                                                                                                
|Net
 cash (used) provided by investing activities                                                |                         
|                                                                                                
|Cash flows
 from financing activities                                                            |                         
|Net
 decrease in customer deposit balances                                                       |                         
|Net
 increase (decrease) in short-term borrowings                                                |                         
|Proceeds
 from long-term borrowings                                                              |                         
|Repayments
 of long-term borrowings                                                              |                         
|Shares
 issued for stock option exercise                                                         |                         
|Excess
 tax benefit of stock-based compensation                                                  |                         
|Acquisition
 of treasury shares                                                                  |                         
|Dividends
 declared                                                                              |                         
|                                                                                                
|Net
 cash provided (used) by financing activities                                                |                         
|                                                                                                
|Net
 increase in cash and cash equivalents                                                       |                         
|                                                                                                
|Cash
 and equivalents, beginning of period                                                       |                         
|                                                                                                
|Cash
 and equivalents, end of period                                                             | $                       
|                                                                                                
|Supplemental
 information                                                                        |                         
|Cash
 paid for                                                                                   |                         
|Interest on deposits and borrowings                                                              | $                       
|Income
 taxes paid, net                                                                          |                         
|Noncash transactions                                                                             |                         
|Net
 non-cash liabilities acquired                                                               |                         
|Value
 of shares issued for acquisitions                                                         |                         
|                                                                                                 |                         

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, 2007. 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,
 stock-based compensation and estimates used to evaluate asset impairment including
 income tax contingencies and deferred tax assets and liabilities and recoverability
 of goodwill and other intangible assets.
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|2. |  | Recent
 Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |  | In May
 2008, the Financial Accounting Standards Board (FASB) issued Statement
 of Financial Accounting Standards No. 162, The Hierarchy of Generally Accepted
 Accounting Principles (SFAS No. 162). SFAS No. 162 identifies
 the sources of accounting principles and the framework for selecting the principles
 used in the preparation of financial statements of nongovernmental entities that
 are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). This Statement shall
 be effective 60 days following the Securities and Exchange Commissions approval
 of the Public Company Accounting Oversight Board (PCAOB) amendments to AU Section
 411, The Meaning of Present Fairly in Conformity With General Accepted
 Accounting Principles. Management believes that the adoption of SFAS No.
 162 will not have a material impact upon the preparation of the Companys consolidated
 financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |  | In April
 2008, the FASB issued FASB Staff Position No. 142-3, Determination of the
 Useful Life of Intangible Assets (FSP No. 142-3). FSP No. 142-3 amends
 the factors that should be considered in developing renewal or extension assumptions
 used to determine the useful life of a recognized intangible asset under SFAS No.
 142, Goodwill and Other Intangible Assets (SFAS No. 142). The
 intent of FSP No. 142-3 is to improve the consistency between the useful life of
 a recognized intangible asset under SFAS No. 142 and the period of expected cash
 flows used to measure the fair value of the asset under SFAS No. 141 (revised 2007),  Business Combinations
 and other applicable accounting literature.
 FSP No. 142-3 is effective for financial statements issued for fiscal years beginning
 after December 15, 2008. The Company does not anticipate that the adoption of FSP
 No. 142-3 will have a material impact on its consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |  | In March
 2008, the FASB issued SFAS No. 161 Disclosures about Derivative Instruments
 and Hedging Activities (SFAS No. 161). SFAS No. 161 changes
 the disclosure requirements regarding derivative instruments and hedging activities
 and specifically requires (i) qualitative disclosures about objectives and strategies
 for using derivatives, (ii) quantitative disclosures about fair value amounts of,
 and gains and losses on, derivative instruments, and (iii) disclosures about credit
 risk-related contingent features in derivative agreements. The new standard is effective
 for financial statements issued for fiscal years beginning after November 15, 2008,
 with early application encouraged. Management believes that the adoption of SFAS
 No. 161 will not have a material impact on the Companys consolidated financial
 statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |  | In December
 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations which replaces SFAS No. 141, Business Combinations (SFAS No. 141(R)). SFAS No. 141(R) retains the fundamental requirements
 in SFAS No. 141 that the acquisition method of accounting be used for all business
 combinations and for an acquirer to be identified for each business combination.
 SFAS No. 141(R) requires among other things, that acquisition-related transaction
 and restructuring costs be expensed rather than capitalized as part of the cost
 of the acquisition; that the acquiring entity in a business combination recognizes
 all the assets acquired and liabilities assumed in the transaction; that the acquisition-date
 fair value be used as the measurement objective for all assets acquired and liabilities
 assumed; and that the acquirer provide certain disclosures that will allow users
 of the financial statements to understand the nature and financial effect of the
 business combination. SFAS No. 141(R) is effective for fiscal years beginning after
 December 15, 2008 and would apply prospectively to any future business                                                                                                                                                                                                                                                                                                                                                                                                                                      

7

---



NewAlliance Bancshares, Inc.
Notes to Unaudited Consolidated Financial Statements





| |  | combinations.
 The adoption of SFAS No. 141(R) on January 1, 2009 is expected to have a significant
 impact on the Companys accounting for business combinations closing on or
 after this date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | In February
 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
 Assets and Financial Liabilities, to permit all entities to choose to
 elect to measure eligible financial instruments at fair value. A business entity
 shall report in earnings, unrealized gains and losses on items for which the fair
 value option has been elected. Eligible items include any recognized financial assets
 and liabilities with certain exceptions including but not limited to, deposit liabilities,
 investments in subsidiaries, and certain deferred compensation arrangements. The
 decision about whether to elect the fair value option is generally applied on an
 instrument-by-instrument basis, is generally irrevocable, and is applied only to
 an entire instrument and not to only specified risks, specific cash flows, or portions
 of that instrument. The adoption of this Statement as of January 1, 2008 did not
 have a material impact on the Companys consolidated financial statements.
 Management did not elect the fair value option for any of the Companys eligible
 financial assets or liabilities on January 1, 2008.                                                                                                                       
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | In September
 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined
 Benefit Pension and Other Postretirement Plans  an amendment of
 SFAS Nos. 87, 88, 106, and 132(R), that requires employers to recognize the overfunded
 or underfunded positions of defined benefit postretirement plans, including pension
 plans, in their balance sheets for fiscal years ending after December 15, 2006.
 The Standard also requires that employers measure plan assets and obligations as
 of the date of their financial statements. This Statement requires a public entity
 that currently measures plan assets and benefit obligations as of a date other than
 the date of its statement of financial position to implement the change in measurement
 date for fiscal years ending after December 15, 2008. Amounts recognized pursuant
 to SFAS No. 158 will not affect the Banks regulatory capital. The impact of
 adopting SFAS No. 158 on December 31, 2006, was a reduction to stockholders equity
 of $5.8 million, net of tax, with no impact to the consolidated statements
 of income and cash flows. The adoption of the measurement date provision on December
 31, 2008 will not have a material impact on the Companys consolidated financial
 statements.
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | In September
 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157), which addresses how companies should measure fair value
 when they are required to use a fair value measure for recognition or disclosure
 purposes under generally accepted accounting principles (GAAP). As a
 result of SFAS No. 157, there is now a common definition of fair value to be used
 throughout GAAP as it establishes a fair value hierarchy. SFAS No. 157 will require
 companies to make expanded disclosures about fair value measurements. The Company
 adopted SFAS No. 157 effective January 1, 2008. The adoption of SFAS No. 157 did
 not have a material impact on the Companys consolidated financial statements.
 See Note 3 in Notes to Unaudited Consolidated Financial Statements for additional
 information.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | In February
 2008, the FASB issued FASB Staff Position FAS No. 157-2,Effective Date
 of FASB Statement No. 157 (FSP No. 157-2), which delays the
 January 1, 2008 effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial
 liabilities, to fiscal years beginning after November 15, 2008, and interim periods
 within those fiscal years. Management has not yet determined the impact of the adoption
 of FSP No. 157-2 upon the Companys consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | In September
 2006, the FASB reached a consensus on Emerging Issues Task Force (EITF)
 Issue 06-4,Accounting for Deferred Compensation and Postretirement Benefit
 Aspects of Endorsement Split-Dollar Life Insurance Arrangements, (EITF
 Issue 06-4). In March 2007, the FASB reached a consensus on EITF Issue 06-10, Accounting
 for Collateral Assignment Split-Dollar Life Insurance Arrangements, (EITF Issue 06-10). Both of these standards require a company
 to recognize an obligation over an employees service period based upon the
 substantive agreement with an employee such as the promise to maintain a life insurance
 policy or provide a death benefit. The Company adopted the provisions of these standards
 effective January 1, 2008 which resulted in the recording of a liability of $1.6
 million with a corresponding reduction to retained earnings, (net of tax).                                                                                                                                                                                                                                                                                                                                                                                 

8

---



NewAlliance Bancshares, Inc.
Notes to Unaudited Consolidated Financial Statements





|3. |  | Fair Value
 Measurements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |  | SFAS No. 157, Fair Value Measurements,
 defines fair value, establishes a framework
 for measuring fair value under GAAP, and expands disclosures about fair value measurements.
 As a result of SFAS No. 157 there is a common definition of fair value to be used
 throughout GAAP, a fair value hierarchy was established and companies are required
 to make expanded disclosures about fair value measurements. The three levels of
 the fair value hierarchy under SFAS No. 157 are described below:

| |  | Level 1  Quoted prices in active markets for identical assets or liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                             
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | Level 2  Observable
 inputs other than Level 1 prices such as quoted prices for similar
 assets or liabilities; quoted prices in markets that are not active; or other inputs
 that are observable or can be corroborated by observable market data for substantially
 the full term of the assets or liabilities. This category generally includes U.S.
 Government and agency mortgage backed securities; corporate debt securities, derivative
 contracts and residential mortgage loans held-for-sale.
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | Level
 3  Unobservable inputs that are supported by little or no market activity
 and that are significant to the fair value of the assets or liabilities. Level 3
 assets and liabilities include financial instruments whose value is determined using
 pricing models, discounted cash flow methodologies, or similar techniques, as well
 as instruments for which the determination of fair value requires significant management
 judgment or estimation.                                           

| |  | A description
 of the valuation methodologies used for instruments measured at fair value, as well
 as the general classification of such instruments pursuant to the valuation hierarchy,
 is set forth below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | Securities
 Available for Sale: Where quoted prices are available in an active market, securities
 are classified within Level 1 of the valuation hierarchy. Level 1 securities include
 highly liquid government bonds, certain mortgage products and exchange-traded equities.
 If quoted prices are not available, then fair values are estimated by using pricing
 models (i.e. matrix pricing) or quoted prices of securities with similar characteristics
 and are classified within Level 2 of the valuation hierarchy. Examples of such instruments
 would include mortgage-backed securities and municipal obligations. The fair value
 measurements consider observable data that may include dealer quotes, market spreads,
 cash flows, the U.S. Treasury yield curve, trade execution data, market prepayment
 speeds, credit information and the bonds terms and conditions, among other
 things.                         
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | Loan
 Servicing Rights: A Loan Servicing Right asset represents the amount by which
 the present value of the estimated future net cash flows to be received from servicing
 loans are expected to more than adequately compensate the Company for performing
 the servicing. The fair value of servicing rights is estimated using a present value
 cash flow model. The most important assumptions used in the valuation model are
 the anticipated rate of the loan prepayments and discount rates. Adjustments are
 only recorded when the discounted cash flows derived from the valuation model are
 less than the carrying value of the asset. As such, measurement at fair value is
 on a nonrecurring basis. Although some assumptions in determining fair value are
 based on standards used by market participants, some are based on unobservable inputs
 and therefore are classified in Level 3 of the valuation hierarchy.
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | Impaired
 Loans: Impaired loans for which the Bank expects to receive less than the contracted
 balance are written down to fair value. Consequently, measurement at fair value
 is on a nonrecurring basis. These loans are written down through a specific reserve
 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 either collateral values supported by appraisals, or observed market prices.                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | The following
 table details the financial instruments carried at fair value on a recurring basis
 as of June 30, 2008 and indicates the fair value hierarchy of the valuation techniques
 utilized by the Company to determine the fair value:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

| |  |                               |  | June 30, 2008      
| |  | ----------------------------- |  | -------------------
| |  |                               |  |                    
| |  |                               |  | Quoted Prices
 in  
| |  |                               |  | Active Markets
 for
| |  |                               |  | Identical Assets   
| |  | (In thousands)                |  | (Level 1)          
| |  |                              
| |  | Securities Available for Sale |  | $                  
| |  |                              

9

---



NewAlliance Bancshares, Inc.
Notes to Unaudited Consolidated Financial Statements





| |  | Certain assets
 and liabilities are measured at fair value on a nonrecurring basis in accordance
 with generally accepted accounting principles. These include assets that are measured
 at the lower of cost or market that were recognized at fair value below cost at
 the end of the period as well as assets that are not measured at fair value on an
 ongoing basis but are subject to fair value adjustments in certain circumstances,
 such as when there is evidence of impairment.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | The following
 table details the financial instruments carried at fair value on a nonrecurring
 basis as of June 30, 2008 and indicates the fair value hierarchy of the valuation
 techniques utilized by the Company to determine the fair value:                                                                                                                                                                                                                                           

| |  |                       |  | June 30, 2008      
| |  | --------------------- |  | -------------------
| |  |                       |  |                    
| |  |                       |  | Quoted Prices
 in  
| |  |                       |  | Active Markets
 for
| |  |                       |  | Identical
 Assets  
| |  | (In thousands)        |  | (Level 1)          
| |  |                      
| |  | Loan Servicing Rights |  | $                  
| |  | Impaired Loans        |  |                    
| |  |                      

|4. |  | Business
 Combinations                                                                                                                                              
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |  |                                                                                                                                                                     
|   |  | There were
 no business combinations completed for the six months ended June 30, 2008. The following
 table summarizes acquisitions completed since January 1, 2007.

| |  |                                         |  |             |  | Balance at       |         |                           |   |        |  |          |        |             |              |        |      |   |        |        |  
| |  | --------------------------------------- |  | ----------- |  | ---------------- | ------- | ------------------------- | - | ------ |  | -------- | ------ | ----------- | ------------ | ------ | ---- | - | ------ | ------ | -
| |  |                                         |  |             |  | Acquisition Date |         | Transaction Related Items
| |  |                                         |  |             |  |                  |         |                          
| |  |                                         |  |             |  |                  |         |                           |   |        |  |          |        |             |              |        |      |   |        |        |  
| |  |                                         |  | Acquisition |  |                  |         |                           |   |        |  |          |        |             | Identifiable |        | Cash |   |        | Shares |  
| |  | (In thousands)                          |  | Date        |  |                  | Assets  |                           |   | Equity |  | Goodwill |        | Intangibles |              | Paid   |      |   | Issued |        |  
| |  |                                        
| |  | Connecticut Investment Management, Inc. |  | 3/5/2007    |  | $                | 951     |                           | $ | 652    |  | $        | 753    |             | $            | 1,363  |      | $ | 2,000  |        | $
| |  | Westbank Corporation,
 Inc.             |  | 1/2/2007    |  |                  | 716,834 |                           |   | 42,967 |  |          | 79,466 |             |              | 14,232 |      |   | 58,447 |        |  
| |  |                                        

| |  | The transactions
 were accounted for using the purchase method of accounting in accordance with SFAS
 No. 141,Business Combinations. Accordingly, the purchase price
 was allocated based on the estimated fair market values of the assets and liabilities
 acquired.                                                                        
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                 
| |  | Connecticut
 Investment Management, Inc.                                                                                                                                                                                                                                                                                                        
| |  | On March 5,
 2007, the Company completed its acquisition of Connecticut Investment Management,
 Inc. (CIMI) a registered investment advisory firm for $2.0 million in
 cash. At December 31, 2006 CIMI had approximately $190.0 million in assets under
 management.                                                                          
| |  |                                                                                                                                                                                                                                                                                                                                                 
| |  | Westbank
 Corporation                                                                                                                                                                                                                                                                                                                           
| |  | On January
 2, 2007 the Company completed the acquisition of Westbank Corporation (Westbank), the parent company of Westbank. The aggregate merger consideration was valued
 at approximately $117.4 million. Westbank had assets of approximately $716.8 million
 and stockholders equity of approximately $43.0 million on January 2, 2007.

10

---



NewAlliance Bancshares, Inc.
Notes to Unaudited Consolidated Financial Statements





|5. |  | Investment
 Securities                                                                                                                                                                        
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |  |                                                                                                                                                                                               
|   |  | The following
 table presents the amortized cost, gross unrealized gains, gross unrealized losses
 and estimated fair values of investment securities at June 30, 2008 and December
 31, 2007.

| |  |                                 |  | June 30, 2008 |           | December 31, 2007
| |  | ------------------------------- |  | ------------- | --------- | -----------------
| |  |                                 |  |               |           |                  
| |  |                                 |  |               |           |                  
| |  |                                 |  |               | Amortized |                  
| |  | (In thousands)                  |  |               | cost      |                  
| |  |                                
| |  | Available
 for sale             |  |               |           |                  
| |  | U.S. Treasury obligations       |  | $             | 596       |                  
| |  | U.S.
 Government sponsored      |  |               |           |                  
| |  | enterprise
 obligations         |  |               | 172,522   |                  
| |  | Corporate
 obligations          |  |               | 7,158     |                  
| |  | Other
 bonds and obligations    |  |               | 47,518    |                  
| |  | Marketable
 and trust preferred |  |               |           |                  
| |  | equity
 securities              |  |               | 72,451    |                  
| |  | Federal
 Home Loan Bank stock   |  |               | 120,821   |                  
| |  | Mortgage-backed
 securities     |  |               | 1,579,084 |                  
| |  |                                
| |  | Total
 available for sale       |  |               | 2,000,150 |                  
| |  |                                
| |  | Held to
 maturity               |  |               |           |                  
| |  | Mortgage-backed
 securities     |  |               | 306,978   |                  
| |  | Other
 bonds                    |  |               | 7,135     |                  
| |  |                                
| |  | Total
 held to maturity         |  |               | 314,113   |                  
| |  |                                
| |  | Total
 securities               |  | $             | 2,314,263 |                  
| |  |                                

| |  | The following
 table presents the fair value of investments with continuous unrealized losses for
 less than one year and those that have been in a continuous loss position for more
 than one year as of June 30, 2008.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |                                                    |  |                    |         |                    |   |            |   |  |   |       |  |   |            |   |  |   |         |  |   |            |  
| |  | -------------------------------------------------- |  | ------------------ | ------- | ------------------ | - | ---------- | - |  | - | ----- |  | - | ---------- | - |  | - | ------- |  | - | ---------- | -
| |  |                                                    |  | Less Than One Year |         | More Than One Year |   | Total     
| |  |                                                    |  |                    |         |                    |   |           
| |  |                                                    |  |                    | Fair    |                    |   | Unrealized |   |  |   | Fair  |  |   | Unrealized |   |  |   | Fair    |  |   | Unrealized |  
| |  | (In thousands)                                     |  |                    | value   |                    |   | losses     |   |  |   | value |  |   | losses     |   |  |   | value   |  |   | losses     |  
| |  |                                                   
| |  | U. S. Treasury obligations                         |  | $                  | -       |                    | $ | -          |   |  | $ | -     |  | $ | -          |   |  | $ | -       |  | $ | -          |  
| |  | U. S. Government
 sponsored enterprise obligations |  |                    | 95,654  |                    |   | (841       | ) |  |   | -     |  |   | -          |   |  |   | 95,654  |  |   | (841       | )
| |  | Corporate
 obligations                             |  |                    | -       |                    |   | -          |   |  |   | -     |  |   | -          |   |  |   | -       |  |   | -          |  
| |  | Other bonds
 and obligations                       |  |                    | 41,951  |                    |   | (2,595     | ) |  |   | -     |  |   | -          |   |  |   | 41,951  |  |   | (2,595     | )
| |  | Marketable
 and trust preferred equity obligations |  |                    | 41,335  |                    |   | (9,102     | ) |  |   | 1,657 |  |   | (339       | ) |  |   | 42,992  |  |   | (9,441     | )
| |  | Mortgage-backed
 securities                        |  |                    | 196,654 |                    |   | (1,913     | ) |  |   | -     |  |   | -          |   |  |   | 196,654 |  |   | (1,913     | )
| |  |                                                   
| |  | Total
 securities with unrealized losses           |  | $                  | 375,594 |                    | $ | (14,451    | ) |  | $ | 1,657 |  | $ | (339       | ) |  | $ | 377,251 |  | $ | (14,790    | )
| |  |                                                   

| |  | Of the issues
 summarized above, 112 issues have unrealized losses for less than twelve months
 and one has an unrealized loss for twelve months or more. Management believes that
 no individual unrealized loss as of June 30, 2008 represents an-other-than-temporary
 impairment, based on its normal 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 company specific (cash
 flow interruptions) and broad market details.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | The unrealized
 losses reported for U.S. Government sponsored obligations are related to changes
 in market interest rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | The unrealized
 losses reported on mortgage-backed securities relate to securities issued by FNMA,
 FHLMC and AAA rated securities issued by private institutions. The unrealized losses
 on the securities issued by FNMA and FHLMC are due to changes in market interest
 rates while widening in non-agency mortgage spreads is the primary factor for the
 unrealized losses reported on AAA rated securities issued by private institutions.
 None of the securities are backed by sub-prime mortgage loans. All securities are
 performing in accordance with contractual terms.                                                                                 
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | The unrealized
 losses reported for other bonds and obligations are primarily related to federally
 guaranteed student loan auction rate certificates that are currently experiencing
 failing auctions. Unrealized losses in this category also relate a position in a
 short term 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 spreads. All securities are performing
 in accordance with contractual terms.                                                                                                

11

---



NewAlliance Bancshares, Inc.
Notes to Unaudited Consolidated Financial Statements





|   |  | The unrealized
 losses reported for trust preferred equity securities relate to changes in market
 interest rates and to the current market stress partially resulting from efforts
 by banks to raise capital. This has in turn inflated coupon rates on new issues
 of trust preferred equity securities versus lower rates on the Companys portfolio
 of A- to AAA rated, non-perpetual seasoned issues of trust preferred equity securities.
 In accordance with the Companys internal policies for review of other-than-temporary
 impairment, a detailed review of select trust preferred equity securities was completed.
 This analysis determined that there was no other-than-temporary impairment at quarter
 end. All trust preferred equity securities are current and no impairment of cash
 flows is anticipated.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |  | The Company
 has the ability and intent to hold the securities contained in the table for a period
 of time necessary to recover the unrealized losses, which may be until maturity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|6. |  | Loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |  | The composition
 of the Companys loan portfolio is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

| |  |                                         |  |   | June 30,  |   |  |   | December
 31, |  
| |  | --------------------------------------- |  | - | --------- | - |  | - | ------------- | -
| |  | (In thousands)                          |  |   | 2008      |   |  |   | 2007          |  
| |  |                                        
| |  | Residential
 real estate                |  | $ | 2,533,248 |   |  | $ | 2,360,921     |  
| |  | Commercial
 real estate                 |  |   | 999,048   |   |  |   | 947,185       |  
| |  | Construction                            |  |   |           |   |  |   |               |  
| |  | Residential                             |  |   | 19,816    |   |  |   | 29,023        |  
| |  | Commercial                              |  |   | 214,830   |   |  |   | 247,428       |  
| |  | Commercial
 business                    |  |   | 473,147   |   |  |   | 457,745       |  
| |  | Consumer                                |  |   |           |   |  |   |               |  
| |  | Home
 equity and equity lines of credit |  |   | 681,978   |   |  |   | 652,107       |  
| |  | Other                                   |  |   | 27,400    |   |  |   | 33,560        |  
| |  |                                        
| |  | Total
 consumer                         |  |   | 709,378   |   |  |   | 685,667       |  
| |  |                                        
| |  | Total
 loans                            |  |   | 4,949,467 |   |  |   | 4,727,969     |  
| |  | Allowance
 for loan losses              |  |   | (47,798   | ) |  |   | (43,813       | )
| |  |                                        
| |  | Total
 loans, net                       |  | $ | 4,901,669 |   |  | $ | 4,684,156     |  
| |  |                                        

| |  | At June 30,
 2008 and December 31, 2007, 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,
 and plant and equipment, collateralize the majority of the commercial business loan
 portfolio. The Company does not originate or directly invest in sub prime loans.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

12

---



|NewAlliance Bancshares, Inc.                        
|----------------------------------------------------
|Notes to Unaudited Consolidated Financial Statements
|                                                    
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|                                                    

|7. | Goodwill
 and Identifiable Intangible Assets                                                                                                                                                                           |  |          |         |               |  |              |        |              |  |       |        |  
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | ------- | ------------- |  | ------------ | ------ | ------------ |  | ----- | ------ | -
|   |                                                                                                                                                                                                                        |  |          |         |               |  |              |        |              |  |       |        |  
|   | The changes in the carrying amount of goodwill and identifiable intangible assets
 for the six months ended June 30, 2008 are summarized as follows:                                                                  
|   |                                                                                                                                                                                                                        |  |          |         |               |  |              |        |              |  |       |        |  
|   |                                                                                                                                                                                                                        |  |          |         |               |  |              |        |              |  | Total
|   |                                                                                                                                                                                                                        |  |          |         |               |  | Core Deposit |        | Identifiable
|   |                                                                                                                                                                                                                        |  |          |         |               |  | and Customer |        | Intangible  
|   | (In thousands)                                                                                                                                                                                                         |  | Goodwill |         | Relationships |  | Assets      
|   |                                                                                                                                                                                                                       
|   | Balance, December 31, 2007                                                                                                                                                                                             |  | $        | 531,191 |               |  | $            | 53,316 |              |  | $     | 53,316 |  
|   | Other                                                                                                                                                                                                                  |  |          | (3,548  | )             |  |              | -      |              |  |       | -      |  
|   | Amortization
 expense                                                                                                                                                                                                  |  |          | -       |               |  |              | (4,728 | )            |  |       | (4,728 | )
|   |                                                                                                                                                                                                                       
|   | Balance, June
 30, 2008                                                                                                                                                                                                |  | $        | 527,643 |               |  | $            | 48,588 |              |  | $     | 48,588 |  
|   |                                                                                                                                                                                                                       
|   | Estimated
 amortization expense for the year ending:                                                                                                                                                                   |  |          |         |               |  |              |        |              |  |       |        |  
|   | Remaining
 2008                                                                                                                                                                                                        |  |          |         |               |  | $            | 4,728  |              |  | $     | 4,728  |  
|   | 2009                                                                                                                                                                                                                   |  |          |         |               |  |              | 8,501  |              |  |       | 8,501  |  
|   | 2010                                                                                                                                                                                                                   |  |          |         |               |  |              | 7,811  |              |  |       | 7,811  |  
|   | 2011                                                                                                                                                                                                                   |  |          |         |               |  |              | 7,556  |              |  |       | 7,556  |  
|   | 2012                                                                                                                                                                                                                   |  |          |         |               |  |              | 7,556  |              |  |       | 7,556  |  
|   | Thereafter                                                                                                                                                                                                             |  |          |         |               |  |              | 12,436 |              |  |       | 12,436 |  
|   |                                                                                                                                                                                                                       
|   | The reduction of $3.5 million in goodwill, shown above as other, was primarily due
 to a reduction of unrecognized tax benefits for tax positions taken in prior years
 based on the settlement of an IRS examination.
|   |                                                                                                                                                                                                                        |  |          |         |               |  |              |        |              |  |       |        |  
|   | The components of identifiable intangible assets are comprised of core deposit and
 customer relationships and had the following balances at June 30, 2008:                                                           
|   |                                                                                                                                                                                                                        |  |          |         |               |  |              |        |              |  |       |        |  
|   |                                                                                                                                                                                                                        |  | Original |         |               |  |              |        | Balance     
|   |                                                                                                                                                                                                                        |  | Recorded |         | Cumulative    |  | June 30,    
|   | (In thousands)                                                                                                                                                                                                         |  | Amount   |         | Amortization  |  | 2008        
|   |                                                                                                                                                                                                                       
|   | Core
 deposit and customer relationships                                                                                                                                                                               |  | $        | 86,908  |               |  | $            | 38,320 |              |  | $     | 48,588 |  
|   |                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                        |  |          |         |               |  |              |        |              |  |       |        |  

13

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|NewAlliance Bancshares, Inc.                        
|----------------------------------------------------
|Notes to Unaudited Consolidated Financial Statements
|                                                    
|                                                    
|                                                    
|8.                                                  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|9.                                                  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|10.                                                 
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    

| | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Includes fair
 value adjustments on acquired borrowings, in accordance with SFAS No. 141,Business Combinations, of $7.6 million and $9.6 million at June 30, 2008 and December
 31, 2007, respectively.                                                                                                                                                                                                                                                                                                                                                                                       
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Includes fair
 value adjustments on acquired borrowings, in accordance with SFAS No. 141,Business Combinations, of $200,000 and $300,000 at June 30, 2008 and December 31,
 2007, respectively. 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.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | The acquisition
 fair value adjustments (premiums) are being amortized as an adjustment to interest
 expense on borrowings over their remaining term using the level yield method.                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 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 U.S. Agency
 hybrid adjustable rate mortgage-backed securities. At June 30, 2008 and December
 31, 2007, the Bank was in compliance with the FHLB collateral requirements. At June
 30, 2008, the Company could borrow an additional $285.6 million from the FHLB, inclusive
 of a line of credit of approximately $20.0 million. Additional borrowing capacity
 of approximately $654.6 million 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 $114.6 million
 as of June 30, 2008, all of which was available on that date. Repurchase agreement
 lines of credit totaled $125.0 million at June 30, 2008, with availability of $100.0
 million. At June 30, 2008, the majority of the Companys $2.24 billion outstanding
 FHLB advances were at fixed rates ranging from 2.25% to 8.17%, while one advance
 of $15.0 million had a floating rate of 2.79%. The weighted average rate for all
 FHLB advances at June 30, 2008 was 4.57%.

14

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|NewAlliance Bancshares, Inc.                        
|----------------------------------------------------
|Notes to Unaudited Consolidated Financial Statements
|                                                    
|                                                    
|                                                    
|11.                                                 
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    

| |                                                                                                                        |  |                   |        |                  |  |          |        |      |  | Supplemental |     |                      |  |   |     |  |  |  
| | ---------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------ | ---------------- |  | -------- | ------ | ---- |  | ------------ | --- | -------------------- |  | - | --- |  |  | -
| |                                                                                                                        |  |                   |        |                  |  |          |        |      |  | Executive    |     | Other Postretirement
| |                                                                                                                        |  | Qualified Pension |        | Retirement Plans |  | Benefits
| |                                                                                                                        |  |                   |        |                  |  |         
| | (In thousands)                                                                                                         |  | 2008              |        | 2007             |  | 2008     |        | 2007 |  | 2008         |     | 2007                
| |                                                                                                                       
| | Service cost
 - benefits earned during the period                                                                      |  | $                 | 787    |                  |  | $        | 809    |      |  | $            | 134 |                      |  | $ | 125 |  |  | $
| | Interest cost
 on projected benefit obligation                                                                         |  |                   | 1,363  |                  |  |          | 1,258  |      |  |              | 177 |                      |  |   | 159 |  |  |  
| | Expected return
 on plan assets                                                                                        |  |                   | (1,798 | )                |  |          | (1,786 | )    |  |              | -   |                      |  |   | -   |  |  |  
| | Amortization:                                                                                                          |  |                   |        |                  |  |          |        |      |  |              |     |                      |  |   |     |  |  |  
| | Transition                                                                                                             |  |                   | -      |                  |  |          | -      |      |  |              | -   |                      |  |   | -   |  |  |  
| | Prior
 service cost                                                                                                    |  |                   | 13     |                  |  |          | 13     |      |  |              | 2   |                      |  |   | 2   |  |  |  
| | Loss
 (gain)                                                                                                           |  |                   | -      |                  |  |          | 79     |      |  |              | -   |                      |  |   | -   |  |  |  
| |                                                                                                                       
| | Net
 periodic benefit cost                                                                                             |  | $                 | 365    |                  |  | $        | 373    |      |  | $            | 313 |                      |  | $ | 286 |  |  | $
| |                                                                                                                       
| |                                                                                                                        |  |                   |        |                  |  |          |        |      |  |              |     |                      |  |   |     |  |  |  
| | The following table presents the amount of net periodic pension cost for the six
 months ended June 30, 2008 and 2007:
| |                                                                                                                        |  |                   |        |                  |  |          |        |      |  |              |     |                      |  |   |     |  |  |  
| |                                                                                                                        |  |                   |        |                  |  |          |        |      |  | Supplemental |     |                      |  |   |     |  |  |  
| |                                                                                                                        |  |                   |        |                  |  |          |        |      |  | Executive    |     | Other Postretirement
| |                                                                                                                        |  | Qualified Pension |        | Retirement Plans |  | Benefits
| |                                                                                                                        |  |                   |        |                  |  |         
| | (In thousands)                                                                                                         |  | 2008              |        | 2007             |  | 2008     |        | 2007 |  | 2008         |     | 2007                
| |                                                                                                                       
| | Service cost
 - benefits earned during the period                                                                      |  | $                 | 1,575  |                  |  | $        | 1,618  |      |  | $            | 269 |                      |  | $ | 250 |  |  | $
| | Interest cost
 on projected benefit obligation                                                                         |  |                   | 2,726  |                  |  |          | 2,515  |      |  |              | 353 |                      |  |   | 318 |  |  |  
| | Expected return
 on plan assets                                                                                        |  |                   | (3,595 | )                |  |          | (3,571 | )    |  |              | -   |                      |  |   |     |  |  |  
| | Amortization:                                                                                                          |  |                   |        |                  |  |          |        |      |  |              |     |                      |  |   |     |  |  |  
| | Transition                                                                                                             |  |                   | -      |                  |  |          | -      |      |  |              | -   |                      |  |   | -   |  |  |  
| | Prior
 service cost                                                                                                    |  |                   | 25     |                  |  |          | 25     |      |  |              | 3   |                      |  |   | 3   |  |  |  
| | Gain
 (loss)                                                                                                           |  |                   | -      |                  |  |          | 159    |      |  |              | -   |                      |  |   | -   |  |  |  
| |                                                                                                                       
| | Net periodic benefit cost                                                                                              |  | $                 | 731    |                  |  | $        | 746    |      |  | $            | 625 |                      |  | $ | 571 |  |  | $
| |                                                                                                                       
| |                                                                                                                        |  |                   |        |                  |  |          |        |      |  |              |     |                      |  |   |     |  |  |  

| | 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 26 years. The unallocated ESOP
 shares are pledged as collateral on the loan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | At June 30,
 2008, the loan had an outstanding balance of $101.0 million and an interest rate
 of 4.0%. The Company accounts for its ESOP in accordance with Statement of Position (SOP) 93-6, Employers Accounting for Employee Stock Ownership Plans. Under SOP 93-6, 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 to equity. The Company will receive a tax
 deduction equal to the cost of the shares released to the extent of the principal
 paydown on the loan by the ESOP. As the loan is internally leveraged, the loan receivable
 from the ESOP to the Company is not reported as an asset nor is the debt of the
 ESOP shown as a liability in the Companys financial statements. Dividends
 on unallocated shares are used to pay the ESOP debt. The ESOP compensation expense
 for the three and six months ended June 30, 2008 was approximately $817,000 and $1.5
 million, respectively. For the three and six months ended June 30, 2007, the ESOP
 compensation expense was approximately $929,000 and $1.9 million, respectively. The
 amount of loan repayments made by the ESOP is used to reduce the unallocated common
 stock held by the ESOP.

15

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|NewAlliance Bancshares, Inc.                        
|----------------------------------------------------
|Notes to Unaudited Consolidated Financial Statements
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    

|12. | 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 revised SFAS No. 123 (SFAS No. 123R), Share Based
 Payment, which was adopted using the modified prospective transition method
 effective January 1, 2006. Under SFAS No. 123R, 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Option
 Awards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Options awarded
 to date are for a term of ten years. Substantially all of these options were awarded
 on the original award date of June 17, 2005 and these 2005 option awards have the
 following vesting schedule: 40% vested at year-end 2005, 20% vested at year-end
 2006 and 2007, respectively and 20% will vest at year-end of 2008. Subsequent awards
 have vesting periods of either three or four years. The Company has assumed a 0.4%
 forfeiture rate as the majority of the options have been awarded to senior level
 management. Compensation expense recorded on options for the three months ended
 June 30, 2008 and 2007 was $1.0 million and $1.1 million, respectively, or after
 tax expense of approximately $682,000 and $715,000, respectively. For both the six
 month periods ended June 30, 2008 and 2007, compensation expense of $2.2 million,
 or after tax of $1.4 million and $1.5 million, respectively was recorded. It is anticipated
 that the Company will recognize expense on options of approximately $4.2 million, $179,000, $153,000, $70,000
 and $7,000 in calendar years 2008 through 2012, unless additional awards are granted.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Options to
 purchase 79,250 shares were granted to employees during the six months ended June
 30, 2008 and options to purchase 80,000 shares were granted during the six months
 ended June 30, 2007. Using the Black-Scholes option pricing model, the weighted-average
 grant date fair value was $1.96 and $2.72 for the options which were granted in 2008
 and 2007, respectively. The weighted-average related assumptions for the six months
 ended June 30, 2008 and 2007 are presented in the following table.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

| |                          |  | 2008       |   |  | 2007       |  
| | ------------------------ |  | ---------- | - |  | ---------- | -
| |                         
| | Risk-free
 interest rate |  | 2.86       | % |  | 4.50       | %
| | Expected dividend
 yield |  | 2.12       | % |  | 1.50       | %
| | Expected volatility      |  | 16.19      | % |  | 16.17      | %
| | Expected life            |  | 6.25 years |   |  | 3.84 years |  
| |                         

16

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|NewAlliance Bancshares, Inc.                        
|----------------------------------------------------
|Notes to Unaudited Consolidated Financial Statements
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    

| | The following
 table summarizes the nonvested options during the six months ended June 30, 2008. |  |        |           |            |  |                  |      | 
| | ------------------------------------------------------------------------------------------------ |  | ------ | --------- | ---------- |  | ---------------- | ---- | 
| |                                                                                                  |  |        |           |            |  |                  |      | 
| |                                                                                                  |  |        |           |            |  | Weighted-average
| |                                                                                                  |  |        |           |            |  | Grant-Date      
| |                                                                                                  |  | Shares |           | Fair Value
| |                                                                                                 
| |                                                                                                  |  |        |           |            |  |                  |      | 
| | Nonvested
 at January 1, 2008                                                                    |  |        | 1,801,508 |            |  | $                | 2.65 | 
| | Granted                                                                                          |  |        | 79,250    |            |  |                  | 1.96 | 
| | Vested                                                                                           |  |        | (72,402   | )          |  |                  | 2.62 | 
| | Forfeited/Cancelled                                                                              |  |        | (48,729   | )          |  |                  | 2.59 | 
| |                                                                                                 
| | Nonvested
 at June 30, 2008                                                                      |  |        | 1,759,627 |            |  | $                | 2.62 | 
| |                                                                                                 
| |                                                                                                  |  |        |           |            |  |                  |      | 

| | Restricted
 Stock Awards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | To date, 3,530,217
 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 either three or four years. The associated expense is recorded based
 on the vesting schedules. Compensation expense recorded on restricted stock for
 the three months ended June 30, 2008 and 2007 was approximately $1.8 million and $2.0
 million or after tax expense of approximately $1.3 million and $1.5 million, respectively.
 For the six months ended June 30, 2008 and 2007, compensation expense for both periods
 was $3.7 million, or after-tax expense of approximately $2.7 million. The Company
 anticipates that it will record expense of approximately $7.0 million, $6.4 million, $6.3
 million, $4.2 million and $29,000 in calendar years 2008 through 2012, respectively,
 unless additional awards are granted.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | The following
 table summarizes the nonvested restricted stock awards during the six months ended
 June 30, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

| |                               |  |        |           |            |  | Weighted-average
| | ----------------------------- |  | ------ | --------- | ---------- |  | ----------------
| |                               |  |        |           |            |  | Grant-Date      
| |                               |  | Shares |           | Fair Value
| |                              
| | Nonvested
 at January 1, 2008 |  |        | 2,262,216 |            |  | $               
| | Granted                       |  |        | 58,300    |            |  |                 
| | Vested                        |  |        | (533,295  | )          |  |                 
| | Forfeited/Cancelled           |  |        | (64,508   | )          |  |                 
| |                              
| | Nonvested
 at June 30, 2008   |  |        | 1,722,713 |            |  | $               
| |                              

17

---



|NewAlliance Bancshares, Inc.                        
|----------------------------------------------------
|Notes to Unaudited Consolidated Financial Statements
|                                                    
|                                                    
|                                                    
|13.                                                 
|                                                    
|                                                    
|                                                    
|                                                    

| |                                                                              |  | Three Months Ended |        | Six Months Ended
| | ---------------------------------------------------------------------------- |  | ------------------ | ------ | ----------------
| |                                                                              |  | June 30,           |        | June 30,        
| |                                                                              |  |                    |        |                 
| | (In thousands)                                                               |  | 2008               |        | 2007            
| |                                                                             
| | Deferred tax
 (benefit) expense allocated to:                                |  |                    |        |                 
| | Stockholders equity, tax effect of net unrealized (loss) gain on investment |  |                    |        |                 
| | securities
 available for sale, net of valuation allowance                   |  | $                  | (3,905 | )               
| | Stockholders equity, tax impact of adoption of EITF 06-04                   |  |                    | -      |                 
| | Goodwill                                                                     |  |                    | -      |                 
| | Income                                                                       |  |                    | (1,780 | )               
| |                                                                             
| | Total
 deferred tax benefit                                                  |  | $                  | (5,685 | )               
| |                                                                             
| |                                                                              |  |                    |        |                 

| | The Company adopted the provisions of FIN 48, Accounting for Uncertainty
 in Income Taxes, on January 1, 2007. A reconciliation of the beginning
 and ending amount of unrecognized tax benefits is as follows:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                  
| | (In thousands)                                                                                                                                                                                                   
| |                                                                                                                                                                                                                  
| | Balance at
 December 31, 2007                                                                                                                                                                                    
| | Additions
 for tax positions of current year                                                                                                                                                                     
| | Additions
 for tax positions of prior year                                                                                                                                                                       
| | Reductions
 for tax positions of prior year                                                                                                                                                                      
| |                                                                                                                                                                                                                  
| | Balance
 at June 30, 2008                                                                                                                                                                                        
| |                                                                                                                                                                                                                  

| | Included in
 the balance at June 30, 2008 are $367,000 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 none of
 the unrecognized tax benefits will reverse in the next twelve months due to statute
 expirations. The Company recognizes interest and penalties accrued related to unrecognized
 tax benefits as a component of income tax expense. As of June 30, 2008, the Company
 has accrued approximately $41,000 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 2002. In the first quarter of 2006, the
 Internal Revenue Service (IRS) commenced an examination of the 2003 and 2004 tax
 years for the Company and various acquired entities. As of March 31, 2008, the IRS
 has completed their audit and they have communicated $64,000 of adjustments before
 interest, to the audited tax years. As a result of the completed audit with the
 IRS, the Company released $991,000 of interest and penalties on unrecognized tax
 benefits through continuing operations and $2.9 million of unrecognized tax benefits
 through goodwill.

18

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|NewAlliance Bancshares, Inc.                        
|----------------------------------------------------
|Notes to Unaudited Consolidated Financial Statements
|                                                    
|                                                    
|                                                    
|14.                                                 
|                                                    
|                                                    
|                                                    
|                                                    

| |                                           |  | June 30, |         | December 31,
| | ----------------------------------------- |  | -------- | ------- | ------------
| | (In thousands)                            |  | 2008     |         | 2007        
| |                                          
| | Loan commitments                          |  | $        | 132,409 |             
| | Unadvanced
 portion of construction loans |  |          | 116,343 |             
| | Standby letters
 of credit                |  |          | 14,494  |             
| | Unadvanced
 portion of lines of credit    |  |          | 581,070 |             
| |                                          
| | Total
 commitments                        |  | $        | 844,316 |             
| |                                          
| |                                           |  |          |         |             

|    | Other Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | As of June
 30, 2008 and December 31, 2007, the Company was contractually committed under limited
 partnership agreements to make additional partnership investments of approximately $2.7
 million and $2.8 million, respectively which constitutes our 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.                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|15. | Stockholders Equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | At June 30,
 2008 and December 31, 2007, stockholders equity amounted to $1.41 billion,
 representing 17.0% and 17.1% of total assets, respectively. The Company paid cash
 dividends totaling $0.135 per share on common stock during the six months ended June
 30, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | 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.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | 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 5,926,000 shares
 of common stock at a weighted average price of $13.38 per share as of June 30, 2008.
 There is no set expiration date for this repurchase plan.                                                                                                                                                                                                                                                                                                   

19

---



|NewAlliance Bancshares, Inc.                        
|----------------------------------------------------
|Notes to Unaudited Consolidated Financial Statements
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    

|    |                                                                                                                                                                   |  |  |        |         |          |      |                   |  |             |         |                   |     |       |  | To Be Well
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ------ | ------- | -------- | ---- | ----------------- |  | ----------- | ------- | ----------------- | --- | ----- |  | ----------
|    |                                                                                                                                                                   |  |  |        |         |          |      |                   |  | For Capital |         | Capitalized Under
|    |                                                                                                                                                                   |  |  |        |         |          |      |                   |  | Adequacy    |         | Prompt Corrective
|    |                                                                                                                                                                   |  |  | Actual |         | Purposes |      | Action Provisions
|    |                                                                                                                                                                   |  |  |        |         |          |      |                  
|    | (Dollars in
 thousands)                                                                                                                                           |  |  | Amount |         | Ratio    |      | Amount            |  | Ratio       |         | Amount            |     | Ratio
|    |                                                                                                                                                                  
|    | NewAlliance
 Bank                                                                                                                                                 |  |  |        |         |          |      |                   |  |             |         |                   |     |       |  |           
|    | June
 30, 2008                                                                                                                                                    |  |  |        |         |          |      |                   |  |             |         |                   |     |       |  |           
|    | Tier
 1 Capital (to Average Assets)                                                                                                                               |  |  | $      | 706,019 |          | 9.3  | %                 |  | $           | 302,237 |                   | 4.0 | %     |  | $         
|    | Tier
 1 Capital (to Risk Weighted Assets)                                                                                                                         |  |  |        | 706,019 |          | 15.6 |                   |  |             | 180,948 |                   | 4.0 |       |  |           
|    | Total
 Capital (to Risk Weighted Assets)                                                                                                                          |  |  |        | 753,817 |          | 16.7 |                   |  |             | 361,896 |                   | 8.0 |       |  |           
|    |                                                                                                                                                                   |  |  |        |         |          |      |                   |  |             |         |                   |     |       |  |           
|    | December
 31, 2007                                                                                                                                                |  |  |        |         |          |      |                   |  |             |         |                   |     |       |  |           
|    | Tier
 1 Capital (to Average Assets)                                                                                                                               |  |  | $      | 692,735 |          | 9.1  | %                 |  | $           | 304,876 |                   | 4.0 | %     |  | $         
|    | Tier
 1 Capital (to Risk Weighted Assets)                                                                                                                         |  |  |        | 692,735 |          | 15.6 |                   |  |             | 178,102 |                   | 4.0 |       |  |           
|    | Total
 Capital (to Risk Weighted Assets)                                                                                                                          |  |  |        | 736,548 |          | 16.5 |                   |  |             | 356,204 |                   | 8.0 |       |  |           
|    |                                                                                                                                                                   |  |  |        |         |          |      |                   |  |             |         |                   |     |       |  |           
|    | NewAlliance
 Bancshares, Inc.                                                                                                                                     |  |  |        |         |          |      |                   |  |             |         |                   |     |       |  |           
|    | June
 30, 2008                                                                                                                                                    |  |  |        |         |          |      |                   |  |             |         |                   |     |       |  |           
|    | Tier
 1 Capital (to Average Assets)                                                                                                                               |  |  | $      | 847,961 |          | 11.2 | %                 |  | $           | 304,006 |                   | 4.0 | %     |  | $         
|    | Tier
 1 Capital (to Risk Weighted Assets)                                                                                                                         |  |  |        | 847,961 |          | 18.7 |                   |  |             | 181,493 |                   | 4.0 |       |  |           
|    | Total
 Capital (to Risk Weighted Assets)                                                                                                                          |  |  |        | 895,759 |          | 19.7 |                   |  |             | 362,987 |                   | 8.0 |       |  |           
|    |                                                                                                                                                                   |  |  |        |         |          |      |                   |  |             |         |                   |     |       |  |           
|    | December 31,
 2007                                                                                                                                                |  |  |        |         |          |      |                   |  |             |         |                   |     |       |  |           
|    | Tier
 1 Capital (to Average Assets)                                                                                                                               |  |  | $      | 833,596 |          | 10.9 | %                 |  | $           | 305,288 |                   | 4.0 | %     |  | $         
|    | Tier
 1 Capital (to Risk Weighted Assets)                                                                                                                         |  |  |        | 833,596 |          | 18.6 |                   |  |             | 179,225 |                   | 4.0 |       |  |           
|    | Total
 Capital (to Risk Weighted Assets)                                                                                                                          |  |  |        | 877,409 |          | 19.6 |                   |  |             | 358,449 |                   | 8.0 |       |  |           
|    |                                                                                                                                                                  
|    |                                                                                                                                                                   |  |  |        |         |          |      |                   |  |             |         |                   |     |       |  |           
|16. | Other Comprehensive Income                                                                                                                                        |  |  |        |         |          |      |                   |  |             |         |                   |     |       |  |           
|    |                                                                                                                                                                   |  |  |        |         |          |      |                   |  |             |         |                   |     |       |  |           
|    | The following table presents the components of other comprehensive income and the
 related tax effects for the three and six months ended June 30, 2008 and 2007.

| |                                                             |  | Three Months Ended |         | Six Months Ended
| | ----------------------------------------------------------- |  | ------------------ | ------- | ----------------
| |                                                             |  | June 30,           |         | June 30,        
| |                                                             |  |                    |         |                 
| | (In thousands)                                              |  | 2008               |         | 2007            
| |                                                            
| | Net income
 (loss)                                          |  | $                  | 11,782  |                 
| | Other comprehensive
 income, before tax                     |  |                    |         |                 
| | Unrealized
 losses on securities                            |  |                    |         |                 
| | Unrealized
 holding losses arising during the period        |  |                    | (11,779 | )               
| | Reclassification
 adjustment for (gains) losses included in |  |                    |         |                 
| | net
 income (loss)                                          |  |                    | (87     | )               
| |                                                            
| | Other comprehensive
 (loss) income, before tax              |  |                    | (11,866 | )               
| | Income tax
 benefit (expense), net of valuation allowance   |  |                    | 3,905   |                 
| |                                                            
| | Other comprehensive
 (loss) income, net of tax              |  |                    | (7,961  | )               
| |                                                            
| | Comprehensive
 income                                       |  | $                  | 3,821   |                 
| |                                                            

20

---



|NewAlliance Bancshares, Inc.                        
|----------------------------------------------------
|Notes to Unaudited Consolidated Financial Statements
|                                                    
|                                                    
|                                                    
|17.                                                 
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    

21

---



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 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;
| |  | Competitive
 pressures among depository and other financial institutions may increase significantly
 and may decrease the profit margin associated with its business;                                                                      
| |  | Legislative
 or regulatory changes, including those related to residential mortgages and changes
 in accounting standards, 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;                                                                                                                                        
| |  | Costs or difficulties
 related to the integration of acquired businesses may be greater than expected;                                                                                                                                     
| |  | 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;                                                                                                                                
| |  | Adverse changes
 may occur in the securities markets impacting the value of NewAlliances investments; and                                                                                                                                 
| |  | Competitors
 of NewAlliance may have greater financial resources and develop products that enable
 them to compete more successfully than NewAlliance.                                                                                     

Readers are
 cautioned not to place undue reliance on these forward-looking statements, which
 speak only as of the date of this report. Except as required by applicable law or
 regulation, management undertakes no obligation to update these forward-looking
 statements to reflect events or circumstances that occur after the date on which
 such statements were made.

Item 2. Managements Discussion
 and Analysis of Financial Condition and Results of Operations

The following Managements Discussion
 and Analysis of Financial Condition and Results of Operations (MD&A)
 is intended to help the reader understand NewAlliance Bancshares, Inc., our operations
 and our present business environment. We believe transparency and clarity are the
 primary goals of successful financial reporting. We remain committed to increasing
 the transparency of our financial reporting, providing our stockholders with informative
 financial disclosures and presenting an accurate view of our financial disclosures,
 financial position and operating results.

MD&A is provided as a supplement toand should be read in conjunction withour Consolidated Financial Statements
 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, 2007. 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.
|  |                                                                                                                                                          
| | Financial
 Condition and Management of Market and Interest Rate Risk  an overview
 of financial condition and market and interest rate risk.            

22

---



Our Business

General

NewAlliance is the third largest banking
 institution headquartered in Connecticut and the fourth largest based in New England
 with consolidated assets of $8.26 billion and stockholders equity of $1.41
 billion at June 30, 2008. Its business philosophy is to operate as a community bank
 with local decision-making authority.

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 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 and other operating expenses.

Results of operations are also significantly
 affected by general economic and competitive conditions and changes in interest
 rates as well as government policies and actions of regulatory authorities. Future
 changes in applicable laws, regulations or government policies may materially affect
 the Company.

Our Objectives

NewAlliance seeks to continually deliver
 superior value to its customers, stockholders, employees and communities through
 achievement of its core operating objectives which are to:

| |  | Build high
 quality, profitable loan portfolios using organic, purchase and acquisition strategies;                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Increase core
 deposit relationships with a focus on checking and savings accounts;                                                                       
| |  | Increase the
 non-interest income component of total revenues through development of banking-related
 fee income and growth in wealth management services;
| |  | Maintain a rigorous risk identification and management process;                                                                                           
| |  | Grow through
 a disciplined acquisition strategy, supplemented by de-novo branching;                                                                      
| |  | Improve operating
 efficiencies; and                                                                                                                      
| |  | Utilize technology
 to enhance superior customer service and products.                                                                                    

Significant factors management reviews to
 evaluate achievement of the Companys operating objectives and its operating
 results and financial condition include, but are not limited to: net income and
 earnings per share, performance of acquisitions and integration activities, return
 on equity and assets, net interest margin, non-interest income, operating expenses
 related to total assets and efficiency ratio, asset quality, loan and deposit growth,
 capital management, liquidity and interest rate sensitivity levels, customer service
 standards, market share and peer comparisons.

Regulatory Considerations

NewAlliance and its subsidiaries are subject
 to numerous examinations by federal and state banking regulators, as well as the
 Securities and Exchange Commission. Please refer to NewAlliances Annual Report
 on Form 10-K for the year ended December 31, 2007 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 GAAP. 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.

23

---



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 stock-based compensation. None
 of the Companys critical accounting estimates have changed during the quarter.
 A brief description of our current policies involving significant management valuation
 judgments follows:

Income Taxes

Management uses the asset and liability
 method of accounting for income taxes in which defined 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 historical
 and 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 filing 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 not be
 recoverable. 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.

Stock-Based Compensation

We have a
 stock-based compensation plan, which includes non-qualified stock options and non-vested
 share awards. Fair value at the grant date is determined using the Black-Scholes
 option-pricing model and associated assumptions include future volatility of our
 stock price, expected dividend yield and future employee turnover rates. Changes
 in these assumptions can materially affect the fair value estimate.

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, 2007).

24

---



|Recent Accounting Changes                                                 
|--------------------------------------------------------------------------
|                                                                          
|We adopted the following new accounting pronouncements on January 1, 2008:
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                          

SFAS No. 157
 had no impact on retained earnings and is not expected to have a material impact
 on our statements of income and condition. We have not made material changes to
 our valuation methodologies as previously disclosed in our Annual Report on Form
 10-K for the year ended December 31, 2007. For further information, see Note 3 in
 the Notes to the Unaudited Consolidated Financial Statements.

SFAS No. 159
 had no impact on retained earnings as management did not elect the fair value option
 for any of the Companys eligible financial assets or liabilities as of January
 1, 2008. EITF Issue 06-4 and EITF Issue 06-10 had the effect of recording a liability
 in the amount of $1.6 million with a corresponding reduction to retained earnings.
 For further information, see Note 2 in the Notes to the Unaudited Consolidated Financial
 Statements.

Operating Results

Executive Overview

In 2007 the
 Company completed two acquisitions, Westbank Corporation (Westbank)
 on January 2nd and Connecticut Investment Management, Inc. (CIMI) on March 5th. Westbank was the holding company for Westbank, a
 commercial bank and trust company with 16 banking offices in Massachusetts and Connecticut.
 CIMI was a registered investment advisory firm with approximately $190.0 million
 in assets under management. Further information regarding acquisitions can be found
 in Note 4, Business Combinations in the Notes to the Unaudited Consolidated
 Financial Statements.

Net income
 for the second quarter of 2008 was $11.8 million or $0.12 per diluted share, compared
 to a loss of $3.9 million or $0.04 per diluted share for the second quarter of 2007.
 For the six months ended June 30, 2008, net income was $24.7 million or $0.25 per
 diluted share, compared to $5.4 million or $0.05 per diluted share.

The largest
 single component causing the quarter-over-quarter and year-over-year increase in
 net income was the investment securities portfolio restructuring in June 2007. The
 restructuring resulted in the Company recording an-other-than-temporary impairment
 charge of $22.6 million ($14.7 million after-tax). The restructuring primarily affected
 fixed rate mortgage-backed securities and CMOs and was completed to reduce
 the Companys exposure to fixed rate assets as well as to increase the yield
 on the portfolio, thereby providing a prospective improvement in the net interest
 margin. The market value of the securities sold was $759.0 million and the cash
 proceeds were reinvested in agency hybrid adjustable rate mortgage-backed securities.
Results for the quarter were also positively affected by a $4.6 million decline
 in funding costs, mainly due to decreases in the average rate and balance of time
 deposits. These improvements were partially offset by an increase in the provision
 for loan losses of $3.1 million which reflects the increase in nonaccrual loans,
 an outcome of the current economic environment.

Year-over-year
 comparisons were positively impacted by the restructuring of the investment securities
 portfolio and a reduction in funding costs. Similar to the quarter, there was an
 increase in the provision for loan losses in the current year-to-date period of
 $3.8 million.

For the three
 and six months ended June 30, 2008 compared to 2007, return on average assets increased
 78 basis points and 47 basis points, respectively, and our return on average equity
 increased 441 basis points and 271 basis points, respectively.

The net interest
 margin experienced improvements over 2007 for both the three and six months ended
 June 30, 2008 due to strong loan growth, the restructuring of the investment securities
 portfolio during the second quarter of 2007 and the reduction in deposit costs,
 partially offset by an increase in FHLB borrowings expense. For the three months
 ended June 30, 2008 the net interest margin was 2.67% as compared to 2.44% for the
 same period in 2007, an increase of 23 basis points. For the six months ended June
 30, 2008 the net interest margin was 2.62%, an increase of 15 basis points from
 2.47% for the six months ended June 30, 2007.

25

---



Our continued focus on maintaining credit
 quality has resulted in continued positive asset quality ratios as compared to our
 peers. The allowance for loan losses to total loans increased four basis points
 to 0.97% from 0.93% at December 31, 2007. The ratio of nonperforming loans to total
 loans was 0.53% at June 30, 2008 compared to 0.35% at December 31, 2007 and 0.33%
 at June 30, 2007. Net charge-offs were $1.3 million and $1.4 million for the three
 and six months ended June 30, 2008, respectively compared to $262,000 and $479,000
 for the three and six months ended June 30, 2007, respectively.

Stockholders equity remained essentially
 flat with December 31, 2007 as net income for the six months ended June 30, 2008
 of $24.7 million, was partially offset by cash dividends paid in the amount of $13.8
 million, or 13.5 cents per common share, as well as the repurchase of approximately
 783,000 shares for $9.8 million. Dividend payments and stock buybacks are in accordance
 with our continued strategy of judicious capital deployment. The Tier I capital
 ratio was xx% at June 30, 2008. Per common share data also improved as of June 30,
 2008 from December 31, 2007 and June 30, 2007. Book value per share increased to
 $13.03 from $12.93 at December 31, 2007 and $12.61 at June 30, 2007, and tangible
 book value per share increased to $7.70 from $7.56 and $7.41 for the same time periods,
 respectively. Diluted weighted average shares decreased by 4.3 million shares from
 June 30, 2007, which was a factor in the increase in earnings per share.

|Selected financial data, ratios and per share data are provided in Table 1.
|---------------------------------------------------------------------------
|                                                                           
|Table 1:
 Selected Data                                                    
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|(Dollars in
 thousands, except per share data)                             
|                                                                           
|Condensed
 Income Statement                                                
|Interest and
 dividend income                                              
|Interest expense                                                           
|                                                                           
|Net interest
 income before provision for loan losses                      
|Provision
 for loan losses                                                 
|                                                                           
|Net interest
 income after provision for loan losses                       
|Non-interest
 income                                                       
|Operating
 expenses                                                        
|Merger related
 charges                                                    
|                                                                           
|Income before
 income taxes                                                
|Income tax
 provision                                                      
|                                                                           
|Net income
 (loss)                                                         
|                                                                           
|Weighted average
 shares outstanding                                       
|Basic                                                                      
|Diluted                                                                    
|Earnings (loss)
 per share                                                 
|Basic                                                                      
|Diluted                                                                    
|                                                                           
|                                                                           
|Financial
 Ratios                                                          
|Return on
 average assets (1)                                              
|Return on
 average equity (1)                                              
|Net interest
 margin (1)                                                   
|                                                                           
|Non-GAAP
 Ratios                                                           
|Efficiency
 ratio (2)                                                      
|                                                                           
|Per
 share data                                                            
|Book value
 per share                                                      
|Tangible book
 value per share                                             
|                                                                           
|                                                                           

|(1) | Annualized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The efficiency
 ratio represents the ratio of non-interest expenses, net of OREO expenses, to the
 sum of net interest income 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 useful to investors in evaluating
 Company performance.

26

---



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

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

|Table 2:
 Average Balance Sheets for the Three Months Ended June 30, 2008 and 2007 |  |                    |           |               |      |   |         | 
|---------------------------------------------------------------------------------- |  | ------------------ | --------- | ------------- | ---- | - | ------- | 
|                                                                                   |  |                    |           |               |      |   |         | 
|                                                                                   |  |                    |           |               |      |   |         | 
|                                                                                   |  |                    |           |               |      |   |         | 
|                                                                                   |  | Three Months Ended
|                                                                                   |  |                   
|                                                                                   |  | June 30, 2008      |           | June 30, 2007
|                                                                                   |  |                    |           |              
|                                                                                   |  |                    |           |               |      |   |         | 
|                                                                                   |  | Average            |           |               |      |   | Yield/  | 
|(Dollars in
 thousands)                                                            |  | Balance            |           | Interest      | Rate |   | Balance | 
|                                                                                  
|Interest-earning
 assets                                                           |  |                    |           |               |      |   |         | 
|Loans                                                                              |  |                    |           |               |      |   |         | 
|Residential
 real estate                                                           |  | $                  | 2,496,686 |               |      | $ | 34,512  | 
|Commercial
 real estate                                                            |  |                    | 1,201,492 |               |      |   | 18,291  | 
|Commercial
 business                                                               |  |                    | 460,348   |               |      |   | 6,819   | 
|Consumer                                                                           |  |                    | 700,195   |               |      |   | 9,547   | 
|                                                                                  
|Total Loans                                                                        |  |                    | 4,858,721 |               |      |   | 69,169  | 
|Short-term
 investments                                                            |  |                    | 29,012    |               |      |   | 190     | 
|Investment
 securities                                                             |  |                    | 2,346,725 |               |      |   | 29,821  | 
|                                                                                  
|Total interest-earning
 assets                                                     |  |                    | 7,234,458 |               |      | $ | 99,180  | 
|Non-interest-earning
 assets                                                       |  |                    | 942,280   |               |      |   |         | 
|                                                                                   |  |                    |           |               |      |   |         | 
|Total assets                                                                       |  | $                  | 8,176,738 |               |      |   |         | 
|                                                                                   |  |                    |           |               |      |   |         | 
|                                                                                   |  |                    |           |               |      |   |         | 
|Interest-bearing
 liabilities                                                      |  |                    |           |               |      |   |         | 
|Deposits                                                                           |  |                    |           |               |      |   |         | 
|Money market                                                                       |  | $                  | 459,839   |               |      | $ | 2,309   | 
|NOW                                                                                |  |                    | 386,766   |               |      |   | 277     | 
|Savings                                                                            |  |                    | 1,238,774 |               |      |   | 7,453   | 
|Time                                                                               |  |                    | 1,667,174 |               |      |   | 14,766  | 
|                                                                                  
|Total interest-bearing
 deposits                                                   |  |                    | 3,752,553 |               |      |   | 24,805  | 
|Repurchase
 agreements                                                             |  |                    | 178,715   |               |      |   | 919     | 
|FHLB advances
 and other borrowings                                                |  |                    | 2,273,945 |               |      |   | 25,208  | 
|                                                                                  
|Total interest-bearing-liabilities                                                 |  |                    | 6,205,213 |               |      |   | 50,932  | 
|Non-interest-bearing
 demand deposits                                              |  |                    | 482,501   |               |      |   |         | 
|Other non-interest-bearing
 liabilities                                            |  |                    | 74,564    |               |      |   |         | 
|                                                                                   |  |                    |           |               |      |   |         | 
|Total liabilities                                                                  |  |                    | 6,762,278 |               |      |   |         | 
|Equity                                                                             |  |                    | 1,414,460 |               |      |   |         | 
|                                                                                   |  |                    |           |               |      |   |         | 
|Total liabilities
 and equity                                                      |  | $                  | 8,176,738 |               |      |   |         | 
|                                                                                   |  |                    |           |               |      |   |         | 
|Net interest-earning
 assets                                                       |  | $                  | 1,029,245 |               |      |   |         | 
|                                                                                   |  |                    |           |               |      |   |         | 
|Net interest
 income                                                               |  |                    |           |               |      | $ | 48,248  | 
|                                                                                   |  |                    |           |               |      |   |         | 
|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
 liabilities                                             |  |                    |           |               |      |   |         | 
|                                                                                  

27

---



|Table 3: Average Balance Sheets for the Six Months Ended June 30, 2008 and 2007
|-------------------------------------------------------------------------------
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|(Dollars in
 thousands)                                                        
|                                                                               
|Interest-earning
 assets                                                       
|Loans                                                                          
|Residential
 real estate                                                       
|Commercial
 real estate                                                        
|Commercial
 business                                                           
|Consumer                                                                       
|                                                                               
|Total
 Loans                                                                   
|Short-term
 investments                                                        
|Investment
 securities                                                         
|                                                                               
|Total
 interest-earning assets                                                 
|Non-interest-earning
 assets                                                   
|                                                                               
|Total
 assets                                                                  
|                                                                               
|                                                                               
|Interest-bearing
 liabilities                                                  
|Deposits                                                                       
|Money
 market                                                                  
|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 liabilities                                         
|                                                                               

28

---



|Table 4: Rate/Volume Analysis      
|-----------------------------------
|                                   
|                                   
|                                   
|                                   
|                                   
|                                   
|                                   
|                                   
|                                   
|                                   
|(In thousands)                     
|                                   
|Interest-earning
 assets           
|Loans                              
|Residential real estate            
|Commercial real estate             
|Commercial
 business               
|Consumer                           
|                                   
|Total loans                        
|Short-term investments             
|Investment securities              
|                                   
|Total interest-earning
 assets     
|                                   
|Interest-bearing
 liabilities      
|Deposits                           
|Money market                       
|NOW                                
|Savings                            
|Time                               
|                                   
|Total interest
 bearing deposits   
|Repurchase
 agreements             
|FHLB advances
 and other borrowings
|                                   
|Total interest-bearing
 liabilities
|                                   
|Increase in
 net interest income   
|                                   

Net Interest Income AnalysisNet 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.

During the first half of 2008, the yield
 curve began to return to a more normal, upward-sloping shape. Since the beginning
 of the fourth quarter of 2007, the Federal Reserve Board (FRB) lowered
 the target federal funds rate seven times, for a total decrease of 275 basis points
 (from 4.75% to 2.00%). Decreases of 200 basis points and 25 basis points occurred
 during the first and second quarters of 2008, respectively.

Comparison of Quarter-to-Date June 2008 and June 2007As shown in Table 2, net interest income
 for the quarter ended June 30, 2008 was $48.2 million, an increase of $5.6 million
 from June 30, 2007. The increase is due to a 23 basis point increase in the net
 interest margin to 2.67% at June 30, 2008 from 2.44% for the same period in the
 prior year, which is offsetting the $50.0 million decline in net interest-earning
 assets.

Interest income increased $1.1 million to
 $99.2 million for the quarter ended June 30, 2008 due to the positive effect of
 the June 2007 investment portfolio restructuring, partially offset by the decrease
 in interest income earned on the loan portfolio. The restructuring of the investment
 portfolio primarily led to the 46 basis point increase in the average yield earned
 over the prior year period. The increase in the average yield earned offset the
 $12.8 million decline in the average balance of investment securities as the Company
 used cash flows from investments as one of the vehicles to fund loan growth and
 offset deposit outflows.

Loan income declined for the quarter due
 to the decrease in the average yield earned in response to the FRB rate cuts as
 new loans were originated and as adjustable rate loans reset, the yields were at
 lower rates. While most loan categories experienced increases in average balances,
 the residential real estate loan portfolio was the main driver of the growth. The
 increase in average balances was due to increased organic loan originations as the
 Company continued to take advantage of the pricing opportunities in our lending
 area due to the sustained dislocations in the credit market, which has in the short
 term diminished competition. Loan portfolio volume accounted for approximately $4.2
 million of the increase in interest income and partially offset the 45 basis point
 decline in the average yield earned on loans. All loan categories, except for residential,
 experienced a decline in the average yield due to the interest rate cuts by the
 FRB.

29

---



The cost of funds for the quarter ended
 June 30, 2008 decreased $4.6 million to $50.9 million, compared to $55.5 million
 for the same period a year ago. The Companys strategy during this period was
 to bring down deposit costs while being mindful of competitor pricing, which resulted
 in a $7.9 million decrease in interest expense comprised of a 72 basis point decrease
 in the average rate paid and a $133.4 million decrease in the average balances.
 This decrease was primarily in higher costing time deposits as interest expense
 in this category decreased $8.2 million as the average balances and average rate
 paid decreased $388.2 million and 93 basis points, respectively. The decrease in
 time deposits was partially offset by an increase in savings accounts as the average
 balance for the period rose $332.7 million the average yield paid increased 51 basis
 points causing interest expense to increase $3.2 million. Savings accounts increased
 due to targeted marketing campaigns which offered higher pricing for select products
 and migration from maturing time deposits as they repriced at reduced rates.

To offset the overall decrease in the average
 balance of deposit accounts and to fund loan growth, the Company expanded the use
 of FHLB advances and other borrowings. This resulted in an increase in the average
 balance of $452.0 million, which accounted for $5.0 million of the increase in interest
 expense.

Comparison of Year-to-Date June 2008 and June 2007As shown in Table 3, net interest income
 for the six months ended June 30, 2008 was $94.3 million compared to $86.0 million
 for the same period a year ago. This year over year increase is primarily due to
 the same factors as previously discussed above.

The increase in interest income was driven
 by the investment portfolio restructuring and the growth in the loan portfolio,
 partially offset by the decrease in the average yield earned on loans. As in the
 quarter, the cost of funds for the current year-to-date period decreased compared
 to the same period a year ago. Although the decline in the cost of funds of $1.8
 million was not as significant as the decrease experienced in the quarter, the shift
 in the mix of interest-bearing liabilities has reduced the cost of funds by 25 basis
 points and helped to improve the net interest spread by 24 basis points.

The Company will continue to evaluate its
 options for funding loan growth and, as necessary, to counter deposit outflows including,
 a) expanding the use of FHLB advances and other borrowings, and b) increasing the
 rate paid on deposits, which may have a negative impact on the net interest margin.

Provision for Loan LossesThe provision for loan losses (provision) is based on managements periodic assessment of the adequacy of the
 loan loss 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 (allowance).
 Management recorded a provision for loan losses of $3.7 million for the three months
 ended June 30, 2008. The primary factors that influenced managements decision
 to record this provision were growth in the loan portfolios as well as increasing
 trends in delinquencies, net charge-offs and nonperforming loans. The second quarter
 increase in non-performing loans of $7.2 million was primarily related to commercial
 construction loans for two residential condominium projects. A provision for loan
 losses of $600,000 was recorded for the three months ended June 30, 2007, based
 on growth in the portfolio, the level of net charge-offs, and non-performing loans
 at that time.

For the six months ended June 30, 2008,
 the provision for loan losses was $5.4 million as compared to $1.6 million for the
 same period a year ago. The year-to-date provision relates to increases in non-performing
 loans of $9.8 million, primarily in the residential portfolio and construction loans
 to commercial developers of residential condominiums due to the current economic
 conditions. Future provisions for loan losses may be deemed necessary if economic
 conditions do not improve or continue to deteriorate.

At June 30, 2008, the allowance for loan
 losses was $47.8 million, which represented 0.97% of total loans and 182.57% of
 non-performing loans. This compared to the allowance for loan losses of $43.8 million
 at December 31, 2007 which represented 0.93% of total loans and 267.38% of non-performing
 loans.

30

---



|Table 5: Non-Interest Income       
|-----------------------------------
|                                   
|                                   
|                                   
|(Dollars in
 thousands)            
|                                   
|Depositor
 service charges         
|Loan and servicing
 income         
|Trust fees                         
|Investment
 management, brokerage &
|insurance
 fees                    
|Bank owned
 life insurance         
|Net gain (loss)
 on securities     
|Net gain on
 sale of loans         
|Other                              
|                                   
|Total
 non-interest income         
|                                   

Non-Interest Income

Comparison of Quarter-to-Date June 2008 and June 2007As displayed in Table 5, non-interest income
 increased $22.3 million to $14.5 million for the three months ended June 30, 2008
 from the prior year period. The increase was primarily due to an increase in net
 gain/loss on securities attributable to the investment portfolio restructuring that
 resulted in a $22.6 million pre-tax charge during the prior year quarter. Excluding
 the restructuring charges, non-interest income decreased $289,000 primarily due
 to decreases in depositor service charges, loan and servicing income and bank-owned
 life insurance, partially offset by an increase in other income.

| |  | Net gain (loss)
 on securities increased $22.4 million, primarily due to the restructuring in 2007.
 Excluding the securities restructuring, the net gain on securities decreased $142,000
 due to the loss on the sale of the last two remaining bank stocks as a result of
 the market downturn in the financial sector, partially offset by the gain on the
 sale of mortgage-backed ARM securities which were sold at a premium in order to
 reduce prepayment risk and to fund deposit outflows.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | Other income
 increased primarily as a result of a net gain on limited partnerships due to the
 increase in the carrying value on certain limited partnerships.                                                                                                                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | Depositor
 service charges decreased due to a decline in overdraft fees, ATM fees and inactive
 and dormant account fees. The Company eliminated ATM point-of-sale and inactive
 and dormant account service charges during the first quarter of 2008 due to promotional
 and competitive reasons and overdraft fees declined due to volume. These decreases
 were partially offset by increased check card revenue due to increased card activity.                                                  
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | Loan and servicing
 fees declined due largely to a decrease in loan fees, principally commercial real
 estate prepayment fees, and to an increase in the valuation allowance of the SBA
 servicing asset.                                                                                                                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | Bank-owned
 life insurance decreased due to a decline in the average yield earned as a result
 of current market interest rates.                                                                                                                                                                                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

Comparison of Year-to-Date June 2008 and June 2007For the six months ended June 30, 2008 non-interest
 income increased $23.7 million to $30.2 million compared to $6.5 million for the
 same period a year ago. Non-interest income for the six months ended June 30, 2007
 was positively affected by the restructuring of the investment portfolio discussed
 above. Excluding the investment restructuring, non-interest income increased $1.1
 million due mainly to increases in investment management, brokerage and insurance
 fees, net gain on securities and net gain on sale of loans, partially offset by
 a decrease in loan and servicing income and bank owned life insurance.

| |  | Net gain on
 securities increased $23.4 million due to the restructuring in 2007 and resulting
 impairment charge of $22.6 million. Excluding the restructuring, net gain on securities
 increased $838,000 due to gains recorded on the sale of adjustable-rate mortgage-backed
 securities. These securities were sold at a premium and were sold in order to reduce
 prepayment risk and offset deposit outflow. Partially offsetting the mortgage-backed
 securities gain was the loss on the sale of bank stocks due to a decline in the
 market price.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Investment
 management, brokerage and insurance fees increased mainly due to the sales of fixed
 annuity products resulting from a favorable rate environment for these products.
 An increase in the number of sales personnel and increased marketing efforts have
 contributed to the increased trading activity and the sales of investment products.                                                                                                                                                                                                   

31

---



| |  | Net gain
 on sale of loans increased due to an upsurge in mortgage loans originated for sale
 due to pricing opportunities in our lending area resulting from the continued dislocations
 in the credit market.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                
| |  | Loan and
 servicing income and bank owned life insurance decreased due to the same reasons
 as discussed in the quarterly comparison.                                                                          

|                                |  |                    |        |        |  |          |        |         |  |      |       |                  |  |        |        |         |  |   |        |  |  |   |        |  |  |   |        |   |  |  |        |   
|------------------------------- |  | ------------------ | ------ | ------ |  | -------- | ------ | ------- |  | ---- | ----- | ---------------- |  | ------ | ------ | ------- |  | - | ------ |  |  | - | ------ |  |  | - | ------ | - |  |  | ------ | --
|Table 6: Non-Interest Expense  
|                                |  | Three Months Ended |        |        |  |          |        |         |  |      |       | Six Months Ended |  |        |        |         |  |   |        | 
|                                |  | June 30,           |        | Change |  | June 30, |        | Change 
|                                |  |                    |        |        |  |          |        |        
|(Dollars in
 thousands)         |  | 2008               |        | 2007   |  | Amount   |        | Percent |  | 2008 |       | 2007             |  | Amount |        | Percent
|                               
|Salaries and
 employee benefits |  | $                  | 22,935 |        |  | $        | 21,635 |         |  | $    | 1,300 |                  |  |        | 6.01   | %       |  | $ | 46,624 |  |  | $ | 43,492 |  |  | $ | 3,132  |   |  |  | 7.20   | % 
|Occupancy                       |  |                    | 4,320  |        |  |          | 4,325  |         |  |      | (5    | )                |  |        | (0.12  | )       |  |   | 9,214  |  |  |   | 8,729  |  |  |   | 485    |   |  |  | 5.56   |   
|Furniture
 and fixtures         |  |                    | 1,654  |        |  |          | 1,702  |         |  |      | (48   | )                |  |        | (2.82  | )       |  |   | 3,340  |  |  |   | 3,443  |  |  |   | (103   | ) |  |  | (2.99  | ) 
|Outside services                |  |                    | 4,471  |        |  |          | 4,182  |         |  |      | 289   |                  |  |        | 6.91   |         |  |   | 8,744  |  |  |   | 8,759  |  |  |   | (15    | ) |  |  | (0.17  | ) 
|Advertising,
 public relations, |  |                    |        |        |  |          |        |         |  |      |       |                  |  |        |        |         |  |   |        |  |  |   |        |  |  |   |        |   |  |  |        |   
|and
 sponsorships               |  |                    | 2,036  |        |  |          | 2,258  |         |  |      | (222  | )                |  |        | (9.83  | )       |  |   | 3,745  |  |  |   | 3,938  |  |  |   | (193   | ) |  |  | (4.90  | ) 
|Amortization
 of identifiable   |  |                    |        |        |  |          |        |         |  |      |       |                  |  |        |        |         |  |   |        |  |  |   |        |  |  |   |        |   |  |  |        |   
|intangible
 assets              |  |                    | 2,364  |        |  |          | 2,951  |         |  |      | (587  | )                |  |        | (19.89 | )       |  |   | 4,728  |  |  |   | 6,039  |  |  |   | (1,311 | ) |  |  | (21.71 | ) 
|Merger related
 charges         |  |                    | 23     |        |  |          | 472    |         |  |      | (449  | )                |  |        | (95.13 | )       |  |   | 78     |  |  |   | 2,339  |  |  |   | (2,261 | ) |  |  | (96.67 | ) 
|Other                           |  |                    | 3,514  |        |  |          | 3,410  |         |  |      | 104   |                  |  |        | 3.05   |         |  |   | 7,082  |  |  |   | 6,965  |  |  |   | 117    |   |  |  | 1.68   |   
|                               
|Total
 non-interest expense     |  | $                  | 41,317 |        |  | $        | 40,935 |         |  | $    | 382   |                  |  |        | 0.93   | %       |  | $ | 83,555 |  |  | $ | 83,704 |  |  | $ | (149   | ) |  |  | (0.18  | )%
|                               

Non-Interest Expense

Comparison of Quarter-to-Date June 2008 and June 2007As displayed in Table 6, non-interest expense
 increased $382,000 to $41.3 million for the three months ended June 30, 2008 from
 $40.9 million for the same period a year ago. The main driver of the increase was
 salaries and employee benefits and outside services. These increases were partially
 offset by decreases in amortization of identifiable intangible assets, merger related
 charges and advertising, public relations, and sponsorships.

| |  | Salaries and
 employee benefits increased as a result of employee incentive accruals, general
 merit increases and a decrease in capitalized salary expenses primarily due to the
 decline in loan originations, particularly commercial loans. These increases were
 partially offset by a decrease to charges associated with the LTCP for an executive
 that is no longer with the Company and to a lesser extent, expenses related to the
 Employee Stock Ownership Plan (ESOP). ESOP expense declined due to a
 lower average stock price during the second quarter of 2008 as compared to the same
 period in 2007.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | Outside services
 increased primarily due to legal and consulting costs related to human resources
 as well as charges incurred for outsourcing general internal audit work, partially
 offset by a decline in data processing expenses.                                                                                                                                                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | Amortization
 of identifiable intangible assets decreased due to using an accelerated method of
 amortization for core deposit intangibles which results in a higher level of expense
 in earlier periods. Amortization of non-compete agreements decreased due to the
 expiration of all agreements in the third quarter of 2007.                                                                                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | Merger related
 charges decreased due to charges for legal, consulting, advertising and data processing
 expense associated with the Westbank acquisition that occurred in 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | Advertising
 expenses decreased due to a decline in higher-costing television advertisements,
 public relations, sponsorships and cash incentive programs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

32

---



Comparison of Year-to-Date June 2008 and June 2007For the six months ended June 30, 2008 non-interest
 expense decreased $149,000 to $83.6 million from $83.7 million for the same period
 a year ago. The main drivers of the decrease were merger related charges and amortization
 of identifiable intangible assets. These decreases were mostly offset by increases
 in salaries and employee benefits and occupancy expenses.

| |  | Conversion
 and merger related charges decreased due to the same reasons as outlined above.                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Amortization
 of identifiable intangible assets decreased due to using an accelerated method of
 amortization as discussed above.                                                                                                                                                                                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Salaries and
 employee benefits increased as a result of severance recorded in the first quarter
 of 2008 for an executive that is no longer with the Company. There were also increases
 in employee incentive accruals, general merit increases, bonus payouts due to the
 increased sales of investment products and a decrease in capitalized salaries primarily
 due to the same factors as discussed above. These increases are partially offset
 by a decrease in ESOP expense due to a decline in the average year-to-date stock
 price.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Occupancy
 expense increased due to a charge of approximately $350,000 in order to facilitate
 the disposition of excess leased space and increased maintenance and repair costs
 spread throughout the branch network.                                                                                                                                                                                                                                                                                                                         

Income Tax Provision

The income tax expense of $6.0 million for
 the three months ended June 30, 2008 resulted in an effective tax rate of 33.6%,
 compared to an income tax benefit of ($2.8) million for the three months ended June
 30, 2007, which resulted in an effective tax rate of 42.3%. The income tax expense
 for the six months ended June 30, 2008 and 2007 was $10.8 million and $1.7 million,
 respectively. The effective tax rate for these periods was 30.3% and 24.2%, respectively.

In the second quarter of 2007, the Company
 restructured a part of the investment securities portfolio which had a significant
 impact on the Companys effective tax rate. Absent the investment portfolio
 restructuring, the effective tax rate for the three and six months ended June 30,
 2007 would have been 31.9% and 32.4%, respectively.

The increase in the effective tax rate for
 the three months ended June 30, 2008 from June 30, 2007 (excluding the impact of
 the portfolio restructuring) is primarily due to a decrease in income from bank
 owned life insurance investments. The decrease in the effective tax rate for the
 six months ended June 30, 2008 from June 30, 2007 (excluding the impact of the portfolio
 restructuring) is primarily due to reduction of $924,000 of unrecognized tax benefits
 for tax positions of prior years resulting from the settlement of the IRS audit
 in the first quarter of 2008.

The projected effective rate for the year
 ended December 31, 2008 is 31.6%.

33

---



Financial Condition

Financial Condition SummaryFrom December 31, 2007 to June 30, 2008, total assets and total liabilities increased
 $51.3 million, due mainly to increases in loans and borrowings, partially offset
 by a decrease in investments and deposits, with virtually no change in stockholders equity.Investment SecuritiesThe following table
 presents the amortized cost and fair value of investment securities at June 30,
 2008 and December 31, 2007.

|Table 7: Investment Securities                    |               |           |                   |   |           |           |  |       |           |  |   |          
|------------------------------------------------- | ------------- | --------- | ----------------- | - | --------- | --------- |  | ----- | --------- |  | - | ---------
|                                                  | June 30, 2008 |           | December 31, 2007
|                                                  |               |           |                  
|                                                  | Amortized     |           | Fair              |   |           | Amortized |  | Fair 
|(In thousands)                                    | cost          |           | value             |   |           | cost      |  | value
|                                                 
|Available for sale                                |               |           |                   |   |           |           |  |       |           |  |   |          
|U.S. Treasury obligations                         | $             | 596       |                   | $ | 596       |           |  | $     | 1,092     |  | $ | 1,095    
|U.S.
 Government sponsored enterprise obligations |               | 172,522   |                   |   | 172,062   |           |  |       | 201,408   |  |   | 202,059  
|Corporate
 obligations                            |               | 7,158     |                   |   | 7,172     |           |  |       | 22,531    |  |   | 22,515   
|Other
 bonds and obligations                      |               | 47,518    |                   |   | 45,005    |           |  |       | 52,853    |  |   | 52,634   
|Marketable
 and trust preferred equity securities |               | 72,451    |                   |   | 63,016    |           |  |       | 86,543    |  |   | 83,466   
|Federal
 Home Loan Bank stock                     |               | 120,821   |                   |   | 120,821   |           |  |       | 113,760   |  |   | 113,760  
|Mortgage-backed
 securities                       |               | 1,579,084 |                   |   | 1,597,830 |           |  |       | 1,706,966 |  |   | 1,725,492
|                                                 
|Total
 available for sale                         |               | 2,000,150 |                   |   | 2,006,502 |           |  |       | 2,185,153 |  |   | 2,201,021
|                                                 
|Held to
 maturity                                 |               |           |                   |   |           |           |  |       |           |  |   |          
|Mortgage-backed
 securities                       |               | 306,978   |                   |   | 310,620   |           |  |       | 282,887   |  |   | 286,968  
|Other
 bonds                                      |               | 7,135     |                   |   | 7,128     |           |  |       | 7,585     |  |   | 7,577    
|                                                 
|Total
 held to maturity                           |               | 314,113   |                   |   | 317,748   |           |  |       | 290,472   |  |   | 294,545  
|                                                 
|Total
 securities                                 | $             | 2,314,263 |                   | $ | 2,324,250 |           |  | $     | 2,475,625 |  | $ | 2,495,566
|                                                 

At June 30, 2008, the Company had total
 investments of $2.32 billion, or 28.1%, of total assets. The decrease of $170.9
 million, from $2.49 billion at December 31, 2007 was mainly the result of using
 cash flows from available-for-sale and held-to-maturity mortgage-backed securities
 primarily to fund loan growth and to a lesser extent offset deposit outflows, partially
 offset by purchases of mortgage-backed securities using funds borrowed from the
 Federal Home Loan Bank.The Companys underlying investment strategy
 has been to purchase FNMA and FHLMC hybrid adjustable rate mortgage-backed securities,
 and seasoned 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 agency securities.
 For mortgage-backed securities, the average life, when purchased, would range between
 1.5 and 3.5 years and the maturity dates for Agency obligations would range between
 one and five years.SFAS No. 115 requires the Company to designate its securities
 as held to maturity, available for sale or trading depending on the Companys
 intent regarding its investments at the time of purchase. The Company does not currently
 maintain a portfolio of trading securities. As of June 30, 2008, $2.01 billion,
 or 86.5%, of the portfolio, was classified as available for sale and $314.1 million,
 or 13.5% of the portfolio was classified as held to maturity. The net unrealized
 gain on securities classified as available for sale as of June 30, 2008 and December
 31, 2007 was $6.4 million and $15.9 million, respectively. The decline in the market
 value of securities available for sale was primarily due to spreads, liquidity and
 fluctuations in market interest rates during the period. In addition to market interest
 rates, the unrealized losses reported for trust preferred equity securities are
 also attributable to the current market stress partially resulting from efforts
 by banks to raise capital. This has in turn inflated coupon rates on new issues
 of trust preferred equity securities versus lower rates on the Companys portfolio
 of A- to AAA rated, non-perpetual seasoned issues of trust preferred equity securities.
 All trust preferred equity securities are current and no impairment of cash flows
 is anticipated. Management has performed a review of all investments with unrealized
 losses and determined that none of these investments had other-than-temporary impairment.
 The investment portfolio does not have direct exposure to sub-prime lending, does
 not include collateralized debt obligations or structured investment vehicles. The
 Company does not own or plan on investing in securities backed by sub-prime mortgage
 collateral.

34

---



Lending ActivitiesThe
 Company makes residential real estate loans secured by one-to-four family residences,
 commercial real estate loans, residential and commercial construction loans, commercial
 business loans, home equity loans and lines of credit and other consumer loans.
 Table 8 displays the balances of the Companys loan portfolio as of June 30,
 2008 and December 31, 2007.

|Table 8:
 Loan Portfolio                |  |               |           |          |                   |   |        |   |           |  |         |  
|--------------------------------------- |  | ------------- | --------- | -------- | ----------------- | - | ------ | - | --------- |  | ------- | -
|                                        |  |               |           |          |                   |   |        |   |           |  |         |  
|                                        |  | June 30, 2008 |           |          | December 31, 2007 |  
|                                        |  |               |           |          |                   |  
|                                        |  |               |           |          | Percent           |   |        |   |           |  | Percent |  
|(Dollars in
 thousands)                 |  | Amount        |           | of Total |                   |   | Amount |   | of Total  | 
|                                       
|Residential real estate                 |  | $             | 2,533,248 |          | 51.2              | % |        | $ | 2,360,921 |  | 49.9    | %
|Residential
 real estate construction   |  |               | 19,816    |          | 0.4               |   |        |   | 29,023    |  | 0.6     |  
|                                       
|Net
 residential real estate            |  |               | 2,553,064 |          | 51.6              |   |        |   | 2,389,944 |  | 50.5    |  
|Commercial
 real estate                 |  |               | 999,048   |          | 20.2              |   |        |   | 947,185   |  | 20.1    |  
|Commercial
 real estate construction    |  |               | 214,830   |          | 4.3               |   |        |   | 247,428   |  | 5.2     |  
|                                       
|Net
 commercial real estate             |  |               | 1,213,878 |          | 24.5              |   |        |   | 1,194,613 |  | 25.3    |  
|Commercial
 business                    |  |               | 473,147   |          | 9.6               |   |        |   | 457,745   |  | 9.7     |  
|Home equity
 and equity lines of credit |  |               | 681,978   |          | 13.8              |   |        |   | 652,107   |  | 13.8    |  
|Other consumer                          |  |               | 27,400    |          | 0.5               |   |        |   | 33,560    |  | 0.7     |  
|                                       
|Total
 loans                            |  | $             | 4,949,467 |          | 100.0             | % |        | $ | 4,727,969 |  | 100.0   | %
|                                       

As shown in Table 8, gross loans were $4.95
 billion, up $221.5 million, or 4.7%, at June 30, 2008 from year-end 2007. The Company
 experienced an increase in most loan categories due to organic loan growth.Residential real estate loans continue to represent the largest segment of the
 Companys loan portfolio as of June 30, 2008, comprising over fifty percent
 of gross loans. The increase of $163.1 million was due primarily to organic loan
 growth with only $25.0 million of purchased loans during the quarter.Commercial
 real estate loans and commercial business loans increased $34.7 million. The increase
 was attributable to the commercial real estate loan portfolio which increased due
 to organic loan growth and a shift from the commercial construction category due
 to loans completing the construction phase and converting to fully amortizing commercial
 mortgage loans. The commercial real estate construction category includes approximately
 $58.0 million of loans to commercial borrowers for residential housing development.
 Since year-end 2007, this segment has experienced an increase in charge-offs, delinquencies
 and adversely classified loans which has impacted the current quarter provision
 for the allowance for loan losses. See the Provision for Loan Losses section
 located on page 30, Asset Quality and Allowance for Loan
 Losses sections located on pages 36-37 for further information concerning
 the allowance for loan losses. The Companys continued strategy is to build
 its commercial loan portfolios including real estate and other business loans by
 promoting strong business development efforts to obtain new business banking relationships,
 while maintaining strong credit quality and profitability. In addition, it is also
 the Companys strategy to limit its exposure to residential construction.Home equity loans and lines of credit increased $29.9 million from December 31,
 2007 to June 30, 2008. These products were promoted by the Company through competitive
 pricing and marketing campaigns as the Company is committed to growing this loan
 segment while maintaining credit quality as a higher yielding alternative to first
 mortgage loans.

35

---



Asset QualityAs displayed
 in Table 9, nonperforming assets at June 30, 2008 increased to $27.6 million compared
 to $17.3 million at December 31, 2007. The increase is primarily due to loans secured
 by residential one-to-four family homes in both the residential and commercial construction
 portfolios, largely as a result of the current economic conditions. The increase
 of $3.6 million in the residential real estate portfolio was due primarily to an
 increase in residential inventory levels, declines in the median sales price of
 residential homes and a general worsening of the economy that is causing difficulties
 for some borrowers due to high energy and food costs. The increase of $6.7 million
 in the commercial construction portfolio was primarily related to three relationships
 with residential home developers for condominium projects. As the current economic
 conditions persist or deteriorate there will be added stress on our loan portfolios.
 The Company believes that its historical practice of conservative underwriting,
 the relatively modest size of its residential construction portfolio, and the strong
 average FICO scores and low 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 continue to remain at relatively low
 levels and at June 30, 2008 were 0.53%, compared to 0.35% at December 31, 2007.

|Table 9: Nonperforming Assets                                 |  |          |        |              |   |        |  
|------------------------------------------------------------- |  | -------- | ------ | ------------ | - | ------ | -
|                                                              |  | June 30, |        | December 31, |  
|(Dollars in thousands)                                        |  | 2008     |        | 2007         |  
|                                                              | 
|Nonaccruing
 loans (1)                                        |  |          |        |              |   |        |  
|Real
 estate loans                                            |  |          |        |              |   |        |  
|Residential (one- to four- family)                            |  | $        | 8,464  |              | $ | 4,837  |  
|Commercial
 real estate loans                                 |  |          | 2,893  |              |   | 3,414  |  
|Commercial
 construction                                      |  |          | 9,055  |              |   | 2,382  |  
|                                                              | 
|Total
 real estate loans                                      |  |          | 20,412 |              |   | 10,633 |  
|Commercial
 business                                          |  |          | 4,904  |              |   | 4,912  |  
|Consumer
 loans                                               |  |          |        |              |   |        |  
|Home
 equity and equity lines of credit                       |  |          | 745    |              |   | 606    |  
|Other
 consumer                                               |  |          | 120    |              |   | 235    |  
|                                                              | 
|Total
 consumer loans                                         |  |          | 865    |              |   | 841    |  
|                                                              | 
|Total
 nonaccruing loans                                      |  |          | 26,181 |              |   | 16,386 |  
|Real estate
 owned                                            |  |          | 1,418  |              |   | 897    |  
|                                                              | 
|Total
 nonperforming assets                                   |  | $        | 27,599 |              | $ | 17,283 |  
|                                                              | 
|Total
 nonperforming loans as a percentage of total loans (2) |  |          | 0.53   | %            |   | 0.35   | %
|Total nonperforming assets as a percentage of total assets    |  |          | 0.33   |              |   | 0.21   |  

|(1) | Nonaccrual
 loans include all loans 90 days or more past due, restructured loans and other loans,
 which have been identified by the Company as presenting uncertainty with respect
 to the collectability of interest or principal.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Total loans
 are stated at their principal amounts outstanding, net of deferred fees and fair
 value adjustments on acquired loans.                                                                                                 

Allowance For Loan LossesAs displayed in Table 10 below, during the three months ended June 30, 2008,
 the Company recorded net charge-offs of $1.3 million compared to net charge-offs
 of $262,000 for the three months ended June 30, 2007. Current quarter charge-offs
 include write-downs totaling $1.0 million on two construction loan relationships.
 These two relationships are with residential home developers and are for condominium
 projects. For the six months ended June 30, 2008, net charge-offs were $1.4 million,
 compared to $479,000 for the six months ended June 30, 2007.The Company
 had a loan loss allowance of $47.8 million and $43.8 million at June 30, 2008 and
 December 31, 2007, respectively. The allowance for loan losses to total loans was
 0.97% at June 30, 2008 compared to 0.93% at December 31, 2007. Management believes
 the allowance for loan losses is adequate and consistent with asset quality and
 delinquency indicators.

36

---



Table 10: Schedule of Allowance for Loan Losses

|                                                  |  | At or For the Three Months |        |   | At or For the Six Months |  
|------------------------------------------------- |  | -------------------------- | ------ | - | ------------------------ | -
|                                                  |  | Ended June 30,             |        |   | Ended June 30,           |  
|                                                  |  |                            |        |   |                          |  
|(Dollars in thousands)                            |  | 2008                       |        |   | 2007                     |  
|                                                 
|Balance at beginning of period                    |  | $                          | 45,414 |   |                          | $
|Net allowances
 gained through acquisition        |  |                            | -      |   |                          |  
|Provision
 for loan losses                        |  |                            | 3,700  |   |                          |  
|Charge-offs                                       |  |                            |        |   |                          |  
|Residential
 and commercial real estate loans     |  |                            | -      |   |                          |  
|Commercial
 construction                          |  |                            | 1,000  |   |                          |  
|Commercial
 business loans                        |  |                            | 504    |   |                          |  
|Consumer
 loans                                   |  |                            | 205    |   |                          |  
|                                                 
|Total
 charge-offs                                |  |                            | 1,709  |   |                          |  
|                                                 
|Recoveries                                        |  |                            |        |   |                          |  
|Residential
 and commercial real estate loans     |  |                            | 14     |   |                          |  
|Commercial
 construction                          |  |                            | -      |   |                          |  
|Commercial
 business loans                        |  |                            | 343    |   |                          |  
|Consumer
 loans                                   |  |                            | 36     |   |                          |  
|                                                 
|Total
 recoveries                                 |  |                            | 393    |   |                          |  
|                                                 
|Net
 charge-offs                                  |  |                            | 1,316  |   |                          |  
|                                                 
|Balance
 at end of period                         |  | $                          | 47,798 |   |                          | $
|                                                 
|Net charge-offs
 to average loans                 |  |                            | 0.11   | % |                          |  
|Allowance
 for loan losses to total loans         |  |                            | 0.97   |   |                          |  
|Allowance
 for loan losses to nonperforming loans |  |                            | 182.57 |   |                          |  
|Net charge-offs
 to allowance for loan losses     |  |                            | 2.75   |   |                          |  
|Total recoveries
 to total charge-offs            |  |                            | 23.00  |   |                          |  

Goodwill and Identifiable Intangible
 AssetsAt June 30, 2008, the Company had intangible assets of $576.2
 million, a decrease of $8.3 million, from $584.5 million at December 31, 2007. The
 decrease is due to year-to-date amortization expense for core deposit and customer
 relationships as well as for the reduction of unrecognized tax benefits for tax
 positions taken in prior years related to acquisitions. In accordance with SFAS
 No. 141, all assets acquired and liabilities assumed are recorded based on their
 fair values on the acquisition date.
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. The Company performed its annual test for goodwill impairment
 during the first quarter of the year, and no impairment was recorded. No events
 or circumstances subsequent to those evaluations indicate that the carrying value
 of the Companys goodwill may not be recoverable.

Sources of FundsCash flows
 from deposits, loan and mortgage-backed securities repayments, securities sales
 proceeds and maturities, borrowings and earnings are the primary sources of the
 Companys funds available for use in its lending and investment activities
 and in meeting its operational needs. While scheduled loan and securities repayments
 are a relatively stable source of funds, deposit flows and loan and investment security
 prepayments are influenced by prevailing interest rates and local and economic conditions
 and are inherently uncertain. The borrowings primarily include FHLB advances and
 repurchase agreement borrowings. See Note 10 of Notes to Consolidated Financial
 Statements contained elsewhere within this Report for further 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.

37

---



DepositsThe Company receives
 retail and commercial deposits through its main office and 88 other banking offices
 throughout Connecticut (77 locations) and Massachusetts (12 locations). Customer
 deposits generated through the NewAlliance banking network are the largest source
 of funds used to support asset growth.

|Table 11: Deposits |  |          |           |              |   |          
|------------------ |  | -------- | --------- | ------------ | - | ---------
|                   |  | June 30, |           | December 31,
|(In thousands)     |  | 2008     |           | 2007        
|                  
|Savings            |  | $        | 1,349,136 |              | $ | 941,051  
|Money market       |  |          | 427,174   |              |   | 492,042  
|NOW                |  |          | 391,946   |              |   | 401,097  
|Demand             |  |          | 500,673   |              |   | 477,408  
|Time               |  |          | 1,662,071 |              |   | 2,062,067
|                  
|Total
 deposits    |  | $        | 4,331,000 |              | $ | 4,373,665
|                  

As displayed in Table 11, deposits decreased $42.7 million compared to December
 31, 2007. The Companys strategy was to reduce rates paid on interest-bearing
 deposits, particularly on time deposits, in order to stabilize the net interest
 margin and increase core deposits. The strategy helped to increase our net interest
 margin from December 31, 2007. During the first quarter of the year, deposit outflows
 did occur due to the reduction in the average rate paid on deposits. Many of our
 peers did not reduce their rates as quickly, therefore, a portion of maturing time
 deposits were lost to competitors. Partially offsetting the decrease in time deposit
 accounts was an increase in core deposits of approximately $357.3 million, as the
 Company was able to retain some of the attrition in time deposit accounts and established
 new customer accounts and relationships through targeted product promotions. During
 the most recent quarter, the Company ran product promotions and offered rates in
 line with many of our competitors which partially recouped deposit outflows from
 the first quarter. Total deposits increased $73.4 million from March 31, 2008.
BorrowingsNewAlliance
 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 following table summaries the Companys recorded borrowings at June 30, 2008.
Table 12: BorrowingsJune 30,

December 31,(In thousands)

2008

2007FHLB advances (1)

$
2,244,598

$
2,136,965Repurchase agreements


183,783


192,145Mortgage loans
 payable


1,390


1,459Junior subordinated
 debentures issued to affiliated trusts (2)


24,835


24,935Total
 borrowings

$
2,454,606

$
2,355,504(1)
Includes fair
 value adjustments on acquired borrowings, in accordance with SFAS No. 141,BusinessCombinations, of $7.6 million and $9.6 million at June 30, 2008 and December
 31, 2007, respectively.(2)
Includes fair
 value adjustments on acquired borrowings, in accordance with SFAS No. 141,BusinessCombinations, of $200,000 and $300,000 at June 30, 2008 and December 31,
 2007, respectively. 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.The acquisition fair value adjustments (premiums)
 are being amortized as an adjustment to interest expense on borrowings over their
 remaining term using the level yield method.Borrowings were $2.45 billion
 at June 30, 2008, an increase of $99.1 million from the balance recorded at December
 31, 2007, and was mainly in FHLB advances. The increase in FHLB advances was primarily
 due to funding loan growth and to offset
38
deposit outflows which occurred predominantly
 during the first quarter, while managing interest rate risk and liquidity. At June
 30, 2008, the majority of the Companys outstanding FHLB advances were at fixed
 rates, while only $15.0 million had floating rates.Stockholders EquityTotal
 stockholders equity equaled $1.41 billion at June
 30, 2008 and December 31, 2007. There was virtually no change in stockholders equity
 due to increases of current year earnings of $24.7 million and stock option and
 restricted stock expense of $5.9 million. These increases were offset by the $13.8
 million payment of cash dividends declared on our common stock during the six months
 ended June 30, 2008, our repurchase of 783,033 shares of our common stock for $9.8
 million and a decline in the fair market value of available for sale investments
 of $6.4 million, net of tax. For information regarding our compliance with applicable
 capital requirements, see Liquidity and Capital Position below.
Dividends declared year to date June 30,
 2008 were $0.135 per share compared to $0.125 per share for the same period last
 year. On July 29, 2008, we declared a $0.07 per share cash dividend payable on August
 19, 2008 to shareholders of record on August 8, 2008. Book value per share amounted
 to $13.03 and $12.93 at June 30, 2008 and December 31, 2007, respectively, and tangible
 book value amounted to $7.70 and $7.56 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 low as
 all are investment grade or have government guarantees. There is no direct sub-prime
 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 several senior executives, is responsible for managing interest rate
 risk. On a quarterly basis, the Board of Directors reviews the Companys gap
 position and interest rate sensitivity exposure described below and Asset/Liability
 Committee minutes detailing the Companys activities and strategies, the effect
 of those strategies on the Companys operating results, interest rate risk
 position and the effect changes in interest rates would have on the Companys
 net interest income. The extent of movement of interest rates is an uncertainty
 that could have a negative impact on earnings.The principal strategies used
 to manage interest rate risk include (i) emphasizing the origination, purchase and
 retention of adjustable rate loans, and the origination and purchase of loans with
 maturities matched with those of the deposits and borrowings funding the loans,
 (ii) investing in debt securities with relatively short maturities and/or average
 lives and (iii) classifying a significant portion of its investment portfolio as
 available for sale so as to provide sufficient flexibility in liquidity management.
 By its strategy of limiting the Banks risk to rising interest rates, the Bank
 is also limiting the benefit of falling interest rates.The Company employs
 two approaches to interest rate risk measurement; gap analysis and income simulation
 analysis.Gap AnalysisThe matching of assets and liabilities
 may be analyzed by examining the extent to which such assets and liabilities are interest rate sensitive
 and by monitoring a banks interest rate
 sensitivity gap. An asset or liability is deemed to be interest rate
 sensitive within a specific time period if it will mature or reprice within that
 time period. The interest rate sensitivity gap is defined as the difference
 between the amount of interest-earning assets maturing or repricing within a specific
 time period and the amount of interest-bearing liabilities maturing or repricing
 within that same time period. At June 30, 2008, 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 negative $38.3 million, or negative 0.46% 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.
39
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 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 flat yield curve as of June 30, 2008 was utilized. This yield
 curve was utilized due to the recent excessive volatility in the rates markets.
 As of June 30, 2008, 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 interest incomeover twelve months200 basis point twelve month ramp upwards in interest rates

3.65%100 basis point twelve month ramp downwards in interest rates

-2.36%As of June 30, 2008, a downward twelve month ramp of 100 basis points was a realistic
 representation of the risk of falling rates as the housing market continued to falter,
 thereby putting pressure on future economic growth. For an increase in rates, an
 upward twelve month ramp of 200 basis points is also a relevant representation of
 potential risk given the recent increases in both overall and core inflation rates.
Based on the scenarios above, net interest income would increase slightly
 in the 12-month period after an upward movement in rates, and would decrease slightly
 after a downward movement in rates. Computation of prospective effects of hypothetical
 interest rate changes are based on a number of assumptions including the level of
 market interest rates, the degree to which non-maturity deposits react to changes
 in market rates, the expected prepayment rates on loans and investments, the degree
 to which early withdrawals occur on time deposits and other deposit flows. As a
 result, these computations should not be relied upon as indicative of actual results.
 Further, the computations do not reflect any actions that management may undertake
 in response to changes in interest rates.
Liquidity and Capital PositionLiquidity is the ability to meet current and future short-term financial
 obligations. The Company further defines liquidity as the ability to respond to
 the needs of depositors and borrowers as well as maintaining the flexibility to
 take advantage of investment opportunities. The Companys primary sources of
 funds consist of deposit inflows, loan repayments and sales, maturities, paydowns
 and sales of investment and mortgage-backed securities, borrowings from the Federal
 Home Loan Bank and repurchase agreements.The Company has expanded its use
 of borrowings from the Federal Home Loan Bank to fund loan growth while managing
 interest rate risk and liquidity. At June 30, 2008, total borrowings from the Federal
 Home Loan Bank amounted to $2.24 billion, exclusive of $7.6 million in purchase
 accounting adjustments, and the Company had the immediate capacity to increase that
 total to $2.54 billion. Additional borrowing capacity of approximately $654.6 million
 would be readily available by pledging eligible investment securities as collateral.
 Depending on market conditions and the Companys liquidity and gap position,
 the Company may continue to borrow from the Federal Home Loan Bank or initiate borrowings
 through the repurchase agreement market. At June 30, 2008 the Companys repurchase
 agreement lines of credit totaled $125.0 million, $100.0 million of which was available
 on that date.The Companys most liquid assets are cash and due from
 banks, short-term investments and debt securities. The levels of these assets are
 dependent on the Companys operating, financing, lending and investment activities
 during any given period. At June 30, 2008, cash and due from banks, short-term investments
 and debt securities maturing within one year amounted to $244.4 million, or 2.96%
 of total assets.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, and the payment of principal and interest to holders of trust preferred securities.
40
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.
At June 30, 2008, the Company had commitments
 to originate loans, unused outstanding lines of credit and standby letters of credit
 totaling $844.3 million. Management anticipates that it will have sufficient funds
 available to meet its current loan commitments. Time deposits maturing within one
 year from June 30, 2008 amount to $1.25 billion.At June 30, 2008, the Companys Tier 1 leverage ratio, a primary measure of regulatory capital was $848.0
 million, or 11.16%, which is above the threshold level of $380.0 million, or 5.0%
 to be considered well-capitalized. The Tier 1 risk-based capital ratio
 stood at 18.69% and the Total risk-based capital ratio stood at 19.74%. The Bank
 also exceeded all of its regulatory capital requirements with leverage capital of
 $706.0 million, or 9.3% of average assets, which is above the required level of
 $303.2 million or 4.0%. The Tier 1 risk-based capital ratio was 15.61% and the Total
 risk-based capital ratio was 16.66%. These ratios qualify the Bank as a well
 capitalized institution under federal capital guidelines.
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
 39 through 41.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 13a-15(e) or Rule 15d-15(e) under the Exchange Act) as of June
 30, 2008. Based upon that evaluation, the Chief Executive Officer and Chief Financial
 Officer concluded that our disclosure controls and procedures are effective.Disclosure controls and procedures are our controls and other procedures that
 are designed to ensure that the information required to be disclosed by us in our
 reports filed or submitted under the Securities Exchange Act of 1934 (the Exchange
 Act) is recorded, processed, summarized and reported within the time periods
 specified in the Securities and Exchange Commissions rules and forms. Disclosure
 controls and procedures include, without limitation, controls and procedures designed
 to ensure that information required to be disclosed by us in our reports filed under
 the Exchange Act is accumulated and communicated to our management, including the
 principal executive officer and principal financial officer, as appropriate to allow
 timely decisions regarding required disclosure in the second quarter 2008.
In addition, based on that evaluation, no change in the Companys internal control
 over financial reporting occurred during the quarter ended June 30, 2008 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 INFORMATIONItem 1.  Legal Proceedings
There are no material legal proceedings
 or other litigation. See the caption Legal Proceedings under Footnote
 14 Commitments and Contingencies in Part I, Item I, Financial Statements
 (Unaudited) of this Form 10-Q for further discussion.
41

Item 1A.Risk FactorsAn investment in our common stock involves certain risks inherent to our
 business. The material risks and uncertainties that management believes affect the
 Company are described below. To understand these risks and to evaluate an investment
 in our common stock, you should read this entire report, including the following
 risk factors.If any of the following risks actually occur, the Companys
 financial condition and results of operations could be materially and adversely
 affected. If this were to happen, the value of the Companys common stock could
 decline significantly.Changes in Interest Rates and Spreads Could Have
 an Impact on Earnings and Results of Operations, Which Could Have a Negative Impact
 on The Value of NewAlliance Stock.NewAlliances earnings and financial
 condition are dependent to a large degree upon net interest income, which is the
 difference between interest earned from loans and investments and interest paid
 on deposits and borrowings. The narrowing of interest rate spreads, meaning the
 difference between interest rates earned on loans and investments and the interest
 rates paid on deposits and borrowings, could adversely affect NewAlliances
 earnings and financial condition. The Company cannot predict with certainty or control
 changes in interest rates. Regional and local economic conditions and the policies
 of regulatory authorities, including monetary policies of the Federal Reserve Board,
 affect interest income and interest expense. The Company has ongoing policies and
 procedures designed to manage the risks associated with changes in market interest
 rates.However, changes in interest rates still may have an adverse effect
 on NewAlliances profitability. For example, high interest rates could also
 affect the amount of loans that we originate, because higher rates could cause customers
 to apply for fewer mortgages, or cause depositors to shift funds from accounts that
 have a comparatively lower cost, to accounts with a higher cost or experience customer
 attrition due to competitor pricing. If the cost of interest-bearing deposits increases
 at a rate greater than the yields on interest-earning assets increase, net interest
 income will be negatively affected. Changes in the asset and liability mix may also
 affect net interest income. Similarly, lower interest rates cause higher yielding
 assets to prepay and floating or adjustable rate assets to reset to lower rates.
 If the Bank is not able to reduce its funding costs sufficiently, due to either
 competitive factors or the maturity schedule of existing liabilities, then the Banks net interest margin will decline.Credit Market Conditions May
 Impact NewAlliances InvestmentsSignificant credit market anomalies
 may impact the valuation and liquidity of the Companys investment securities.
 The problems of numerous primary security dealers have reduced market liquidity,
 increased normal bid-asked spreads and increased the uncertainty of market participants.
 Such illiquidity could reduce the market value of the Companys investments,
 even those with no apparent credit exposure.NewAlliances Business
 Strategy of Growth Through Acquisitions Could Have an Impact on Earnings and Results
 of Operations That May Negatively Impact the Value of NewAlliance Stock.
In recent years, NewAlliance has focused, in part, on acquisitions. Over the past
 four years, the Company has acquired four banking institutions, a non-depository
 trust company and a registered investment advisory firm. From time to time in the
 ordinary course of business, the Company engages in preliminary discussions with
 potential acquisition targets. As of the date of this filing, there are no binding
 or definitive agreements, plans, arrangements, or understandings for such acquisitions
 by the Company. Although our business strategy includes both internal expansion
 and acquisitions, there can be no assurance that, in the future, we will successfully
 identify suitable acquisition candidates, complete acquisitions successfully, integrate
 acquired operations into our existing operations or expand into new markets. Further,
 there can be no assurance that acquisitions will not have an adverse effect upon
 our operating results while the operations of the acquired businesses are being
 integrated into our operations. In addition, once integrated, acquired operations
 may not achieve levels of profitability comparable to those achieved by our existing
 operations, or otherwise perform as expected. Further, transaction-related expenses
 may adversely affect our earnings. These adverse effects on our earnings and results
 of operations may have a negative impact on the value of our stock.If
 The Goodwill That The Company Has Recorded in Connection With Its Acquisitions Becomes
 Impaired, It Could Have a Negative Impact on The Companys Profitability and
 Stockholders Equity.Applicable accounting standards require that the
 purchase method of accounting be used for all business combinations. Under purchase
 accounting, if the purchase price of an acquired company exceeds the fair value
 of the companys net assets, the excess is carried on the acquirers balance
 sheet as goodwill. At December 31, 2007, the Company had approximately $531.2 million
 of goodwill on its balance sheet. Companies must evaluate goodwill for impairment
 at least annually. Write-downs of the amount of any impairment, if necessary, are
 to be charged to the results of operations in the period in which the impairment
 occurs. There can be no assurance that future evaluations of goodwill will not result
 in findings of impairment and related write-downs, which may have a material adverse
 effect on NewAlliances financial conditions and results of operations.
42

NewAlliance May Experience Higher Levels
 of Loan Losses Due to Recent Growth.NewAlliances growth strategy depends
 on generating an increasing level of loans to produce an acceptable return to our
 stockholders. We will also need to accomplish this loan growth while maintaining
 low loan losses in our portfolio. We expect growth to occur in markets that are
 relatively new to us, including central and western Massachusetts through our recent
 acquisition of Westbank. As such, NewAlliances allowance for loan losses may
 need to be increased, or may be deemed insufficient by various regulatory agencies.
 Such agencies may require the Bank to recognize an increase to the allowance for
 loan losses. Any increases in the allowance for loan losses will result in a decrease
 in net income and, possibly capital, and may have a material adverse effect on NewAlliances financial condition and results of operations. See the sections titled Allowance
 for Loan Losses and Classification of Assets and Loan Review in
 Item 7, Managements Discussion and Analysis of Financial Condition and Results
 of Operation, located in the Companys most recent Annual Report on Form 10-K
 for further discussion related to the process for determining the appropriate level
 of the allowance for loan losses.NewAlliance May Experience Higher Levels
 of Loan Losses Due to Economic Conditions.NewAlliances business is
 subject to periodic fluctuations based on national and local economic conditions.
 These fluctuations are not predictable, cannot be controlled and may have a material
 adverse impact on the Companys operations and financial condition. For example,
 recent declines in housing activity including declines in building permits, housing
 starts and home prices may make it more difficult for our borrowers to sell their
 homes or refinance their debt. Sales may also slow, which could strain the resources
 of real estate developers and builders. Many analysts are now predicting the U.S.
 Economy is in or will experience a recession in the near term. This could affect
 employment levels and the ability of our borrowers to service their debt. The Bank
 may suffer higher loan losses as a result of these factors and the resulting impact
 on our borrowers.
Strong Competition Within NewAlliances Market Areas May Limit Growth and Profitability.Competition in the
 banking and financial services industry is intense. In our market areas, we compete
 with commercial banks, savings institutions, mortgage brokerage firms, credit unions,
 finance companies, mutual funds, insurance companies, and brokerage and investment
 banking firms operating locally and elsewhere. As we grow, we will be expanding
 into market areas where we may not be as well known as other institutions that have
 been operating in those areas for some time. In addition, regional, super regional
 and national interstate banking institutions have become increasingly active in
 our market areas. Many of these competitors, in particular the regional, super regional
 and national institutions, have substantially greater resources and lending limits
 than we have and may offer certain services that we do not or cannot efficiently
 provide. Our profitability depends upon our continued ability to successfully compete
 in our market areas. The greater resources and deposit and loan products offered
 by some of our competitors may limit our ability to grow profitably.
NewAlliance May Not Pay You Dividends
 if NewAlliance is Not Able to Receive Dividends From Its Subsidiary, NewAlliance
 Bank.Cash dividends from NewAlliance Bank and our liquid assets are our
 principal sources of funds for paying cash dividends on our common stock. Unless
 we receive dividends from NewAlliance Bank or choose to use our liquid assets, we
 may not be able to pay dividends. NewAlliance Banks ability to pay us dividends
 is subject to its ability to earn net income and to meet certain regulatory requirements.
NewAlliance is Subject To Extensive Government
 Regulation and SupervisionNewAlliance, primarily through NewAlliance Bank
 and certain non-bank subsidiaries, is subject to extensive federal and state regulation
 and supervision. Banking regulations are primarily intended to protect customers,
 depositors funds, federal deposit insurance funds and the banking system as
 a whole, not stockholders. These regulations affect the Companys lending practices,
 capital structure, investment practices, dividend policy and growth, among other
 things. Congress and federal regulatory agencies continually review banking laws,
 regulations and policies for possible changes. Changes to statutes, regulations
 or regulatory policies, including changes in interpretation or implementation of
 statutes, regulations or policies, could affect the Company in substantial and unpredictable
 ways. Such changes could subject the Company to additional costs, limit the types
 of financial services and products we may offer and/or increase the ability of non-banks
 to offer competing financial services and products, among other things. Failure
 to comply with laws, regulations or policies could result in sanctions by regulatory
 agencies, civil money penalties and/or reputation damage, which could have a material
 adverse effect on the Companys business, financial condition and results of
 operations. While NewAlliance has policies and procedures designed to prevent any
 such violations, there can be no assurance that such violations will not occur.
 See the section captioned Supervision and Regulation in Item 1. of the
 Companys most recent annual report on Form 10-K for further information.
43

NewAlliance May Not Be Able To Attract
 and Retain Skilled PeopleNewAlliances success depends, in large part,
 on its ability to attract and retain key people. Competition for the best people
 in most activities engaged in by the Company can be intense and we may not be able
 to hire people or to retain them. The unexpected loss of services of one or more
 of the Companys key personnel could have a material adverse impact on the
 business because of their skills, knowledge of the market, years of industry experience
 and the difficulty of promptly finding qualified replacement personnel.NewAlliance
 Continually Encounters Technological ChangeThe financial services
 industry is continually undergoing rapid technological change with frequent introductions
 of new technology-driven products and services. The effective use of technology
 can increase efficiency and enable financial institutions to better serve customers
 and to reduce costs. However, some new technologies needed to compete effectively
 result in incremental operating costs. The Companys future success depends,
 in part, upon its ability to address the needs of its customers by using technology
 to provide products and services that will satisfy customer demands, as well as
 to create additional efficiencies in operations. Many of the Companys competitors
 have substantially greater resources to invest in technological improvements. The
 Company may not be able to effectively implement new technology-driven products
 and services or be successful in marketing these products and services to its customers.
 Failure to successfully keep pace with technological change affecting the financial
 services industry could have a material adverse impact on the Companys business
 and, in turn, its financial condition and results of operations.
NewAlliances Controls and Procedures
 May Fail or Be CircumventedManagement regularly reviews and updates the
 Companys internal controls, disclosure controls and procedures, and corporate
 governance policies and procedures. Any system of controls, however well designed
 and operated, is based in part on certain assumptions and can provide only reasonable,
 not absolute, assurances that the objectives of the system are met. Any failure
 or circumvention of the controls and procedures or failure to comply with regulations
 related to controls and procedures could have a material adverse effect on the Companys business, results of operations and financial condition.
Customer Information May be Obtained
 and Used FraudulentlyRisk of theft of customer information resulting from
 security breaches by third parties exposes the Company to reputation risk and potential
 monetary loss. The Company has exposure to fraudulent use of our customers
 personal information resulting from its general business operations and through
 customer use of financial instruments, such as debit cards. If a breach in security
 does occur in the marketplace and the financial data of our customers is compromised,
 the Company will react as quickly as possible to protect customer accounts and limit
 potential losses to the Company.
NewAlliances Stock Price Can be
 Volatile.NewAlliances stock price can fluctuate widely in response
 to a variety of factors including:

actual or
 anticipated variations in quarterly operating results;
recommendations
 by securities analysts;
new technology
 used, or services offered, by competitors;
significant
 acquisitions or business combinations, strategic partnerships, joint ventures or
 capital commitments by or involving the Company or the Companys competitors;
failure to
 integrate acquisitions or realize anticipated benefits from acquisitions;
operating
 and stock price performance of other companies that investors deem comparable to
 NewAlliance;
news reports
 relating to trends, concerns and other issues in the financial services industry;
changes in
 government regulations; and
geopolitical
 conditions such as acts or threats of terrorism or military conflicts.General market fluctuations, industry factors
 and general economic and political conditions and events, such as economic slowdowns
 or recessions, interest rate changes, credit loss trends or currency fluctuations
 could also cause NewAlliances stock price to decrease regardless of the Companys operating results.
44

Item 2.Unregistered Sales of
 Equity Securities and Use of Proceeds(a)  None.(b)  Not applicable.
(c)  The following table sets forth information
 about the Companys stock repurchases for the three months ended June 30, 2008.
Issuer Purchases of Equity Securities

|                 |     | (a) Total Number of SharesPurchased | (b) AveragePrice Paid per Share (includescommission)   | (c) Total Number of SharesPurchased as Part ofPublicly Announced Plans or Programs | (d) Maximum Number (orApproximate Dollar Value) ofShares that may Yet BePurchased
 Under the Plans orPrograms
|---------------- | --- | ----------------------------------- | ------------------------------------------------------ | ---------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------
|Period           |     |                                     |                                                        |                                                                                    |                                                                                                              
|April 1-30, 2008 |     | 0                                   | $             
                          
           - | 0                                                                                  | 4,709,000 shares                                                                                             
|May 1-31,
 2008  |     | 115,400                             | $             
                          
   12.99     | 115,400                                                                            | 4,593,600
 shares                                                                                            
|June 1-30,
 2008 | (1) | 519,933                             | $             
                          
   12.68     | 519,720                                                                            | 4,073,880
 shares                                                                                            
|Total            |     | 635,333                             | $             
                          
   12.74     | 635,120                                                                            |                                                                                                              

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


|(1) | Includes 213
 shares which represent common stock withheld by the Company to satisfy tax withholding
 requirements on the vesting of restricted shares under the Companys 2005 Long-Term
 Compensation Plan.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Item 3.Defaults Upon Senior SecuritiesNone.Item 4.Submission of Matters to a Vote
 of Security HoldersNone.Item 5.Other InformationNone.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.                                                                                                                                                                                                                             
|4.1     |  | See Exhibit
 3.1, Amended and Restated Certificate of Incorporation and Exhibit 3.2, Bylaws of
 NewAlliance Bancshares, Inc.                                                                                                                                                             
|10.1    |  | NewAlliance
 Bank Deferred Compensation Plan. Incorporated herein by reference is Exhibit 10.2
 filed with the Registrants Registration Statement on Form S-1, Registration
 No. 333-109266, filed September 30, 2003.                                                                  
|10.2    |  | Fourth Amendment
 to NewAlliance Bank Supplemental Executive Retirement Plan. Incorporated herein
 by reference is Exhibit 10.3.2 filed with Pre-Effective Amendment No. 1 to the Registrants Registration Statement on Form S-1, Registration No. 333-109266, filed December
 12, 2003.
|10.2.1  |  | NewAlliance
 Bank 2004 Supplemental Executive Retirement Plan. Incorporated herein by reference
 is Exhibit 10.3.3 filed with Pre-Effective Amendment No. 1 to the Registrants
 Registration Statement on Form S-1, Registration No. 333-109266, filed December
 12, 2003.              

45

---

|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
 Current Report on Form 8-K, filed October 1, 2007.                                                    
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 Current Report
 on Form 8-K, filed October 1, 2007.                                                                  
|10.5    |  | NewAlliance
 Bank Executive Incentive Plan approved by shareholders on April 17, 2008, as amended
 (filed herewith).                                                                                                                                                                      
|10.6    |  | Employee 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 September 25, 2007. Incorporated herein by reference
 is Exhibit 10.7.1 filed with the Companys Current Report on Form 8-K, filed
 October 1, 2007.  
|10.7.2  |  | Amended and
 Restated Employment Agreement among NewAlliance Bancshares, Inc., NewAlliance Bank
 and Merrill B. Blanksteen, effective September 25, 2007. Incorporated herein by
 reference is Exhibit 10.7.2 filed with the Companys Current Report on Form
 8-K, filed October 1, 2007.
|10.7.3  |  | Amended and
 Restated Employment Agreement among NewAlliance Bancshares, Inc., NewAlliance Bank
 and Gail E.D. Brathwaite, effective September 25, 2007. Incorporated herein by reference
 is Exhibit 10.7.3 filed with the Companys Current Report on Form 8-K, filed
 October 1, 2007. 
|10.7.4  |  | Intentionally
 omitted.                                                                                                                                                                                                                                                                   
|10.7.5  |  | Amended and
 Restated Employment Agreement between NewAlliance Bank and Diane L. Wishnafski,
 effective September 25, 2007. Incorporated herein by reference is Exhibit 10.7.5
 filed with the Companys Quarterly report on Form 10-Q, filed November 8, 2007.                           
|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
 September 25, 2007. Incorporated herein by reference is Exhibit 10.7.8 filed with
 the Companys Current Report on Form 8-K, filed October 1, 2007.                                 
|10.7.9  |  | Employment
 Agreement between NewAlliance Bank and Paul A. McCraven, effective September 25,
 2007. Incorporated herein by reference is Exhibit 10.7.9 filed with the Companys Current Report on Form 8-K, filed October 1, 2007.                                                        
|10.7.10 |  | Amended and
 Restated Employment Agreement between NewAlliance Bank and Koon-Ping Chan, effective
 September 25, 2007. Incorporated herein by reference is Exhibit 10.7.10 filed with
 the Companys Current Report on Form 8-K, filed October 1, 2007.                                   
|10.8.1  |  | Form of Stock
 Option Agreement (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 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, 2005.                                                                            
|10.9.1  |  | Form of Restricted
 Stock Award Agreement (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 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   |  | Amendment
 Number One to the New Haven Savings Bank/NewAlliance Bank 2004 Supplemental Executive
 Retirement Plan. Incorporated herein by reference is Exhibit 10.11 filed with the
 Companys Annual Report on Form 10-K, filed March 1, 2007.                                           
|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.                                                                            
|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.                                                                                            
|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 Merrill B. Blanksteen 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 Merrill B. Blanksteen pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
 to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                                                       

46

---

SIGNATURES

| | Pursuant to
 the requirements of the Securities Exchange Act of 1934, the registrant has duly
 caused this report to be signed on its behalf by the undersigned thereunto duly
 authorized.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                            
| | NewAlliance
 Bancshares, Inc.                                                                                                                                                              

| | By:   |  | /s/ Merrill
 B. Blanksteen                                      
| | ----- |  | ----------------------------------------------------------------
| |       |  |                                                                 
| |       |  | Merrill B.
 Blanksteen                                          
| |       |  | Executive
 Vice President, Chief Financial Officer and Treasurer
| |       |  | (principal
 financial officer)                                  
| |       |  |                                                                 
| |       |  |                                                                 
| | Date: |  | July 28, 2008                                                   

47