Strong Business Momentum Including $290 Million in Mortgage Originations

NewAlliance Bancshares, Inc. (NYSE: NAL), the holding company for NewAlliance Bank, today announced net income of $11.6 million or $0.12 per diluted share for the first quarter of 2009, compared to $9.6 million or $0.10 per diluted share for the fourth quarter of 2008 and $12.9 million or $0.13 per diluted share for the first quarter of 2008.

Peyton R. Patterson, Chairman, President and Chief Executive Officer, stated, “In what was a very challenging environment for the industry overall, we are extremely pleased with our operating results which indicate that our core business continues to perform at a high level. The increase in earnings, the growth in core deposits and originated loans combined with strong asset quality indicators and exceptional capital levels demonstrate the strength of the NewAlliance franchise.”

Ms. Patterson added, “As we continue throughout 2009 we will augment the strength of NewAlliance by focusing on the key business priorities that I outlined at the beginning of the year, including, strengthening balance sheet profitability, improving core banking fee income, maintaining superior credit quality and improving our operating efficiency.”

The Company also announced that its Board of Directors voted to pay a quarterly dividend of $0.07 per share on May 19, 2009 to shareholders of record on May 8, 2009. This will be the Company’s 20^th consecutive quarterly dividend payment.

Loan and Deposit Growth

“We experienced strong momentum in the quarter in our core banking business activities. Our commitment to serving creditworthy consumer, business and commercial customers has continued throughout the economic downturn. Our loan demand remains robust as we continue to fund those customers that have solid credit and strong fundamentals in their business. Core deposits have also continued to grow due in part to new product offerings, enhanced marketing efforts and a trend of customers placing their deposits in a bank they trust,” said Ms. Patterson. Highlights include:

• $450.0 million in mortgage applications, including $137.0 million in the pipeline from over 1,400 homeowners in the first quarter, up 125.0% from the prior quarter and 47.0% over the prior year quarter;
• Funded approximately $290.0 million in mortgage loans, helping nearly 900 homeowners either purchase a home or lower their payments through refinancing;
• Gains recorded from mortgage banking activity and loan sales increased $1.8 million on a linked quarter basis and prior year quarter;
• Core deposits at quarter end increased $309.9 million on a linked quarter basis and $471.8 million over the prior year quarter;
• Total deposits increased $214.3 million on a linked quarter basis and $404.5 million over the prior year quarter;
• Deposit costs were reduced $7.2 million from the prior year quarter while average balances of interest-bearing core deposits increased $425.7 million. On a linked quarter basis, deposit costs decreased $2.4 million as the average balance of interest-bearing core deposits increased $159.4 million and total average deposits increased $92.6 million.

Capital Management

The tangible common equity ratio was 10.10% and total shareholder’s equity was $1.39 billion at March 31, 2009. The Company has maintained an excellent Tier 1 leverage ratio of 11.02%. As in prior quarters, the Company’s Tier 1 leverage ratio at March 31, 2009 was more than double the 5% benchmark considered to be “well capitalized”. The Company repurchased approximately 164,000 shares during the quarter at an average price of $10.48 and paid a cash dividend of $0.07 during the quarter.

The Company continues to be well-capitalized and in strong financial health with no need for Federal assistance. Accordingly, the Company has not applied for funds from the TARP program. Commenting on the Company’s capital position, Ms. Patterson said “We look forward to prudently leveraging our strong capital base to maximize shareholder value without compromising our community bank approach. We are actively seeking potential opportunities to enhance shareholder value that will be accretive to earnings. We also have the flexibility to capitalize on unexpected opportunities created by market disruptions due to our strong capital position, history of credit discipline and profitability.”

Credit Quality

Asset quality trends and reserve levels remain strong even as the Company experiences the effects of the deterioration in the overall economy. Nonperforming loans to total loans were 1.02% as compared to 0.77% in the prior quarter and nonperforming assets to total assets were 0.61% as compared to 0.49% for the same period. Net charge-offs experienced a slight increase of approximately $300,000 to $3.4 million. Total delinquencies are 1.33% at quarter end, up from 1.22% from the prior quarter. Nonperforming loans increased $11.8 million to $50.1 million on a linked quarter basis, primarily in the residential real estate portfolio, as the economic crisis has persisted. The allowance for loan losses to total loans increased from 1.01% to 1.03% at March 31, 2009 on a linked quarter basis after recording a $4.1 million provision during the quarter, similar to the provision recorded in each of the prior three quarters.

“In the face of continued national economic weakness during the quarter asset quality remained a hallmark of the Company. Our proactive efforts to manage credit quality in this stressed economic environment continue to be a priority and, while our asset quality is trending slightly downward, our overall asset quality continues to be excellent and a distinguishing factor of the Bank’s performance. Where homeowners are experiencing financial difficulties, our efforts continue to be focused on assisting them to remain in their homes,” said Don Chaffee, Executive Vice President and Chief Credit Officer.

Net Interest Income

Net interest income increased slightly by $190,000 on a linked quarter basis despite the downward pricing of our loan portfolio as a result of the Federal Reserve rate cuts. The net interest margin remained stable at 2.58% as compared to 2.59% in the prior quarter which we consider to be quite good as the current quarter margin does not include dividends from the Federal Home Loan Bank of Boston (“FHLB”). The FHLB eliminated their quarterly dividend in the current quarter and for the foreseeable future. Based on fourth quarter 2008 results we estimate the loss of the FHLB dividend to approximate 4 basis points to the margin.

Net interest income benefited from an increase in interest-earning assets of $64.1 million and a decrease in the cost of interest-bearing liabilities of $4.2 million. The decline in the yield on interest-earning assets of 26 basis points was mitigated by the drop in the yield on interest-bearing liabilities of 30 basis points. The decrease in the yield on liabilities was mainly due to our deposit mix improving as higher cost time deposits were replaced with lower cost core deposits coupled with a decrease in the average balance and yield of FHLB borrowings. We were able to reduce borrowings due to the increase in the balances of our core deposits.

Non-Interest Income

Non-interest income for the quarter was $2.0 million higher than fourth quarter levels as investment management, brokerage and insurance fees and gains on the sale of loans and investments outpaced the declines experienced in banking service charges and write-downs associated with mortgage servicing rights ($475,000) and investment in limited partnerships ($748,000), which impacted loan and servicing income, and other income, respectively.

Non-Interest Expense

Non-interest expense decreased on a linked quarter basis by $1.3 million or 3.0%. Our stringent expense controls combined with excellent revenues helped us achieve an improved efficiency ratio for the quarter ended March 31, 2009 of 65.7% and a record low expenses to average assets ratio of 1.91%. These ratios were attained despite a seven basis point increase in the assessment rate by the FDIC which contributed an additional $770,000 in deposit insurance premium expense during the quarter. FDIC insurance expense increases have been approved for the remaining three quarters of 2009. “Even with this scheduled increase we expect to keep total 2009 expenses flat as compared to 2008 levels by continuing our expense control philosophy,” stated Ms. Patterson.

At March 31, 2009, NewAlliance Bancshares, the parent company of NewAlliance Bank, had $8.50 billion in assets and operated 89 banking offices in Connecticut and Massachusetts.

NewAlliance Bank provides a full range of consumer and commercial banking products and services, trust services and investment and insurance products and services. The Bank’s website is at www.newalliancebank.com. Shareholders are particularly urged to monitor the Investor Relations section of the Company’s website.

NewAlliance will hold a conference call on first quarter earnings at 10:00 a.m. Eastern Time on Wednesday, April 29, 2009. The call is being webcast and will be available at the Investor Relations section of the Company’s website at www.newalliancebank.com. Individuals can dial in to the call at 1-800-860-2442. The international dial-in number is 1-412-858-4600.

A replay of the webcast and call will be available after 12 Noon on April 29 through May 13, 2009. To access the replay, dial 1-877-344-7529. For international access, dial 1-412-317-0088. The passcode for either replay number is 429397.

Note: In discussing financial results, management may refer to certain non-GAAP (Generally Accepted Accounting Principles) measures. The Company’s management believes these non-GAAP measurements, which generally exclude the effects of charges and expenses related to the consummation of mergers and acquisitions and costs related to the integration of merged entities, as well as other unusual events, are essential to a proper understanding of the operating results of the Company’s core business largely because the merger and acquisition related items and their impact on the Company’s performance are difficult to predict. These non-GAAP measurements are not a substitute for operating results determined in accordance with GAAP nor do they necessarily conform to non-GAAP performance measures that may be presented by other companies. A reconciliation of GAAP and non-GAAP information is included in this release.

Statements in this news release, if any, concerning future results, performance, expectations or intentions are forward-looking statements. Actual results, performance or developments may differ materially from forward-looking statements as a result of known or unknown risks, uncertainties and other factors, including those identified from time to time in the Company’s filings with the Securities and Exchange Commission, press releases and other communications. Actual results also may differ based on the Company’s ability to successfully maintain and integrate customers from acquisitions.

The Company intends any forward-looking statements to be covered by the Litigation Reform Act of 1995 and is including this statement for purposes of said safe harbor provisions. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this news release. Except as required by applicable law or regulation, the Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances that occur after the date as of which such statements are made.

The Company’s capital strategy includes deployment of excess capital through acquisitions. Past and future acquisitions are expected to continue to impact the Company’s results in future periods.

NewAlliance Bank
Merrill B. Blanksteen, 203-789-2639
Executive Vice President