Oct. 27, 2009 (Business Wire) -- NewAlliance Bancshares, Inc. (NYSE: NAL), the holding company for NewAlliance Bank, today announced net income for the quarter of $12.6 million or $0.13 per diluted share. This compares to $10.1 million or $0.10 per diluted share for the second quarter of 2009, a 24.9% increase, and $10.9 million or $0.11 per diluted share for the third quarter of 2008, a 15.4% increase. Excluding the FDIC special assessment of $2.6 million after taxes, net income was $12.7 million or $0.13 per diluted share for the second quarter of 2009.

Revenues continued to increase for the third consecutive quarter and credit quality remained stable. Total revenue grew by 4.6% from $65.2 million to $68.2 million on a linked quarter basis and 11.0% from $61.5 million as compared to the prior year quarter. Total delinquencies are 1.45% at quarter end, down from 1.51% from the prior quarter. Nonperforming loans to total loans were 1.02% as compared to 1.13% in the prior quarter and nonperforming assets to total assets were 0.61% as compared to 0.65% for the same period.

“Our strong earnings performance in the third quarter was the result of excellent business momentum, sustained revenue growth and improved credit quality. This reaffirms the soundness of our operating strategy and the value we offer in the marketplace,” stated Peyton R. Patterson, Chairman, President and Chief Executive Officer.

Financial Highlights:

• Net interest income before provision increased by 3.8%, or $1.8 million, to $51.8 million compared with $49.9 million for the linked quarter and by 7.7%, or $3.7 million, compared with $48.1 million for the prior year quarter.
• The net interest margin continued to trend upward and increased to 2.71% compared to 2.63% on a linked quarter basis and 2.63% compared with the prior year quarter.
• Gains recorded from mortgage banking activity and loan sales remain strong at $1.3 million for the third quarter, down $213,000 from the linked quarter and up $840,000 compared to the prior year quarter.
• Total Deposits increased $111.8 million from the linked quarter and $567.4 million from the prior year quarter mainly due to growth in core deposits which increased $87.1 million from the linked quarter and $832.8 million from the prior year quarter.
• Deposit costs were reduced by $2.3 million on a linked quarter basis while average balances of interest-bearing core deposits increased $219.6 million. Deposit costs were reduced by $5.7 million compared to the prior year quarter while average balances of interest-bearing core deposits increased by $775.4 million.
• Total non-interest income increased $1.2 million on the linked quarter and $3.0 million from the prior year quarter.
• Loan origination levels remained robust, with loan originations of $358.7 million for the quarter as compared to $403.5 million on a linked quarter basis and $82.5 million for the third quarter of 2008.
• Commercial mortgages and commercial loan originations increased from $39.0 million to $92.8 million, or 138.0% growth, on a linked quarter basis.
• Nonperforming asset levels improved as the balance decreased by 7.3% on a linked quarter basis to a total of $51.8 million.
• The efficiency ratio for the quarter was 63.61% compared to the prior quarter of 63.42% and compared to the prior year quarter of 66.90%.
• The Board of Directors voted to pay a quarterly dividend of $0.07 per share on October 27, 2009 to shareholders of record on November 6, 2009 and payable on November 17, 2009. This will be the Company’s 22nd consecutive quarterly dividend payment.

Net Interest Income

Net interest income before provision for loan loss increased by $1.8 million on a linked quarter basis and $3.7 million as compared to the prior year quarter demonstrating strong revenue momentum as it represents the third consecutive quarterly increase. The net interest margin increased to 2.71% compared to 2.63% on a linked quarter basis. The increase in net interest income and the net interest margin is directly related to the reduction in costs associated with borrowings and deposits. The cost of deposits has continued to decrease over the last three quarters and has decreased by over 23% compared to the prior year quarter while the average balance of interest bearing core deposits has increased by $775.4 million from the prior year quarter.

“We are extremely pleased with the expansion in our net interest margin as it is the highest that it has been in three years. The increase in our net interest margin, coupled with robust balance sheet growth, reflects our pricing discipline and competitive strength,” Ms. Patterson stated.

Non-Interest Income and Non-Interest Expense

Non-interest income for the quarter increased $1.2 million on a linked quarter basis and increased $3.0 million compared to the prior year quarter. In the second quarter of 2009, an impairment charge of $626,000 was recorded and thus the increase in non-interest income on a linked quarter basis, excluding this charge, was $532,000. The increases for the quarter and as compared to the prior year quarter are primarily due to depositor service charges. In addition, wealth management fees showed a significant improvement on a linked quarter basis.

Non-interest expense decreased $2.2 million or 4.9% on a linked quarter basis. Included in non-interest expense for the prior quarter is the FDIC special assessment of approximately $4.0 million, before tax. Absent this item, non-interest expense for the current quarter increased from the prior quarter by $1.8 million and primarily relates to an increase in salary and marketing expenditures. NewAlliance has made significant investments over the past two quarters in the franchise via personnel, marketing and consulting initiatives. These initiatives are having a positive impact on core account generation including business checking, consumer checking and first mortgage originations. We expect 2009 expense levels to be in line with the 2008 levels.

Credit Quality

"Our experienced team continues to exhibit superior performance in managing the credit quality of our loan portfolio as evidenced by positive asset quality indicators, such as the stabilization of the nonperforming loan levels. With the high unemployment rate, there will continue to be pressure on asset quality but we expect our performance to remain among the best in the industry,” said Don Chaffee, Interim Chief Financial Officer, Executive Vice President and Chief Credit Officer.

Key Developments:

• Nonperforming loans to total loans improved from 1.13% to 1.02% on a linked quarter basis and nonperforming assets to total assets also improved from 0.65% to 0.61% for the same period.
• Nonperforming loans decreased $5.8 million to $49.1 million on a linked quarter basis.
• Nonperforming assets decreased on a quarterly basis by $4.1 million, or 7.3%, in the third quarter compared to an increase of $4.4 million, or 8.5%, in the second quarter of 2009.
• The provision for loan losses increased by $433,000 on a linked quarter basis and $1.2 million compared to the prior year quarter.
• NewAlliance experienced an increase in net charge-offs of $1.1 million to $5.2 million on a linked quarter basis. Although the Company’s net charge-offs increased from the prior quarter, the charge-off levels remain low relative to peer levels.

• Total delinquencies are 1.45% at quarter end, down from 1.51% from the prior quarter.
• The allowance for loan losses to total loans increased to 1.08% from 1.06% on a linked quarter basis.

Capital Management

The tangible common equity ratio and total risk-based capital ratio was 10.82% and 21.1%, respectively, and total shareholder’s equity was $1.43 billion at September 30, 2009. The Company's Tier 1 leverage capital ratio was 10.97% and is more than double the 5% regulatory benchmark that is considered ‘well-capitalized’ for banks. “Maintaining a solid capital position to strengthen the Company is just as important as maintaining good asset quality and keeping a firm hand on sound underwriting,” stated Ms. Patterson.

Today, the Board of Directors authorized the filing of a shelf registration statement with the Securities and Exchange Commission. This is a common step for banks to take to position themselves to raise capital quickly should an appropriate opportunity arise.

At September 30, 2009, NewAlliance Bancshares, the parent company of NewAlliance Bank, had $8.54 billion in assets and operated 87 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 encouraged to monitor the Investor Relations section of the Company’s website.

NewAlliance will hold a conference call on third quarter earnings at 10:00 a.m. Eastern Time on Wednesday, October 28, 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 noon on October 28th through November 11, 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 434042.

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 are essential to a proper understanding of the operating results of the Company’s core business. 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. Future acquisitions are expected to impact the Company’s results in future periods.