Additions to net assets attributable to:

Investment Income

Interest and dividend income

Interest income on loans to participants

Net appreciation in fair value of investments

Total investment income

Contributions:

Participants

Employer

Rollovers

Merged plans

Total contributions

Total additions

Deductions from net assets attributable to:

Distributions

Administrative and other expenses

Total deductions

Net increase

Net assets available for benefits

Beginning of year

End of Year

The NewAlliance Bank 401(k) Plan (the “Plan”) is a defined contribution plan covering eligible employees of NewAlliance Bank (the “Bank”). Below are the general provisions of the Plan. Plan participants should refer to the Plan document or the summary plan description for a more complete description of the Plan’s provisions. The Plan is subject to the provisions of ERISA.

General
On April 1, 2004, the Plan’s sponsor, NewAlliance Bank, converted from a state-chartered mutual savings bank to a state-chartered stock savings bank and issued approximately 10.6 million shares of common stock at $10 per share. In connection with the conversion, the Bank registered 1,000,000 shares which may be purchased with employee contributions pursuant to the Plan document provisions.

Effective April 1, 2004, the Plan name was changed to The NewAlliance Bank 401(k) Plan from the New Haven Savings Bank Profit Sharing Plan With Cash Or Deferred Arrangement. Also effective April 1, 2004, the matching contributions are made by the Employee Stock Ownership Plan (“ESOP”) and no longer made by the Bank to the Plan.

Overall
The Compensation Committee of the Bank is the Plan administrator, and the Plan’s trustee is Riggs Bank, N.A. (The New Haven Savings Bank prior to April 1, 2003). The Bank has appointed Riggs Bank, N.A. as the custodian of the Plan’s assets. USI Consulting Group serves as the record keeper for the Plan. The custodian is responsible for all investment assets and the execution of all investment transactions.

Eligibility
An employee who has been employed by the Bank for three months and is at least 20-1/2 years old is eligible to participate in the Plan. A participant may elect to authorize a payroll deduction of not more than 100% of their compensation, as defined, up to the Internal Revenue Service (“IRS”) defined maximum dollar amount, as an elective salary deferral contribution to their account in the Plan. Participants may enter the Plan on a quarterly basis after meeting eligibility requirements.

Contributions
An employee who has been employed by the Bank for one year and is at least 20-1/2 years old is eligible to receive matching contributions beginning the quarter after the one year anniversary of service. Each Plan year, the ESOP makes a uniform matching contribution to the Plan in an amount equal to 50% of a participant’s pre-tax contribution up to 3% of such participant’s total annual compensation. Until April 1, 2004, the Bank made the matching contribution in the form of cash. Beginning April 1, 2004, the matching contribution is made by the ESOP in the form of shares of NewAlliance Bancshares, Inc (the “Company”). In addition to such matching contribution, the Bank may make a discretionary profit sharing contribution, subject to approval by the Board of Directors, solely from current or accumulated income of the Bank. If, for a given year, there is no current or accumulated income, no contributions may be made to the Plan. For the nine-month period December 31, 2003, the Bank made a discretionary contribution in an amount equal to 1.5% of each participant’s base salary, and for the twelve-month period March 31, 2003 the Bank made a discretionary contribution in an amount equal to 2.00% of each participants’ base salary as defined by the Plan, to the Plan. There was no discretionary contribution made for the year ended December 31, 2004. No additional discretionary contributions are anticipated to be made.

The NewAlliance Bank 401(k) Plan
Notes to Financial Statements

Participant Accounts
Each participant’s account is credited with the participant’s contribution and allocation of the ESOP’s contributions and Plan earnings. Allocations are based on participant earnings or account balances, as defined. A participant is entitled to the benefit that can be provided from the participant’s vested account balance. Participants may direct the investment of their accounts into one of several investment options described in Note 2.

Vesting
Under the Plan, a participant is fully vested at all times with respect to participant contributions. A participant becomes 25% vested after 2 years in Bank matching contributions, 50% after 3 years, 75% after 4 years and 100% after 5 years. Discretionary contributions that have been made shall be fully vested, unless otherwise determined by the Board of Directors. However, upon death or permanent disability while employed at the Bank, a participant becomes 100% vested regardless of years of service.

Payment of Benefits
A participant may apply to the Plan to withdraw amounts from their account if they are over 59-1/2 years old and (i) their account has accumulated for at least 2 years or (ii) they have been a participant in the Plan for at least 5 years. In addition, a participant may apply for a withdrawal in the event of hardship, as defined in the Plan. All hardship withdrawals are subject to the approval of the Plan administrator and must meet the hardship requirements as defined by the IRS.

On termination of service, if a participant’s vested account balance is less than $5,000, they will receive a lump sum payment equal to the vested portion of their account. If a participant’s vested account balance is greater than $5,000, they may elect to receive the value of the vested portion of their account in a lump sum payment or installment payments on a monthly, quarterly, semi-annual or annual basis.

Forfeitures
Forfeitures result from participants that terminate employment prior to being fully vested. The forfeiture reserve balance of $14,951 and $4,964 at December 31, 2004 and 2003, respectively, is included in the Pioneer Cash Reserve Account and is available to reduce the Bank’s total contributions to the Plan, in accordance with the Plan document. Bank contributions were offset by $5,650 from forfeited non-vested accounts during the year ended December 31, 2004, $8,300 during the nine-month period ended December 31, 2003 and $472 during the year ended March 31, 2003.

Loans to Participants
Participants may make an application to the Plan administrator for a loan. The amount of the loan must be made in accordance with the Plan document. The loans are collateralized by the participant’s vested account balance. The interest rate for these loans is fixed at the Bank’s prime rate at the time of the loan. Principal and interest is paid through monthly payroll deductions for a maximum term of five years, except for loans made for the acquisition of a principal residence.

Plan Termination
Although the Bank expects to continue the Plan and the contributions to the Plan indefinitely, the Bank may, by action of its Board of Directors, terminate the Plan at any time, subject to the provisions of ERISA. In the event of termination and after payment of all liabilities and expenses, Plan participants are entitled to receive their respective shares of the Plan’s net assets.

Change of Fiscal Year
The Plan has changed its fiscal year end to December 31 from March 31 effective December 31, 2003.

Merge of Plans
The Plans of the former Savings Bank of Manchester (“SBM Plan”) and Tolland Bank (“Tolland Plan”) have been merged into the Plan effective December 31, 2004. At the time of the merger, the assets of the SBM Plan were $16,708,110 and the assets of the Tolland Plan were $2,487,832. The participants of the two merged plans may select investment options as indicated under ’Investments’ in note 2.

Summary of Significant Accounting Policies

Basis of Accounting
The accompanying financial statements and supplemental schedule of the Plan have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America and with the applicable accounting requirements of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 (“ERISA”).

Investments
Investments are recorded at fair value as determined using quoted market prices and for the certificate of deposit, at principal plus accrued interest. Purchases and sales of securities are recorded on a trade date basis. Dividends are recorded on the ex-dividend date. Participant loans are recorded at cost, which approximates fair value.

Investment options available to participants include a NewAlliance Bank certificate of deposit, (which includes the Burham Money Market Account), a Pioneer Cash Reserve Account, ten mutual funds and NewAlliance Bancshares, Inc. stock. The certificate of deposit interest rate is based on the one (1) month, Jumbo Certificate of Deposit Rate, for the $1 million to $5 million tier. The rate is adjusted monthly on the first day of each month.

For the year ended December 31, 2004, the average rate on the certificate of deposit was 1.37%.

One mutual fund option is invested with AIM International Funds, Inc. through USI Securities, Inc. The remaining nine funds include: Excelsior Money Fund, Morley Capital Stable Value II, Federated Intermediate Income Trust, Oppenheimer Quest Balances Value Fund, Franklin Templeton Conservative Target, American Funds Europacific Growth, Oppenheimer Main Street Opportunity, Vanguard Index 500 and are invested through USI Securities, Inc. In addition, investment in common stock of the Company is an available option.

Administrative Expenses
The Bank may pay all or a portion of the expenses of the Plan, but it is not required to do so. Administrative expenses of $75,977 were paid by the Bank on behalf of the Plan for the year ended December 31, 2004. Expenses paid by the Plan consist of loan origination fees charged to participant accounts.

Benefit Payment
Benefit payments are recorded when paid.

Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

Risks and Uncertainties
The Plan provides for various investment options in mutual funds, a money market account, a certificate of deposit and NewAlliance Bancshares, Inc. common stock. Investment securities are exposed to various risks, such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits.

Concentration of Investments

As of December 31, 2004 and 2003, the fair values of individual investments that represented 5% or more of the Plan’s total net assets were:

Certificate of Deposit with NewAlliance Bank

SEI Mutual Fund S&P Index Portfolio

Oppenheimer Quest Balanced Value Fund

Van Kampen Aggressive Growth Fund

Vanguard Index 500

NewAlliance Bancshares, Inc. common stock

NewAlliance Restricted Unitized Stock

For the year ended December 31, 2004, net appreciation in the fair value of investments of $2,099,592 related to equity investments and $876,280 to investments in mutual funds.

The NewAlliance Bank 401(k) Plan
Notes to Financial Statements

Transactions with Related Parties

Certain plan investments are shares of mutual funds managed by USI Securities, Inc. USI Securities, Inc. is the recordkeeper as defined by the Plan and, therefore, transactions with USI Securities, Inc. qualify as party-in-interest transactions. Among the investment options available to the Plan is the Certificate of Deposit issued by NewAlliance Bank and common stock of NewAlliance Bancshares, Inc., the holding company of the Bank, the Plan sponsor. Riggs Bank, N.A. is the trustee as defined by the Plan and, therefore, transactions with Riggs Bank, N.A. qualify as party-in-interest transactions. The Plan’s custodian invests funds at NewAlliance Bank and administers participant directed investments in various investment options as designated by the Plan’s participants. Personnel and facilities of the Bank have been used to perform administrative functions for the Plan at no charge to the Plan. Participant loans also qualify as party-in-interest transactions.

Federal Income Tax Status

The Plan obtained its latest determination letter, dated October 17, 2002, in which the IRS stated that the Plan, as designed, was in compliance with the applicable requirements of the Internal Revenue Code (“IRC”) through amendments dated February 26, 2002. The Plan has been amended since February 26, 2002, however, the Plan administrator believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC. Therefore, no provision for income taxes has been made.

Certificate of deposit: interest rate 2.00%, no stated marturity, rate adjusted monthly

Excelsior Money Market Fund

Morley Capital Stable Value II

Pioneer Cash Reserve

Burham Money Market

Federated Intermediate Income Trust

Oppenheimer Quest Balanced Value Fund

Franklin Templeton Conservative Target

AIM Real Estate Fund

American Funds Europacific Growth Fund

Pioneer Small Cap

Oppenheimer Main Street Opportunity Fund

Vanguard Index 500

NewAlliance Bancshares, Inc. common stock

NewAlliance Bancshare Restricted Unitized Stock

Participant loans, various terms collateralized by vested account balance, interest ranging from 4.00% to 9.50%

Total