Statements of Net Assets Available for Benefits

Statements of Changes in Net Assets Available for Benefits

Notes to Financial Statements

Schedule H, Line 4(i) - Schedule of Assets (Held at End of Year)

Total assets

Total liabilities

Interest and dividends

Interest on loans to participants

Net (depreciation) appreciation in fair value of investments

Total investment income

Participants

Rollovers

Total contributions

Total additions

Distributions

Administrative and other expenses

Total deductions

Beginning of year

End of year

The following description of The NewAlliance Bank 401(k) Plan (the “Plan”) provides only general provisions of the 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 a defined contribution plan covering eligible employees of NewAlliance Bank (the “Bank”). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).

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 106 million shares of common stock at $10 per share. In connection with the conversion, the Bank registered 1,000,000 shares which were available for purchase by participants using employee contributions through the NewAlliance Bancshares, Inc. Restricted Unitized Stock Fund. Participants were unable to sell these shares for a period of one year, at which time the restricted units were transferred to the NewAlliance Bancshares, Inc. Unitized Stock Fund.

Effective April 1, 2004, the Plan name was changed to The NewAlliance Bank 401(k) Plan. Also effective April 1, 2004, the Bank’s matching contributions and any discretionary contributions are made to The NewAlliance Bancshares, Inc. Employee Stock Ownership Plan (“ESOP”) and are no longer made to the Plan.

The Compensation Committee of the Bank is the Plan Administrator. The Plan’s trustee and custodian of Plan assets is Wachovia Bank, N.A., who is responsible for all investment assets and the execution of all investment transactions. USI Consulting Group, Inc. serves as the record keeper for the Plan.

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 the first day of any month following the month in which they meet eligibility requirements.

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. Prior to April 1, 2004, the Bank made matching and discretionary contributions to the Plan in the form of cash. Effective April 1, 2004, matching and discretionary contributions ceased to be made to the Plan and instead are made to the ESOP in the form of common shares of NewAlliance Bancshares, Inc (the “Company”). The annual uniform matching contribution made to the ESOP is equal to 50% of a participant’s pre-tax contribution to the Plan, with a maximum of 3% of such participant’s total annual compensation.

Each participant account is credited with participant contributions and Plan earnings based on allocations as defined under the Plan. 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 as discussed in Note 2.

In accordance with the Pension Protection Act of 2006, Plan participants are allowed to diversify their ESOP Plan assets by transferring those assets into their individual 401(k) accounts utilizing the investment options available in the Plan. For the year ended December 31, 2007, diversification transfers into the Plan amounted to $17,901. There were none for the year ended December 31, 2006.

Under the Plan, a participant is fully vested at all times with respect to participant contributions. Matching and discretionary contributions made through the 401(k) plan ceased on April 1, 2004. Participants participating in the Plan prior to this date become 25% vested after 2 years, 50% vested after 3 years, 75% vested after 4 years, and 100% vested after 5 years. Discretionary contributions made prior to April 1, 2004 were considered fully vested for all participating participants. Upon death or permanent disability while employed at the Bank, a participant becomes 100% vested regardless of years of service.

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.

Upon termination of service, participants with balances less than $5,000 receive lump sum distributions. Participants with balances of $1,000 to $5,000 are notified of their account status. If they do not request a distribution or rollover, the account is automatically rolled over into an Individual Retirement Account (“IRA”) at the Plan sponsor. Participants with balances in excess of $5,000 can either continue to participate in the Plan, request a lump sum distribution, or request a rollover to a new qualified plan or an IRA. At December 31, 2007 and 2006, payments totaling $114,790 and $353,267 respectively, were due to participants who withdrew from the plan.

Forfeitures relate to matching contributions made prior to April 1, 2004, and result from participants that terminate employment prior to becoming fully vested. The forfeiture reserve balance of $26,484 and $24,945 at December 31, 2007 and 2006, respectively, is included in the Pioneer Cash Reserve Account and is available to reduce future employer contributions made to the Plan, in accordance with the Plan document. The forfeiture reserve balance was not used in the years ended December 31, 2007 and 2006.

Participants may make an application to the Plan administrator for a maximum of two outstanding loans at any one time. Loan amounts range from a minimum of $1,000 to a maximum of $50,000.

The loans are collateralized by the participant’s vested account balance and generally bear a fixed interest rate based on the current prime interest rate as of the loan origination date. 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, which are repaid according to the provisions in the Plan document.

The Plan adopted an amendment which became effective January 1, 2006 to recognize prior hours and years of service for the former employees and current employees of Cornerstone Bank employed on or after the acquisition date of Cornerstone Bank. The Plan adopted an amendment which became effective January 1, 2007 to recognize prior hours, years of service and years of vesting service for former employees and current employees of Westbank employed on or after the acquisition date of Westbank.

The 401(k) plan of the former Trust Company of Connecticut (“TCC Plan”) was merged into the Plan effective December 31, 2005. The TCC Plan had assets of $1,296,321 at the time of the merger. The 401(k) plan of the former Cornerstone Bank (“Cornerstone Plan”) was merged into the Plan effective November 1, 2006. The Cornerstone Plan had assets of $1,187,624 at the time of the merger. At the time of merger, participants could select investment options available to the Plan as of their respective merger date. The 401(k) plan of the former Westbank (“Westbank Plan”) has not yet been merged into the Plan. It is expected that the Westbank Plan will be merged into the Plan in 2008.

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 are recorded at fair value as determined using quoted market prices. The certificate of deposit, as explained below, is stated at principal plus accrued interest. Purchases and sales of securities are recorded on a trade date basis. Interest income is recorded on the accrual basis, and dividends are recorded on the ex-dividend date. Earnings from the funds are re-invested and added to the cost basis of the funds. Participant loans are recorded at cost, which approximates fair value.

Investment options available to participants include a NewAlliance Bank Certificate of Deposit Fund, which includes the NewAlliance Certificate of Deposit and the Burnham US Government Money Market Fund, and the NewAlliance Unitized Stock Fund, both of which are related parties as discussed in Note 5. The certificate of deposit interest rate is adjusted monthly on the first day of each month. For the years ended December 31, 2007 and 2006, the average rate on the certificate of deposit was 4.91% and 5.58%, respectively.

The remaining investment options include, AIM Real Estate Fund, Excelsior Money Market Fund, Morley Stable Value Fund, Federated Intermediate Corp. Bond Inst. Svc. Fund, Oppenheimer Quest Balanced Value Fund, Franklin Templeton Conservative Target Fund, American Funds Europacific Growth Fund, Oppenheimer Main Street Opportunity Fund, Vanguard Index 500 Fund, Van Kampen Mid Cap Growth Fund, JP Morgan Small Cap Equity A Fund, and Goldman Sachs Mid Cap Value Fund. Contributions are invested through USI Securities, Inc., a related party as discussed in Note 5.

The Bank may pay all or a portion of the expenses of the Plan, but it is not required to do so. Expenses paid by the Plan consist of administrative and distribution fees. Loan processing fees are charged to participant accounts. Administrative expenses of $6,826, $20,203 and $15,984 were paid by the Bank on behalf of the Plan for the years ended December 31, 2007, 2006 and 2005, respectively.

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.

The Plan provides for various investment options which are exposed to various risks, including 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 participant account balances, the amounts reported in the statements of net assets available for benefits, and the amounts reported in the statements of changes in net assets available for benefits. The certificate of deposit held by the Plan exceeds federally insured limits. The Plan has not experienced any losses from this investment.

Prior years’ financial statements have been reclassified to conform to changes in the current financial statement presentation.

For the year ended December 31, 2007, there was net (depreciation) appreciation in the fair value of investments of $(3,766,486) related to equity investments, $102,495 related to common collective trust funds, $(402,016) related to investments in mutual funds, and $4 related to the certificate of deposit fund. For the year ended December 31, 2006, there was net appreciation in the fair value of investments of $1,600,380 related to equity investments, $107,654 related to common collective trust funds, $2,329,866 related to investments in mutual funds, and $160 related to the certificate of deposit fund.

Certain investment transactions are managed by USI Securities, Inc. USI Securities, Inc. is a related party to USI Consulting Group, Inc., the record keeper as defined by the Plan and, therefore, transactions with USI Securities, Inc. qualify as party-in-interest transactions. An investment option available in the Plan is the NewAlliance Bank Certificate of Deposit Fund, which includes a certificate of deposit issued by NewAlliance Bank, the Plan sponsor. The NewAlliance Bancshares, Inc. Unitized Stock Fund includes shares of common stock issued by NewAlliance Bancshares, Inc., the holding company of the Bank. Wachovia Bank N.A. is the trustee as defined by the Plan and, therefore, transactions with Wachovia Bank N.A. qualify as party-in-interest transactions. The Plan’s custodian invests certain funds at the Bank and administers participant directed investments in various investment options as designated by the participants. The Bank controls and manages the operation and administration of the Plan. No officers or employees of the Bank receive compensation from the Plan. Participant loans also qualify as party-in-interest transactions.

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.

The Bank may terminate the Plan at any time, subject to the provisions of ERISA. In the event of Plan termination, participants become fully vested and are entitled to receive their respective shares of the Plan’s net assets after payment of all liabilities and expenses. As of December 31, 2007 the Plan had not expressed an intention to terminate and the Bank expects to continue the Plan indefinitely.