SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

|x| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934.

    For the fiscal year ended June 30, 2001

    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
    ACT OF 1934

     For the transition period from ______ to _______.

                        Commission file number: 000-29655

                           Alamogordo Financial Corp.
                 (Name of Small Business Issuer in Its Charter)

             Federal                                    74-281948
 (State or Other Jurisdiction of         (I.R.S. Employer Identification Number)
 Incorporation or Organization)

         500 10th Street
     Alamogordo, New Mexico                               88310
 (Address of Principal Executive                       (Zip Code)
            Offices)

Securities registered under Section 12(b) of the Exchange Act: None


Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock par value $.10 per share
                                (Title of Class)

                                 (505) 437-9334
                (Issuer's Telephone Number, Including Area Code)

        Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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.

Yes   X                 No

        Check if there is no disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.  |__|

        The Issuer's revenues for the fiscal year ended June 30, 2001 were $10
million.

        The aggregate market value of the voting stock held by nonaffiliates of
the Registrant, computed by reference to the average of the closing bid and ask
price of such stock on the OTS Bulletin Board on September 15, 2001 was
approximately $5.6 million.

        The number of shares outstanding of the Issuer's Common Stock, the
issuer's only class of outstanding capital stock, as of September 15, 2001 was
1,292,317.

                       Documents Incorporated by Reference

        The following documents, in whole or in part, are specifically
incorporated by reference in the indicated Part of this Annual Report on Form
10-KSB:

I.      Portions of the Alamogordo  Financial  Corp.  Proxy  Statement for the
        2001 Annual Meeting of Shareholders are incorporated by reference into
        certain items of Part III.

II.     Portions of the Alamogordo  Financial Corp. 2001 Annual Report are
        incorporated by reference into certain items of Part II.



<PAGE>



                                     PART I

Item 1.    Business

        Alamogordo Financial Corporation. We own 100% of the outstanding shares
of Alamogordo Federal. We have not engaged in any significant business activity
other than owning the common stock of Alamogordo Federal. Our principal
executive offices are located at 500 10th Street, Alamogordo, New Mexico, and
our telephone number is (505) 437-9334.

        Alamogordo Federal Savings and Loan Association. Alamogordo Federal is a
community-oriented savings association engaged primarily in the business of
offering FDIC-insured deposits to customers and investing those deposits,
together with funds generated from operations and borrowings, in loans,
investment securities and mortgage-backed securities. Alamogordo Federal's
mortgage loans include one- to four-family residential, multifamily and
nonresidential, construction and land loans. Consumer and other loans include
second mortgage, consumer, commercial business and deposit account loans. Based
on total deposits, Alamogordo Federal is the largest depository institution
headquartered in Alamogordo, and the New Mexico County of Otero.

Market Area

        We operate one full-service branch in addition to our main office. Our
branch and main office are both located in Alamogordo, New Mexico. Our
geographic market area for loans and deposits is principally Otero County, New
Mexico. The majority of our loans are secured by real estate in Otero County,
New Mexico. Otero County's economy is heavily dependent on two U.S. Government
military installations located in the county. Otero County is located in
southern New Mexico, 90 miles Northeast of El Paso, Texas, and is adjacent to
the New Mexico counties of Lincoln, Chaves, Eddy, Dona Ana and Sierra and the
Texas counties of El Paso, Hudspeth and Culberson.

        The local economy is comprised primarily of tourist related activity and
light manufacturing. White Sands National Monument, home of the annual White
Sands Balloon Festival, is a major attraction, as are the International Space
Hall of Fame and the Lincoln National Forest.

        Holloman Air Force Base, the area's largest employer, is located near
Alamogordo, and is the home of the 49 Fighter Wing, flying the F-117 Stealth
Fighter. The air force base is also home to the German Air Force Flying Training
Center which provides flight training for Germany's Tornado Pilots. Holloman is
also the home of the high speed test track which provides extensive testing for
various aircraft components.

        White Sands Missile Range, a U.S. Army installation near Alamogordo, is
the second largest overland testing range in the world. The range is utilized by
Holloman Air Force Base, Fort Bliss, Texas, and various defense contractors, and
is presently home to the High Energy Laser Test Facility developing a ballistic
missile defense system. White Sands Missile Range is the birthplace of the U.S.
rocket program in the 1940's, and today is the testing site for numerous
Department of Defense research and evaluation programs including the next
generation for anti-ballistic missiles.

        Other larger employers include Alamogordo Public Schools and the School
for the Visually Handicapped, City of Alamogordo, Gerald Champion Regional
Medical Center, Van Winkles IGA, White Sands Research Center and Casa Arena
Blanca Nursing Home.




Lending Activities

        Loan Portfolio Composition. At June 30, 2001, we had total loans of
$125.1 million, of which $108.7 million, or 87%, were one- to four-family
residential mortgages. The remainder of our mortgage loans at June 30, 2001,
consisted of multi-family and nonresidential, land and construction loans. In
addition, we originate consumer and other loans including second mortgage loans,
consumer loans, commercial business loans, and deposit account loans. As of June
30, 2001, $5.8 million, or 4.7%, of our total loans have adjustable rates of
interest.

        Our loans are subject to federal and state law and regulations. The
interest rates we charge on loans are affected principally by the demand for
loans, the supply of money available for lending purposes and the interest rates
offered by our competitors. These factors are, in turn, affected by general and
local economic conditions, monetary policies of the federal government,
including the Federal Reserve Board, legislative tax policies and governmental
budgetary matters.



<PAGE>


        The following table shows the composition of Alamogordo Federal's loan
portfolio in dollar amounts and in percentages (before deductions for loans in
process, deferred fees and discounts and allowances for losses) as of the dates
indicated.
<TABLE>
<CAPTION>

                                               June 30,
                              -------------------------------------------------------------
                                    2001                  2000                 1999
                              ------------------    ------------------    -----------------
                              Amount     Percent    Amount     Percent    Amount    Percent
                              ------     -------    ------     -------    ------    -------
                                                 (Dollars in Thousands)
<S>                          <C>          <C>      <C>           <C>    <C>           <C>
Mortgage loans:
 One- to four-family.......  $108,661     86.9%    $104,587      87.9%  $106,286      88.7%
 Multifamily and
  nonresidential...........    8,816       7.0        7,410       6.2      8,109       6.8
 Construction..............      291       0.2          260       0.2        807       0.7
 Land......................      364       0.3          531       0.5         42        --
  Total mortgage loans.....  118,132      94.4      112,788      94.8    115,244      96.2


Consumer and other loans:
 Second mortgage...........    2,008       1.6%     1,830         1.5     1,326        1.1
 Consumer..................    1,503       1.2      1,347         1.1     1,271        1.1
 Commercial business.......    1,996       1.6      1,362         1.2       511        0.4
 Deposit account...........    1,471       1.2      1,693         1.4     1,436        1.2
  Total consumer and
   other loans.............    6,978       5.6      6,232         5.2     4,544        3.8

   Total loans.............  125,110     100.0%   119,020       100.0%  119,788      100.0%

Less:
 Loans in process..........   (1,136)              (1,291)               (2,825)
 Deferred fees and
   discounts...............     (570)                (528)                 (541)
 Allowance for losses......     (409)                (419)                 (473)
  Total loans receivable,
   net..................... $122,995             $116,782              $115,949

</TABLE>

        Loan Maturity Schedules. The following table sets forth the dollar
amounts of fixed- and adjustable-rate loans at June 30, 2001 that are
contractually due after June 30, 2002.


                                           Fixed       Adjustable        Total
                                                      (In thousands)

Mortgage loans:
  One- to four-family................  $  98,932        $   4,993     $ 103,925
  Multifamily and nonresidential.....      6,987              837         7,824
  Construction.......................         --               --            --
  Land...............................        342               --           342
Consumer and other loans.............      4,583               --         4,583
Add back: Loans in process...........      1,136               --         1,136
Total loans due after one year.......  $ 111,980        $   5,830       117,810





<PAGE>



        Maturity of Loan Portfolio. The following table sets forth certain
information at June 30, 2001 regarding the dollar amount of loans maturing in
Alamogordo Financial's portfolio based on their contractual terms to maturity,
but does not include scheduled payments or potential prepayments. Demand loans
and loans with no stated maturity are reported as becoming due within one year.
Loan balances do not include undisbursed loan proceeds, unearned discounts,
unearned income and allowance for loans losses.
<TABLE>
<CAPTION>

                                              Multifamily and
                        One- to Four-Family   Nonresidential     Construction        Land        Consumer and Other        Total
                        -------------------  -----------------  ---------------  -------------   ------------------  ---------------
                                  Weighted           Weighted          Weighted        Weighted           Weighted          Weighted
                                   Average           Average            Average         Average            Average           Average
                          Amount    Rate      Amount   Rate      Amount   Rate   Amount  Rate    Amount      Rate     Amount   Rate
                          ------   -------    ------  ------     ------  ------ ------ ------   ------     ------     ------  ------

                                                                          (Dollars in Thousands)

Due During Years
Ending June 30,
<S>                    <C>         <C>     <C>       <C>      <C>      <C>     <C>    <C>     <C>         <C>      <C>       <C>
2002 (1)............     $ 3,647     7.68%   $  978    8.37%    $   260  8.75%   $  21  11.07%  $ 2,394     8.65%    $  7,300  8.14%
2003................       3,723     7.64       504    8.32          --    --      196   9.30     1,088     8.90        5,511  8.11
2004................       3,973     7.62       488    8.30          --    --       16   9.37       857     9.01        5,334  8.07
2005 and 2006.......       8,197     7.62     1,709    8.47          --    --      117   9.66     1,476     9.12       11,499  8.05
2007 to 2011........      20,590     7.57     4,311    8.18          --    --        1   7.27       875     9.12       25,789  7.87
2012 to 2026........      58,262     7.50       813    8.16          --    --        1   9.73       286     9.14       59,362  7.66
2027 and following..       9,179     7.47        --      --          --    --       --     --        --       --        9,179  7.71
Add back: loans
 in process.........       1,090      --         13      --          31    --       --     --         2       --        1,136    --

Total loans.........    $108,661    7.47%    $8,816    8.55%    $   291  8.75%   $ 364   9.73%  $ 6,978     9.14%    $125,110  7.71%

</TABLE>


(1) Includes demand loans, loans having no stated maturity and overdraft loans.



<PAGE>

        One- to Four-Family Residential Real Estate Loans. We emphasize the
origination of mortgage loans secured by one- to four-family properties that
serve as the primary residence of the owner, although we also offer loans
secured by properties that do not serve as the primary residence of the owner.
We currently hold most of the loans that we originate in our portfolio and
intend to continue to do so, although in the past we have sold loans. >From time
to time we purchase one- to four-family residential mortgage loans, and have
purchased loans that are secured by properties that are not located in our
market area. Generally, the loans that we purchase have adjustable rates of
interest, and are purchased as part of our interest rate risk management
strategy. As of June 30, 2001, loans secured by one- to four-family residential
properties accounted for $108.7 million, or 87%, of our total loan portfolio.

        We originate a significant amount of VA guaranteed loans, that is,
30-year fixed-rate residential real estate loans that are partially guaranteed
as to repayment of principal and interest by the Department of Veterans Affairs
("VA"). The Department of Veterans Affairs guarantees up to 25% of the mortgage
loan principal balance against default by the borrower. VA guaranteed loans may
be repaid at any time without penalty, and are assumable by another borrower at
the same rate if the borrower sells a home. At June 30, 2001, $20.7 million, or
19.1 %, of our one- to four-family residential real estate loans were VA
guaranteed loans.

        We originate VA guaranteed loans in amounts up to 100% of the appraised
value or selling price of the mortgaged property, whichever is less. In other
cases, we lend up to 95% of the lesser of the appraised value or purchase price
of the property, with the condition that private mortgage insurance is required
on loans with a loan-to-value ratio in excess of 80%. On occasion we originate
non-conforming loans which are tailored for the local community, but which may
not satisfy the various requirements imposed by Fannie Mae.

        Our one- to four-family residential mortgage loan originations are
generally for terms from 10 to 30 years, and amortize on a monthly basis with
interest and principal due each month. Residential real estate loans often
remain outstanding for significantly shorter periods than their contractual
terms as borrowers may refinance or prepay loans at their option without
penalty. Except for our VA guaranteed loans, our one- to four-family residential
mortgage loans customarily contain "due-on-sale" clauses which permit us to
accelerate the indebtedness of the loan upon transfer of ownership of the
mortgage property. Because our local economy is heavily dependent on two U.S.
Government military installations located in the county, many of our borrowers
are employed by the federal government in positions that require frequent
relocation. When these borrowers relocate, they often sell the homes securing
the loan, and prepay the mortgage loan. As a result, we believe our one- to
four-family residential real estate loans, particularly our 30-year VA
guaranteed loans, remain outstanding for a shorter period of time than the
national average for 30-year fixed-rate one- to four-family residential real
estate loans.

        We also offer adjustable-rate mortgage, or ARM, loans with a maximum
term of 30 years. The adjustable-rate loans that we offer generally include
limitations on the maximum increases and decreases in interest rates, and may
have "teaser" rates, or relatively low initial rates of interest. We believe
that adjustable-rate mortgage loans help reduce our exposure to changes in
interest rates. However, there are unquantifiable credit risks resulting from
potential increased costs to the borrower as a result of the pricing of
adjustable-rate mortgage loans. During periods of rising interest rates, the
risk of default on adjustable-rate mortgage loans may increase due to the upward
adjustment of interest cost to the borrower. We have not originated any
adjustable-rate one- to four-family residential real estate loans during the
fiscal year ended June 30, 2001.

        During the fiscal year ended June 30, 2001, we purchased a $78,000
adjustable-rate loan secured by one-to four-family residential real estate
located in New Mexico. During the fiscal year ended June 30, 2000 we made no
adjustable-rate loan purchases. During the fiscal year ended June 30, 1999, we
purchased $4.6 million of adjustable-rate loans secured by one- to four-family
residential real estate located in Indiana. At June 30, 2001, our portfolio
included $5.0 million of adjustable-rate one- to four-family residential
mortgage loans, or 4.0% of our total loan portfolio. Almost all of the
adjustable-rate loans that we currently own were purchased from another lender
and are secured by real estate located outside of our market area.


        Multifamily and Nonresidential Real Estate Lending. Our multifamily and
nonresidential real estate loans include real estate loans secured primarily by
first liens on commercial real estate and apartment buildings. The commercial
real estate properties are predominantly nonresidential properties such as
office buildings, retail strip centers and more specialized properties such as
churches, mobile home parks, restaurants and motel/hotels. Loans secured by
commercial real estate totaled $6.7 million, or 5.3%, of our total loan
portfolio as of June 30, 2001, and consisted of 28 loans outstanding with an
average loan balance of approximately $238,000. Loans secured by multifamily
residential real estate totaled $2.1 million, or 1.7%, of our total loan
portfolio as of June 30, 2001, and consisted of four loans outstanding with an
average loan balance of approximately $537,000. Substantially all of our
commercial real estate and multifamily loans are secured by properties located
in our primary market area. As of June 30, 2001, we had one multifamily
residential real estate loan and two commercial real estate loans with balances
in excess of $500,000. Each of these loans was performing in accordance with its
contractual terms.

        As part of the our ongoing interest rate risk management, we offer
adjustable-rate commercial and multifamily real estate loans. The initial
interest rates on these loans adjust after an initial three or five year period
to new market rates that generally range between 200 to 350 basis points over
the then current three or five year U.S. Treasury or FHLB rates. Commercial and
multifamily residential real estate loans typically have a term of approximately
10 years, with an amortization schedule of approximately 20 years, and may be
repaid subject to certain penalties.

        In the underwriting of commercial and multifamily real estate loans, we
generally lend up to 70% of the property's appraised value on apartment
buildings, and commercial properties that are not owner-occupied, and up to 75%
of the property's appraised value on commercial properties that are
owner-occupied. Appraised values are determined by independent appraisers that
we designate. We generally obtain an environmental assessment from an
independent engineering firm of any environmental risks that may be associated
with a particular building or the site. Decisions to lend are based on the
economic viability of the property and the creditworthiness of the borrower.
Creditworthiness is determined by considering the character, experience,
management and financial strength of the borrower, and the ability of the
property to generate adequate funds to cover both operating expenses and debt
service. In evaluating a commercial real estate loan, we emphasize primarily the
ratio of net cash flow to debt service for the property, generally requiring a
ratio of at least 125%, computed after deduction for a vacancy factor and
property expenses that we deem appropriate. In addition, a personal guarantee of
the loan is generally required from the principal(s) of the borrower. On all
real estate loans, we require title insurance insuring the priority of its lien,
fire and extended coverage casualty insurance, and flood insurance, if
appropriate, in order to protect our security interest in the underlying
property.

        Multifamily and nonresidential real estate loans generally carry higher
interest rates and have shorter terms than those on one- to four-family
residential mortgage loans. Multifamily and nonresidential real estate loans,
however, entail significant additional credit risks compared to one- to
four-family residential mortgage loans, as they typically involve large loan
balances concentrated with single borrowers or groups of related borrowers. In
addition, the payment experience on loans secured by income producing properties
typically depends on the successful operation of the related real estate project
and thus may be subject to a greater extent to adverse conditions in the real
estate market and in the economy generally.

        Construction and Land Loans. We originate acquisition, development and
construction loans to builders in our market area. Acquisition loans are made to
help finance the purchase of land intended for further development, including
single-family houses, multifamily housing, and commercial income property. Loans
for the acquisition of land are generally limited to our most creditworthy
customers. In general, the maximum loan-to-value ratio for a land acquisition
loan is 50% of the appraised value of the property. Development loans are often
made in conjunction with development and construction loans. Acquisition loans
may also be made to borrowers who already own the property, but who require
additional financing to develop the property.

        We also make development loans to builders in our market area to finance
improvements to real estate, consisting mostly of single-family subdivisions,
typically to finance the cost of utilities, roads and sewers. Builders generally
rely on the sale of single family homes to repay development loans, although in
some cases the improved building lots may be sold to another builder. The
maximum loan-to-value ratio for these loans is generally 60% of the appraised
value of the property. Advances are made in accordance with a schedule
reflecting the cost of improvements. Our policy is to confirm prior to each
advance that the improvements have been completed properly as evidenced by an
inspection report issued by an appraiser or engineer that we hire. In addition,
prior to advancing funds, we confirm that its lien priority remains in effect.

        We also grant construction loans to area builders, often in conjunction
with development loans. These loans finance the cost of completing homes on the
improved property. The loans are generally limited to the lesser of 75% of the
appraised value of the property or the actual cost of improvements. In the case
of single-family construction, we limit the number of houses we will finance
that are not under contract for sale. As part of our underwriting process for
construction loans on income producing properties, such as apartment buildings
and commercial rental properties, we consider the likelihood of leasing the
property at the expected rental amount, and the time to achieve sufficient
occupancy levels. We generally require a percentage of the building to be leased
prior to granting a construction loan on income producing property.

        Advances on construction loans are made in accordance with a schedule
reflecting the cost of construction. Our policy is to confirm prior to each
advance that the construction has been completed properly as evidenced by an
inspection report typically issued by an in-house staff inspector. We also
confirm that our lien priority remains in force before advancing funds. The
normal construction period is six months, during which time we collect monthly
interest on the loan. Repayment of construction loans on residential
subdivisions is normally expected from the sale of units to individual
purchasers, although we may convert the construction loan into permanent
financing at such time. In the case of income producing property, repayment is
usually expected from permanent financing upon completion of construction. We
commit to provide the permanent mortgage financing on most of our construction
loans on income-producing property.

        Acquisition, development and construction lending exposes us to greater
credit risk than permanent mortgage financing. The repayment of acquisition,
development and construction loans depends upon the sale of the property to
third parties or the availability of permanent financing upon completion of all
improvements. These events may adversely affect the borrower and the collateral
value of the property. Development and construction loans also expose us to the
risk that improvements will not be completed on time in accordance with
specifications and projected costs. In addition, the ultimate sale or rental of
the property may not occur as anticipated.

        Consumer and Other Loans. The Bank originates a variety of consumer and
other loans, including second mortgage loans, consumer loans, deposit account
loans and commercial business loans. As of June 30, 2001, consumer and other
loans totaled $7.0 million, or 5.6% of the total loan portfolio. Our second
mortgage loans include fixed-rate, fixed-term second mortgage and home equity
loans. Our second mortgage loans are offered in amounts up to 90% of the
appraised value of the property (including prior liens). Other consumer loans
include primarily loans secured by personal property such as autos, recreational
vehicles and boats, although we make a small number of unsecured loans that are
personally guaranteed. Our procedures for underwriting consumer loans include an
assessment of an applicant's credit history and the ability to meet existing
obligations and payments on the proposed loan. Although an applicant's
creditworthiness is a primary consideration, the underwriting process also
includes a comparison of the value of the collateral security, if any, to the
proposed loan amount. Consumer loans generally entail greater risk than
residential mortgage loans, particularly in the case of consumer loans that are
unsecured or secured by assets that tend to depreciate, such as automobiles. In
such cases, repossessed collateral for a defaulted consumer loan may not provide
an adequate source of repayment for the outstanding loan and the remaining
deficiency often does not warrant further substantial collection efforts against
the borrower. In addition, the repayment of consumer loans depends on the
borrower's continued financial stability, as their repayment is more likely than
a single family mortgage loan to be adversely affected by job loss, divorce,
illness or personal bankruptcy. Furthermore, the application of various federal
and state laws (including bankruptcy and insolvency laws) may limit the amount
that can be recovered on such loans.

        We also currently offer commercial business loans to customers in our
market area, some of which are secured in part by additional real estate
collateral. In our effort to expand our customer account relationships and
develop a broader base of more interest rate sensitive assets, we make various
types of secured commercial loans for the purpose of financing equipment
acquisition, expansion, working capital, inventory, operations and other general
business purposes. The terms of these loans generally range from less than one
year to up to ten years. The loans are either negotiated on a fixed-rate basis
or carry adjustable interest rates indexed to a lending rate which is determined
internally, or a short-term market rate index.

        We base our commercial credit decisions upon a complete credit
assessment of the loan applicant. We try to comprehensively assess the risks
involved in the loan as part of our overall determination of whether the
applicant will be able to repay in accordance with the proposed terms. We
generally require personal guarantees of the principals. In addition to
evaluating the loan applicant's financial statements, we try to determine the
probable adequacy of the primary and secondary sources of repayment that we may
rely upon in the transaction. We supplement our analysis of the applicants
creditworthiness with credit agency reports of the applicant's credit history as
well as bank checks and trade investigations. We also analyze collateral
supporting a secured transaction to determine its marketability and liquidity.
Commercial business loans generally bear higher interest rates than residential
loans, but they also involve a higher risk of default since their repayment is
generally dependent on the successful operation of the borrower's business.

        Loan Originations, Purchases, Sales and Servicing. Although we originate
both fixed-rate and adjustable-rate loans, our ability to generate each type of
loan depends upon borrower demand, market interest rates, borrower preference
for fixed- versus adjustable-rate loans, and the interest rates offered on each
type of loan by other lenders in our market area. This includes competing banks,
savings institutions, credit unions, and mortgage banking companies, as well as
life insurance companies, and Wall Street conduits that also actively compete
for local commercial real estate loans. Loan originations are derived from a
number of sources, including branch office personnel, existing customers,
borrowers, builders, attorneys, real estate broker referrals and walk-in
customers.

        Our loan origination and sales activity may be adversely affected by a
rising interest rate environment that typically results in decreased loan
demand. Accordingly, the volume of loan originations and the profitability of
this activity can vary from period to period. One- to four-family residential
mortgage loans are generally underwritten to current Fannie Mae and Freddie Mac
seller/servicer guidelines, although we generally do not sell our loans.

        From time to time we purchase one- to four-family residential mortgage
loans, and have purchased loans that are secured by properties that are not
located in our market area. Generally, the loans that we purchase have
adjustable rates of interest, and are purchased as part of our interest rate
risk strategy. Almost all of the adjustable-rate loans that we currently own
were purchased from another lender and are secured by real estate located
outside of our market area.


<PAGE>



        The following table presents our loan originations, purchases, sales and
principal payments for the periods indicated.

                                                     Years Ended June 30,
                                                2001         2000        1999
                                                        (In Thousands)

Loans receivable, net, at beginning
 of period.................................. $116,782     $115,949    $109,766

Loans originated:
 Mortgage loans:
  One- to four-family ......................   18,480       9,062       18,283
  Multifamily and nonresidential............    1,231         208          981
  Construction..............................    3,071       3,811       10,228
  Land......................................       91         793          146
    Total mortgage loans originated.........   22,873      13,874       29,638
 Consumer and other loans:
  Commercial................................    1,754       2,160          423
  Second mortgage, consumer and
    deposit account........................     1,810        2,838       2,593
   Total consumer and other
    loans originated.......................     3,564        4,998       3,016
Loans purchased:
 Mortgage loans:
  One- to  four-family......................       78          --        4,585
  Multifamily and nonresidential............       --          --           --
  Construction..............................       --          --           --
  Land......................................       --          --           --
   Total loans purchased....................       78          --        4,585
Loans sold:
 Mortgage loans:
  One- to  four-family......................       --          --       (1,148)
  Multifamily and nonresidential............       --          --           --
  Construction..............................       --          --           --
  Land......................................       --          --           --
   Total loans sold.........................       --          --       (1,148)

   Principal repayments.....................  (20,425)    (19,640)     (28,406)

Increase (decrease) in other items, net.....      123       1,601       (1,502)

Loans receivable, net, at end of period..... $122,995     $116,782     $115,949


        Loan Approval Procedures and Authority. Once we receive a completed
application, it is presented to the Loan Committee which consists of Alamogordo
Federal's directors, senior management and loan officers. Our President has
lending authority up to $50,000, and other officers may have individual lending
authority up to $35,000. Loans of up to $250,000 may be approved by any three
members of the Loan Committee (other than loan officers). All loans of over
$250,000 must be approved by the Board of Directors.

        The following describes our current lending procedures. Upon receipt of
a completed loan application from a prospective borrower, we order a credit
report and we verify certain other information. If necessary, we obtain
additional financial or credit related information. We require an appraisal for
all mortgage loans including loans made to refinance existing mortgage loans.
Appraisals are performed by licensed or certified third-party appraisal firms
which have been approved by our Board of Directors. We require title insurance
on all first mortgage loans and certain other loans. We require borrowers to
obtain hazard insurance, and if applicable, we may require borrowers to obtain
flood insurance prior to closing. Borrowers are required to deposit funds on a
monthly basis together with each payment of principal and interest to a mortgage
escrow account from which we make disbursements for items such as real estate
taxes, flood insurance, hazard insurance, and private mortgage insurance
premiums, if required.



Asset Quality

        One of our key operating objectives has been and continues to be to
maintain a high level of asset quality. Through a variety of strategies,
including, but not limited to, borrower workout arrangements and aggressive
marketing of foreclosed properties, we have been proactive in addressing problem
and non-performing assets. These strategies, as well as our high proportion of
one- to four-family mortgage loans, our maintenance of sound credit standards
for new loan originations and our loan administration procedures, have resulted
in historically low delinquency ratios and, in recent years, a reduction in non-
performing assets. These factors have helped strengthen our financial condition.

        Delinquent Loans and Foreclosed Assets. When a borrower fails to make
required payments on a loan, we take a number of steps to induce the borrower to
cure the delinquency and restore the loan to a current status. In the case of
mortgage loans, our mortgage servicing department is responsible for collection
procedures from the 15th day up to the 120th day of delinquency. A late charge
notice is sent at 15 days. A reminder letter requesting prompt payment is sent
on the 25th day. At 30 days we also attempt to establish telephone contact with
the borrower. If no contact is established, progressively stronger collection
letters are sent on the 45th and 60th days of delinquency. Between the 60th and
90th day of delinquency, if telephone contact has not been established or if
there has been mail returned, the collector or his assistant makes a physical
inspection of the property. When contact is made with the borrower at any time
prior to foreclosure, we attempt to obtain full payment of the amount delinquent
or work out a repayment schedule with the borrower in order to avoid
foreclosure. It has been our experience that most loan delinquencies are cured
within 90 days and no legal action is taken.

        We send the "right to cure" foreclosure notice when a loan is
approximately 75 days delinquent. This contains a "right to cure" clause that
gives our customer the terms which must be met within 30 days of the date the
letter is sent in order to avoid foreclosure action. After this letter expires,
we send the loan to committee for approval to foreclose. We commence foreclosure
if the loan is not brought current by the 120th day of delinquency unless
specific limited circumstances warrant an exception. We hold property foreclosed
upon as other real estate owned. We carry foreclosed real estate at its fair
market value less estimated selling costs. If a foreclosure action is commenced
and the loan is not brought current, paid in full or refinanced before the
foreclosure sale, we either sell the real property securing the loan at the
foreclosure sale or sell the property as soon thereafter as practical. The
collection procedures for Federal Housing Association ("FHA") and VA one- to
four-family mortgage loans follow the collection guidelines outlined by those
agencies.

        The collection procedures for consumer and other loans include our
sending periodic late notices and letters to a borrower once a loan is past due.
We attempt to make direct contact with a borrower once a loan is 15 days past
due. We follow the same collection procedure as mortgages in our attempts to
reach individuals by telephone and sending them letters and notices. Supervisory
personnel in our lending area and in our collection area review loans 30 days or
more delinquent on a regular basis. If collection activity is unsuccessful after
120 days, we may charge off a loan and/or refer the matter to our legal counsel
for further collection effort. Loans deemed uncollectible by our Collection
Department are proposed for charge-off. All loan charge-offs regardless of
amount are to be approved by the senior loan officer or the president. Those
charge-offs in excess of $2,500 must be approved by a second senior officer and
reported to the Executive Committee or the Lending Committee at its next
scheduled meeting.

        Our policies require that management continuously monitor the status of
the loan portfolio and report to the Board of Directors on a monthly basis.
These reports include information on delinquent loans and foreclosed real estate
and our actions and plans to cure the delinquent status of the loans and to
dispose of the real estate.



<PAGE>


        Delinquent Loans.  The following table sets forth our loan delinquencies
by type, by amount and by percentage of type at June 30, 2001.
<TABLE>
<CAPTION>

                                       Loans Delinquent For:
                       --------------------------------------------------------
                                                       90 Days and Over
                              30-89 Days             and Nonaccrual Loans         Total Delinquent Loans
                       ---------------------------   --------------------------  -------------------------
                                         Percent                        Percent                    Percent
                                         Of Loan                        Of Loan                    of Loan
                       Number   Amount   Category     Number  Amount   Category   Number  Amount  Category
                       ------   ------   --------     ------  ------   --------   ------  ------  --------
                                                     (Dollars in Thousands)

Mortgage loans:
<S>                       <C>   <C>        <C>           <C> <C>          <C>       <C>   <C>       <C>
 One- to four-family.     13    $ 767      0.71%         10  $  620       0.57%     23    $1,387    1.28%
 Multifamily and
  nonresidential.....     --       --        --           1     151       1.71       1       151    1.71
 Construction........      1       40     13.75          --      --         --       1        40   13.75
 Land................     --       --        --           1      98      26.92       1        98   26.92
Total mortgage loans.     14      807      0.68          12     869       0.74      26     1,676    1.42
Consumer and other loans:
 Second mortgage.....     --       --        --          --      --         --      --        --      --
 Consumer............      4       14      0.93          --      --       0.00       4        14    0.93
 Commercial business.     --       --        --           1      84       4.21       1        84    4.21
 Deposit account.....      1        3      0.20          --      --       0.00       1         3    0.20
  Total consumer and other
   loans.............      5       17      0.24           1      84       1.20       6       101    1.45
Total delinquent loans:   19    $ 824      0.66%         13   $ 953       0.76%     32    $1,777    1.42%
</TABLE>


<PAGE>




        Nonperforming Loans. The table below sets forth the amounts and
categories of non-performing assets in our loan portfolio. Loans are placed on
non-accrual status when the collection of principal and/or interest become
doubtful. For all years presented, we have had no troubled debt restructurings
(which involve forgiving a portion of interest or principal on any loans or
making loans at a rate materially less than that of market rates). Foreclosed
assets include assets acquired in settlement of loans.
<TABLE>
<CAPTION>
                                                                     June 30,
                                                          --------------------------------
                                                           2001        2000          1999
                                                          ------      ------       -------
                                                                 (Dollars in Thousands)
Non-accruing loans:
 Mortgage loans:
<S>                                                     <C>          <C>           <C>
  One- to four-family................................   $   483      $  561        $  513
  Multifamily and nonresidential.....................       151         152            --
  Construction.......................................        --          --            19
  Land...............................................        98          --            --
 Consumer and other loans:
  Second mortgage....................................        --          --            --
  Consumer...........................................        --           1            --
  Commercial.........................................        84          --            --
  Deposit account....................................        --          --            --
    Total non-accruing loans.........................       816         714           532
Accruing loans delinquent more than 90 days:
 Mortgage loans:
  One- to four-family................................       137          --            --
  Multifamily and nonresidential.....................        --          --            --
  Construction.......................................        --          --            --
  Land...............................................        --          --            --
 Consumer and other loans:
  Second mortgage....................................        --          --            --
  Consumer...........................................        --          --            --
  Commercial.........................................        --          --            --
  Deposit account....................................        --          --            --
    Total accruing loans more than 90 days delinquent       137          --            --
Total non-performing loans...........................       953         714           532
Foreclosed assets:
 Mortgage loans:
  One- to four-family................................       133          52            --
  Multifamily and nonresidential.....................        --          --            --
  Construction.......................................        --          --            --
  Land...............................................        --          --            --
    Total foreclosed assets..........................       133          52            --
Total non-performing assets..........................   $ 1,086      $  766        $  532
 Total nonperforming assets as a percentage of
  total assets.......................................      0.74%       0.52%         0.33%
Allowance for loan losses as a percentage of
 nonperforming loans.................................     43.02%      58.68%        88.72%
Allowance for loan losses as a percentage of
 gross loans receivable..............................      0.33%       0.35%         0.39%
</TABLE>


        For the year ended June 30, 2001 gross interest income which would have
been recorded had the non-accruing loans been current in accordance with their
original terms amounted to $50,000. We recorded no income on such loans for the
year ended June 30, 2001.

        With the exception of first mortgage loans insured or guaranteed by the
FHA or VA or for which the borrower has obtained private mortgage insurance, we
stop accruing income on loans when interest or principal payments are 90 days in
arrears or earlier when the timely collectibility of such interest or principal
is doubtful. We designate loans on which we stop accruing income as non-accrual
loans and we reverse outstanding interest that we previously credited. We may
recognize income in the period that we collect it, when the ultimate
collectibility of principal is no longer in doubt. We return a non-accrual loan
to accrual status when factors indicating doubtful collection no longer exist.

        We define the population of impaired loans to be all non-accrual
commercial real estate and commercial loans greater than $250,000. Impaired
loans are individually assessed to determine whether a loan's carrying value is
not in excess of the fair value of the collateral or the present value of the
loan's cash flows. Smaller balance homogeneous loans that are collectively
evaluated for impairment, such as residential mortgage loans and consumer loans,
are specifically excluded from the impaired loan portfolio. We had no loans
classified as impaired at June 30, 2001.

        Foreclosed real estate consists of property we acquired through
foreclosure or deed in lieu of foreclosure. Foreclosed real estate properties
are initially recorded at the lower of the recorded investment in the loan or
fair value. Thereafter, we carry foreclosed real estate at fair value less
estimated selling costs.

        Classification of Assets. Our policies, consistent with regulatory
guidelines, provide for the classification of loans and other assets such as
securities that are considered to be of lesser quality as substandard, doubtful,
or loss assets. An asset is considered substandard if it is inadequately
protected by the current net worth and paying capacity of the obligor or of the
collateral pledged, if any. Substandard assets include those characterized by
the distinct possibility that the savings institution will sustain some loss if
the deficiencies are not corrected. Assets classified as doubtful have all of
the weaknesses inherent in those classified substandard with the added
characteristic that the weaknesses present make collection or liquidation in
full, on the basis of currently existing facts, conditions, and values, highly
questionable and improbable. Assets classified as loss are those considered
uncollectible and of such little value that their continuance as assets is not
warranted. Assets that do not expose us to risk sufficient to warrant
classification in one of the aforementioned categories, but which possess some
weaknesses, are required to be designated as special mention by management. As
of June 30, 2001, we had $2.6 million of assets designated as special mention.

        When we classify assets as either substandard or doubtful, we allow for
analytical purposes a portion of general valuation allowances or loss reserves
to such assets as deemed prudent by management. General allowances represent
loss allowances that have been established to recognize the inherent risk
associated with lending activities, but which have not been allocated to
particular problem assets. When we classify problem assets as loss, we are
required either to establish a specific allowance for losses equal to 100% of
the amount of the assets so classified, or to charge-off such amount. Our
determination as to the classification of its assets and the amount of its
valuation allowance is subject to review by regulatory agencies, which can order
the establishment of additional loss allowances. Management regularly reviews
Alamogordo Federal's asset portfolio to determine whether any assets require
classification in accordance with applicable regulations. On the basis of
management's review of Alamogordo Federal's assets at June 30, 2001, classified
assets consisted of substandard assets of $1.0 million. There were no assets
classified as doubtful or loss at June 30, 2001.



<PAGE>



        Allowance for Loan Losses. The following table sets forth activity in
Alamogordo Federal's allowance for loan losses and other ratios at or for the
dates indicated.

                                                     Years Ended June 30,
                                                2001         2000        1999
                                                      (Dollars In Thousands)

Balance at beginning of period............   $    419     $   472      $   486

Charge-offs:
 Mortgage loans:
   One- to four-family....................          5          11            9
   Multifamily and nonresidential.........         --          --           --
   Construction...........................         --          --           --
   Land...................................         --           --          --
 Consumer and other loans:
   Second mortgage........................         --          --            5
   Consumer...............................          4           2           --
   Commercial.............................         --          --           --
   Deposit account........................         --          --           --
 Real estate held for investment..........         --          --           --
     Total charge-offs....................          9          13           14

Recoveries:
 Mortgage loans:
   One- to four-family....................         --           8           --
   Multifamily and nonresidential.........         --          --           --
   Construction...........................         --          --           --
   Land...................................         --           --          --
 Consumer and other loans:
   Second mortgage........................         --           2           --
   Consumer...............................         --          --           --
   Commercial ............................         --          --           --
   Deposit account........................         --          --           --
 Real estate held for investment..........         --          --           --
     Total recoveries.....................         --          10           --

Net charge-offs...........................          9           3           14
Credit for loan losses....................         --         (50)          --
Balance at end of period..................   $    410     $   419      $   472

Ratio of net charge-offs during the
 period to average loans outstanding
 during the period........................      0.008%      0.003%       0.012%

Ratio of net charge-offs during the period to
 average non-performing assets............      1.241%      0.619%       2.042%


        The allowance for loan losses is a valuation account that reflects our
evaluation of the losses inherent in our loan portfolio. We maintain the
allowance through provisions for loan losses that we charge to income. We charge
losses on loans against the allowance for loan losses when we believe the
collection of loan principal is unlikely.

        Our evaluation of risk in maintaining the allowance for loan losses
includes the review of all loans on which the collectibility of principal may
not be reasonably assured. We consider the following factors as part of this
evaluation: our historical loan loss experience, known and inherent risks in the
loan portfolio, the estimated value of the underlying collateral and current
economic and market trends. There may be other factors that may warrant our
consideration in maintaining an allowance at a level sufficient to provide for
probable losses. Although we believe that we have established and maintained the
allowance for loan losses at adequate levels, future additions may be necessary
if economic and other conditions in the future differ substantially from the
current operating environment.

         In addition, various regulatory agencies, as an integral part of their
examination process, periodically review our loan and foreclosed real estate
portfolios and the related allowance for loan losses and valuation allowance for
foreclosed real estate. These agencies may require us to increase the allowance
for loan losses or the valuation allowance for foreclosed real estate based on
their judgments of information available to them at the time of their
examination, thereby adversely affecting our results of operations.

        Allocation of the Allowance for Loans Losses. The following table
presents our allocation of the allowance for loan losses by loan category and
the percentage of loans in each category to total loans at the periods
indicated.


<PAGE>
<TABLE>
<CAPTION>

                                                                    June 30,
                        ------------------------------------------------------------------------------------------------
                                    2001                              2000                             1999
                        -----------------------------    ------------------------------   ------------------------------
                                             Percent                            Percent                          Percent
                                            of Loans                           of Loans                         of Loans
                                    Loan     in Each                   Loan     in Each                 Loan     in Each
                        Amount of  Amounts  Category      Amount of   Amounts  Category    Amount of   Amounts  Category
                        Loan Loss    by     to Total      Loan Loss     by     to Total    Loan Loss     by     to Total
                        Allowance Category   Loans        Allowance  Category   Loans      Allowance  Category    Loans
                        --------- --------   -----        ---------  --------   -----      ---------  --------    -----

                                                              (Dollars in Thousands)


<S>                     <C>      <C>        <C>              <C>    <C>          <C>         <C>     <C>          <C>
Mortgage loans......    $ 354    $118,132   94.42%           $ 359  $112,788     94.76%      $ 412   $115,244     96.21%
Consumer and
 other loans........       56       6,978    5.58               60     6,232      5.24          60      4,544      3.79

Total...............    $ 410    $125,110  100.00%            $419  $119,020    100.00%      $ 472   $119,788    100.00%

</TABLE>


Investment Activities

        Alamogordo Federal is permitted under federal law to invest in various
types of liquid assets, including U.S. Government obligations, securities of
various federal agencies and of state and municipal governments, deposits at the
Federal Home Loan Bank of Dallas, certificates of deposit of federally insured
institutions, certain bankers' acceptances and federal funds. Within certain
regulatory limits, Alamogordo Federal may also invest a portion of its assets in
commercial paper and corporate debt securities. Savings institutions like
Alamogordo Federal are also required to maintain an investment in FHLB stock.
Alamogordo Federal is required under federal regulations to maintain a minimum
amount of liquid assets. At June 30, 2001, Alamogordo Federal's liquidity ratio
(liquid assets as a percentage of net withdrawable savings deposits and current
borrowings) was 8.7%.

        Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," requires that investments be
categorized as "held to maturity," "trading securities" or "available for sale,"
based on management's intent as to the ultimate disposition of each security.
Statement of Financial Accounting Standards No. 115 allows debt securities to be
classified as "held to maturity" and reported in financial statements at
amortized cost only if the reporting entity has the positive intent and ability
to hold those securities to maturity. Securities that might be sold in response
to changes in market interest rates, changes in the security's prepayment risk,
increases in loan demand, or other similar factors cannot be classified as "held
to maturity." Debt and equity securities held for current resale are classified
as "trading securities." These securities are reported at fair value, and
unrealized gains and losses on the securities would be included in earnings.
Alamogordo Federal does not currently use or maintain a trading account. Debt
and equity securities not classified as either "held to maturity" or "trading
securities" are classified as "available for sale." These securities are
reported at fair value, and unrealized gains and losses on the securities are
excluded from earnings and reported, net of deferred taxes, as a separate
component of equity.

        All of Alamogordo Federal's investment securities carry market risk
insofar as increases in market rates of interest may cause a decrease in their
market value. Many also carry prepayment risk insofar as they may be called
prior to maturity in times of low market interest rates, so that Alamogordo
Federal may have to invest the funds at a lower interest rate. Alamogordo
Federal's investment policy does not permit engaging directly in hedging
activities or purchasing high risk mortgage derivative products. Investments are
made based on certain considerations, which include the interest rate, tax
considerations, yield, settlement date and maturity of the investment,
Alamogordo Federal's liquidity position, and anticipated cash needs and sources.
The effect that the proposed investment would have on Alamogordo Federal's
credit and interest rate risk and risk-based capital is also considered.
Alamogordo Federal purchases investment securities to provide necessary
liquidity for day-to-day operations. Alamogordo Federal also purchases
investment securities when investable funds exceed loan demand.

        Generally, the investment policy of Alamogordo Federal, as established
by the Board of Directors, is to invest funds among various categories of
investments and maturities based upon Alamogordo Federal's liquidity needs,
asset/liability management policies, investment quality, marketability and
performance objectives.

        Alamogordo Federal's investment and mortgage-backed securities include
securities issued by the U.S. Government and government agencies, although from
time to time Alamogordo may purchase other investment and mortgage-backed
securities as permitted by applicable laws and regulations.

        The following table sets forth the composition of our investment
securities, net of premiums and discounts, at the dates indicated. As of June
30, 2001, the average remaining life of our securities was 2.2 years.
<TABLE>
<CAPTION>
                                                                  June 30,
                                        ---------------------------------------------------------
                                                2001                2000               1999
                                        -----------------   -----------------  ------------------
                                         Carrying   % of     Carrying   % of    Carrying   % of
                                          Value     Total      Value    Total     Value    Total
                                         -------   ------   --------   ------  ---------   ------
                                                      (Dollars in Thousands)
<S>                                      <C>      <C>          <C>      <C>       <C>      <C>
Securities held to maturity:
 U.S. government agency securities..     $  --       --%      $   --      --%   $   407     1.78%
 Securities issued by states and
   political subdivisions...........     1,175    12.79        1,626    9.68      2,747    12.05
Securities available for sale:
 U.S. government agency securities..     3,506    38.16       12,918   76.93     13,916    61.03
  Total investment securities.......     4,681    50.95       14,544   86.61     17,070    74.86
FHLB stock..........................     1,519    16.53        1,435    8.54      1,332     5.84
  Total securities and FHLB stock...     6,200    67.48       15,979   95.15     18,402    80.70
Other interest-earning assets:
 Interest-bearing deposits with banks    2,988    32.52          814    4.85      4,401    19.30
Total investment securities,
   FHLB stock and other.............    $9,188   100.00%     $16,793  100.00%   $22,803   100.00%

</TABLE>

        The following table presents the composition of our mortgage-backed
securities portfolios.
<TABLE>
<CAPTION>
                                                                       June 30,
                                              ---------------------------------------------------------
                                                      2001                2000               1999
                                              -----------------   -----------------  ------------------
                                               Carrying   % of     Carrying   % of    Carrying   % of
                                                Value     Total      Value    Total     Value    Total
                                               -------   ------   --------   ------  ---------   ------
                                                            (Dollars in Thousands)
Mortgage-backed securities held to maturity:
<S>                                             <C>       <C>       <C>      <C>       <C>        <C>
 FHLMC..............................            $ 127     5.56%     $ 211    7.64%     $ 319      9.29%
Mortgage-backed securities available for sale:
 GNMA...............................              401    17.54        506   18.32        626     18.24
 FNMA...............................            1,082    47.33      1,243   45.00      1,513     44.07
 FHLMC..............................              676    29.57        802   29.04        975     28.40
  Total mortgage-backed securities..           $2,286   100.00%    $2,762  100.00%    $3,433    100.00%
</TABLE>


        Carrying Values, Yields and Maturities. The following table sets forth
the scheduled maturities, carrying values, market value and weighted average
yields for our investment securities at June 30, 2001.



<PAGE>
<TABLE>
<CAPTION>



                                        Less Than         1 to 5       5 to 10        Over
                                         1 Year           Years         Years       10 Years     Total Investment Securities
                                       -----------     -----------   -----------  -----------    ---------------------------
                                        Carrying        Carrying       Carrying    Carrying       Carrying          Market
                                          Value          Value          Value       Value          Value            Value
                                       -----------     -----------   -----------  -----------    ----------      -----------
                                                          (Dollars in Thousands)

<S>                                     <C>             <C>             <C>        <C>             <C>             <C>
U.S. government agency securities...    $  --           $ 3,506         $  --      $   --          $ 3,506         $ 3,506
Mortgage-backed securities..........      127                --            --       2,159            2,286           2,285
Securities issued by states and
 political subdivisions............       450               725            --          --            1,175           1,187
Equity securities...................       --                --            --          --               --               8

Total securities....................    $ 577           $ 4,231         $  --      $2,159          $ 6,967         $ 6,986

Weighted average yield..............     4.64%             5.46%           --%       6.16%            5.60%

</TABLE>


Sources of Funds

        General. Deposits are the primary source of Alamogordo Financial's funds
for lending and other investment purposes. In addition to deposits, Alamogordo
Financial derives funds primarily from principal and interest payments on loans.
Loan repayments are a relatively stable source of funds, while deposit inflows
and outflows are significantly influenced by general interest rates and money
market conditions. Borrowings may also be used on a short-term basis to
compensate for reductions in the availability of funds from other sources and
may be used on a longer-term basis for general business purposes.

        Deposits. Alamogordo Financial's deposits are attracted principally from
within its primary market area. Deposit account terms vary, with the principal
differences being the minimum balance required, the time periods the funds must
remain on deposit and the interest rate.

        Alamogordo Financial's deposits are obtained primarily from residents of
its primary market area. Alamogordo Financial is not currently using brokers to
obtain deposits. Alamogordo Financial's deposit products include demand and NOW,
money market, savings, and term certificate accounts. Interest rates paid,
maturity terms, service fees and withdrawal penalties are established by
Alamogordo Financial on a periodic basis. Management determines the rates and
terms based on rates paid by competitors, Alamogordo Financial's needs for funds
or liquidity, growth goals and federal and state regulations.

        Deposit Activity.  The following table sets forth Alamogordo Financial's
savings  flows during the periods indicated.

                                               Years Ended June 30,
                                           ---------------------------------
                                              2001        2000       1999
                                           ---------   ---------   ---------
                                                (Dollars in Thousands)

Opening balance........................    $116,298     $122,460    $126,659
Deposits...............................     249,686      223,173     159,824
Withdrawals............................    (253,992)    (235,550)   (170,637)
Interest credited......................       6,265        6,215       6,614
Ending balance.........................    $118,257     $116,298    $122,460

Net increase (decrease)................    $  1,959     $ (6,162)   $ (4,199)

Percent increase (decrease)............        1.68%       (5.03)%     (3.32)%


        Deposit Accounts. The following table sets forth the dollar amount of
savings deposits in the various types of deposit programs we offered as of the
dates indicated.
<TABLE>
<CAPTION>

                                                                 June 30,
                                        -----------------------------------------------------------------------------
                                                 2001                           2000                     1999
                                        ----------------------          --------------------      -------------------
                                         Amount        Percent          Amount       Percent      Amount      Percent
                                        -------        -------          ------       -------      ------      -------
                                                          (Dollars in Thousands)

Transaction and savings deposits:
<S>                                     <C>             <C>            <C>             <C>        <C>           <C>
 Demand and NOW (0% to 2.60%)......     $8,633          7.30%          $ 7,172         6.17%      $ 6,668       5.44%
 Money market (0% to 3.75%)........      6,293          5.32             6,790         5.84         8,229       6.72
 Savings deposits (0% to 3.00%)....      5,040          4.26             4,862         4.18         5,066       4.14
  Total transaction and
    savings deposits...............     19,966         16.88            18,824        16.19        19,963      16.30

Term certificates:
 0.00 - 4.00%......................      1,781          1.51                 4           --           887       0.72
 4.01 - 5.00%......................     17,518         14.81            10,067         8.66        27,281      22.28
 5.01 - 6.00%......................     29,475         24.92            41,973        36.09        35,965      29.37
 6.01 - 7.00%......................     48,437         40.96            37,836        32.53        29,912      24.42
 7.01 and above....................      1,080          0.92             7,594         6.53         8,461       6.91
  Total term certificates..........     98,291         83.12            97,474        83.81       102,506      83.70
Total deposits.....................   $118,257        100.00%         $116,298       100.00%     $122,469     100.00%

</TABLE>

        Time Deposit Maturity Schedule. The following table presents, by rate
category, the remaining period to maturity of time deposit accounts outstanding
as of June 30, 2001.
<TABLE>
<CAPTION>

                         More Than       More Than      More Than      More Than              Percent
                        4.0% to 5.0%    5.0% to 6.0%   6.0% to 7.0%      7.0%      Total      of Total
                        ------------    ------------   ------------    ---------   -----      --------
                             (Dollars in Thousands)
Quarter Ending:

<S>                       <C>               <C>            <C>             <C>     <C>          <C>
September 30, 2001..      2,909             3,895          7,114           626     14,544       14.80%
December 31, 2001...      4,446             2,867          6,217            --     13,530       13.77
March 31, 2002......        249             5,085          3,574            --      8,908        9.06
June 30, 2002.......      2,922             2,335          3,884            --      9,141        9.30
September 30, 2002..         --             1,693          3,945            --      5,638        5.74
December 31, 2002..         337             1,978          3,310            --      5,625        5.72
March 31, 2003.....          83             3,591          2,464            --      6,138        6.24
June 30, 2003......         516               488          2,602            --      3,606        3.67
September 30, 2003.          --             1,382          2,384            --      3,766        3.83
December 30, 2003..          --             1,016          1,266            --      2,282        2.32
March 31, 2004 ....          --             2,340          2,528            --      4,868        4.95
Thereafter.........       2,177             3,195         14,319           554     20,245       20.60
  Total............     $13,639           $29,865        $53,607        $1,180    $98,291      100.00%

  Percent of total        13.88%            30.38%         54.54%         1.20%    100.00%

</TABLE>

        Large Certificates. The following table indicates the amount of our
certificates of deposit and other deposits by time remaining until maturity as
of June 30, 2001.
<TABLE>
<CAPTION>
                                                                      Maturity
                                              -------------------------------------------------------
                                                            Over        Over
                                               3 Months    3 to 12    12 to 36    Over
                                               or Less     Months      Months   36 Months     Total
                                              ---------   --------   ---------  ---------   ---------

<S>                                            <C>        <C>       <C>        <C>        <C>
Certificates of deposit less than $100,000.    $ 9,969    $22,867   $ 30,218   $ 8,435    $ 71,489
Certificates of deposit of $100,000 or more.     3,076      6,910      8,111     5,405      23,502
Deposits from governmental and other
 public entities............................     1,500      1,800         --        --       3,300
Total certificates of deposit...............   $14,545    $31,577    $38,329  $ 13,840     $98,291
</TABLE>


        Borrowings. Alamogordo Federal may obtain advances from the FHLB of
Dallas upon the security of the common stock it owns in that bank and certain of
its residential mortgage loans and mortgage-backed securities, provided certain
standards related to creditworthiness have been met. These advances are made
pursuant to several credit programs, each of which has its own interest rate and
range of maturities. FHLB advances are generally available to meet seasonal and
other withdrawals of deposit accounts and to permit increased lending.

        The following table sets forth the maximum month-end balance and average
balance of FHLB advances and other borrowings for the periods indicated.

                                                     Years Ended June 30,
                                                ------------------------------
                                                2001         2000        1999
                                                -----       ------      ------
                                                        (In Thousands)
Maximum balance:
  FHLB advances.........................     $  7,000     $10,000      $10,000
  Other borrowings......................           --          --          151

Average balance:
  FHLB advances.........................     $  2,165     $ 8,840      $10,000
  Other borrowings......................           --          --           75


        The following table sets forth certain information as to our borrowings
at the dates indicated.
<TABLE>
<CAPTION>

                                                                        June 30,
                                                            -------------------------------
                                                             2001        2000         1999
                                                            ------      ------       ------
                                                                     (In Thousands)

<S>                                                       <C>          <C>         <C>
FHLB advances.........................................    $    --      $ 5,000     $10,000
Other borrowings......................................         --           --          --
Total borrowings......................................    $    --      $ 5,000     $10,000

Weighted average interest rate of FHLB advances.......        n/a         6.69%       4.81%

Weighted average interest rate of other borrowings....        n/a          n/a         n/a
</TABLE>


Subsidiary Activities

        Alamogordo Financial has no direct subsidiaries other than Alamogordo
Federal. As a federally chartered savings association, Alamogordo Federal is
permitted by OTS regulations to invest up to 2% of its assets in the stock of,
or loans to, service corporation subsidiaries. Alamogordo Federal may invest an
additional 1% of its assets in service corporations where such additional funds
are used for inner-city or community development purposes and up to 50% of its
total capital in conforming loans to service corporations in which it owns more
than 10% of the capital stock. In addition to investments in service
corporations, federal associations are permitted to invest an unlimited amount
in operating subsidiaries engaged solely in activities in which a federal
association may engage. At June 30, 2001, Alamogordo Federal had one subsidiary,
Space Age City Service Corporation. Alamogordo Federal's investment in its
subsidiary was $178,000 as of June 30, 2001. As of June 30, 2001, Alamogordo
Federal had an outstanding note receivable from Space Age City Service
Corporation of $112,000. The subsidiary has been involved in a real estate
development project for the purpose of development of real estate lots. As of
June 30, 2001, Space Age City Service Corporation owns real estate it values at
approximately $215,000. Gross rental income from its investment amounted to
$5,000 for the fiscal year ended June 30, 2001.

Competition

 ........We face intense competition both in making loans and attracting
deposits. New Mexico, and Otero County have a high concentration of financial
institutions, many of which are branches of large money center and regional
banks which have resulted from the consolidation of the banking industry in New
Mexico and surrounding states. Some of these competitors have greater resources
than we do and may offer services that we do not provide. Moreover, many of our
competitors offer services through the internet, which we do not offer, and many
larger institutions that do not have a physical presence in our market area
compete with us through the use of the Internet.

 ........Our competition for loans comes principally from commercial banks,
savings institutions, mortgage banking firms, credit unions, finance companies,
insurance companies and brokerage and investment banking firms. Our most direct
competition for deposits has historically come from credit unions, commercial
banks and savings and loan associations. We face additional competition for
deposits from short-term money market funds, corporate and government securities
funds, and from brokerage firms, mutual funds, and insurance companies.

Personnel

        As of June 30, 2001, we had 43 full-time employees and one part-time
employee. The employees are not represented by a collective bargaining unit and
we consider our relationship with our employees to be good.

                                   REGULATION

General

        Alamogordo Federal is regulated, examined and supervised by the OTS, as
its chartering agency, and the FDIC, as the insurer of its deposits. The
activities of federal savings institutions are governed by the Home Owners' Loan
Act, as amended and, in certain respects, the Federal Deposit Insurance Act and
the regulations issued by the OTS and the FDIC to implement these statutes.
These laws and regulations delineate the nature and extent of the activities in
which federal savings associations may engage. Lending activities and other
investments must comply with various statutory and regulatory capital
requirements. In addition, Alamogordo Federal's relationship with its depositors
and borrowers is also regulated to a great extent, especially in matters such as
the ownership of deposit accounts and the form and content of Alamogordo
Federal's mortgage documents. Alamogordo Federal must file reports with the OTS
and the FDIC concerning its activities and financial condition in addition to
obtaining regulatory approvals prior to entering into certain transactions such
as mergers with, or acquisitions of, other financial institutions. There are
periodic examinations by the OTS and the FDIC to review Alamogordo Federal's
compliance with various regulatory requirements. The regulatory structure also
gives the regulatory authorities extensive discretion in connection with their
supervisory and enforcement activities and examination policies, including
policies with respect to the classification of assets and the establishment of
adequate loan loss reserves for regulatory purposes. Any change in policies,
whether by the OTS, the FDIC or Congress, could have a material adverse impact
on Alamogordo Federal and its operations.

Federal Regulation of Savings Associations

        Office of Thrift Supervision. The OTS is an office in the Department of
the Treasury. It generally possesses the supervisory and regulatory duties and
responsibilities formerly vested in the Federal Home Loan Bank Board. Among
other functions, the OTS issues and enforces regulations affecting federally
insured savings associations and regularly examines these institutions.

        Federal Home Loan Bank System. The Federal Home Loan Bank System,
consisting of 12 banks, is under the jurisdiction of the Federal Housing Finance
Board. Alamogordo Federal, as a member of the Federal Home Loan Bank of Dallas,
is required to acquire and hold shares of capital stock in the Federal Home Loan
Bank of Dallas in an amount equal to the greater of 1.0% of the aggregate
outstanding principal amount of residential mortgage loans, home purchase
contracts and similar obligations at the beginning of each year, or 1/20 of its
borrowings from the Federal Home Loan Bank of Dallas. Alamogordo Federal is in
compliance with this requirement. Among other benefits, the Federal Home Loan
Bank of Dallas provides a central credit facility primarily for member
institutions.

        Federal Deposit Insurance Corporation. The FDIC is an independent
federal agency that insures the deposits, up to prescribed statutory limits, of
depository institutions. The FDIC currently maintains two separate insurance
funds: the Bank Insurance Fund and the Savings Association Insurance Fund. As
insurer of Alamogordo Federal's deposits, the FDIC has examination, supervisory
and enforcement authority over Alamogordo Federal.

        The FDIC may terminate the deposit insurance of any insured depository
institution if it determines after a hearing that the institution has engaged or
is engaging in unsafe or unsound practices, is in an unsafe or unsound condition
to continue operations, or has violated any applicable law, regulation, order or
any condition imposed by an agreement with the FDIC. It also may suspend deposit
insurance temporarily during the hearing process for the permanent termination
of insurance, if the institution has no tangible capital. If insurance of
accounts is terminated, the accounts at the institution at the time of
termination, less subsequent withdrawals, shall continue to be insured for a
period of six months to two years, as determined by the FDIC. Management is
aware of no existing circumstances that could result in termination of the
deposit insurance of Alamogordo Federal.

Standards for Safety and Soundness

        The federal banking regulatory agencies have adopted regulatory
guidelines for all insured depository institutions relating to internal
controls, information systems and internal audit systems; loan documentation;
credit underwriting; interest rate risk exposure; asset growth; asset quality;
earnings; and compensation, fees and benefits. The guidelines outline the safety
and soundness standards that the federal banking agencies use to identify and
address problems at insured depository institutions before capital becomes
impaired. If the OTS determines that Alamogordo Federal fails to meet any
standard prescribed by the guidelines, it may require Alamogordo Federal to
submit to the agency an acceptable plan to achieve compliance with the standard.
OTS regulations establish deadlines for the submission and review of safety and
soundness compliance plans.

        Qualified Thrift Lender Test. All savings associations are required to
meet a qualified thrift lender test to avoid certain restrictions on their
operations. A savings institution that fails to become or remain a qualified
thrift lender shall either convert to a national bank charter or face the
following restrictions on its operations. These restrictions are: the
association may not make any new investment or engage in activities that would
not be permissible for national banks; the association may not establish any new
branch office where a national bank located in the savings institution's home
state would not be able to establish a branch office; the association shall be
ineligible to obtain new advances from any Federal Home Loan Bank; and the
payment of dividends by the association shall be under the rules regarding the
statutory and regulatory dividend restrictions applicable to national banks.
Also, beginning three years after the date on which the savings institution
ceases to be a qualified thrift lender, the savings institution would be
prohibited from retaining any investment or engaging in any activity not
permissible for a national bank and would be required to repay any outstanding
advances to any Federal Home Loan Bank. In addition, within one year of the date
on which a savings association controlled by a company ceases to be a qualified
thrift lender, the company must register as a bank holding company and follow
the rules applicable to bank holding companies. A savings institution may
requalify as a qualified thrift lender if it thereafter complies with the test.

        Currently, the qualified thrift lender test requires that either an
institution qualify as a domestic building and loan association under the
Internal Revenue Code or that 65% of an institution's "portfolio assets" consist
of certain housing and consumer-related assets on a monthly average basis in
nine out of every 12 months. Assets that qualify without limit for inclusion as
part of the 65% requirement are loans made to purchase, refinance, construct,
improve or repair domestic residential housing and manufactured housing; home
equity loans; mortgage-backed securities where the mortgages are secured by
domestic residential housing or manufactured housing; Federal Home Loan Bank
stock; direct or indirect obligations of the FDIC; and loans for educational
purposes, loans to small businesses and loans made through credit cards. In
addition, the following assets, among others, may be included in meeting the
test based on an overall limit of 20% of the savings institution's portfolio
assets: 50% of residential mortgage loans originated and sold within 90 days of
origination; 100% of consumer loans; and stock issued by Freddie Mac or Fannie
Mae. Portfolio assets consist of total assets minus the sum of goodwill and
other intangible assets, property used by the savings institution to conduct its
business, and liquid assets up to 20% of the institution's total assets. At June
30, 2001, Alamogordo Federal was in compliance with the qualified thrift lender
test.

        Capital Requirements.  Federal regulations require a savings association
must satisfy three minimum capital requirements: core  capital, tangible capital
and risk-based capital.  Savings associations must meet all of the standards in
order to comply with the capital requirements.

        OTS capital regulations establish a 3% core capital or leverage ratio
(defined as the ratio of core capital to adjusted total assets). Core capital is
defined to include common stockholders' equity, noncumulative perpetual
preferred stock and any related surplus, and minority interests in equity
accounts of consolidated subsidiaries, less any intangible assets, except for
certain qualifying intangible assets; certain mortgage servicing rights; and
equity and debt investments in subsidiaries that are not "includable
subsidiaries," which is defined as subsidiaries engaged solely in activities not
impermissible for a national bank, engaged in activities impermissible for a
national bank but only as an agent for its customers, or engaged solely in
mortgage-banking activities. In calculating adjusted total assets, adjustments
are made to total assets to give effect to the exclusion of certain assets from
capital and to account appropriately for the investments in and assets of both
includable and non-includable subsidiaries.

        Savings associations also must maintain "tangible capital" not less than
1.5% of Alamogordo Federal's adjusted total assets. "Tangible capital" is
defined, generally, as core capital minus any "intangible assets" other than
purchased mortgage servicing rights. Each savings institution must maintain
total risk-based capital equal to at least 8% of risk-weighted assets. Total
risk-based capital consists of the sum of core and supplementary capital,
provided that supplementary capital cannot exceed core capital, as previously
defined. Supplementary capital includes permanent capital instruments such as
cumulative perpetual preferred stock, perpetual subordinated debt and mandatory
convertible subordinated debt, maturing capital instruments such as subordinated
debt, intermediate-term preferred stock and mandatory convertible subordinated
debt, based on an amortization schedule, and general valuation loan and lease
loss allowances up to 1.25% of risk-weighted assets.

        The risk-based capital regulation assigns each balance sheet asset held
by a savings institution to one of four risk categories based on the amount of
credit risk associated with that particular class of assets. Assets not included
for purposes of calculating capital are not included in calculating
risk-weighted assets. The categories range from 0% for cash and securities that
are backed by the full faith and credit of the U.S. Government to 100% for
repossessed assets or assets more than 90 days past due. Qualifying residential
mortgage loans, including multi-family mortgage loans, are assigned a 50% risk
weight. Consumer, commercial, home equity and residential construction loans a
reassigned a 100% risk weight, as are non qualifying residential mortgage loans
and that portion of land loans and nonresidential construction loans that do not
exceed an 80% loan-to-value ratio. The book value of assets in each category is
multiplied by the weighing factor from 0% to 100% assigned to that category.
These products are then totaled to arrive at total risk-weighted assets.
Off-balance sheet items are included in risk-weighted assets by converting them
to an approximate balance sheet "credit equivalent amount" based on a conversion
schedule. These credit equivalent amounts are then assigned to risk categories
in the same manner as balance sheet assets and included risk-weighted assets.

        The OTS has incorporated an interest rate risk component into its
regulatory capital rule. Under the rule, savings associations with "above
normal" interest rate risk exposure would face a deduction from total capital
for purposes of calculating their risk-based capital requirements. A savings
association's interest rate risk is measured by the decline in the net portfolio
value of its assets, or the difference between incoming and outgoing discounted
cash flows from assets, liabilities and off-balance sheet contracts, that would
result from a hypothetical 200 basis point increase or decrease in market
interest rates divided by the estimated economic value of the association's
assets, as calculated in accordance with guidelines of the OTS. A savings
association whose measured interest rate risk exposure exceeds 2% must deduct an
interest rate risk component in calculating its total capital under the
risk-based capital rule. The interest rate risk component is an amount equal to
one-half of the difference between the institution's measured interest rate risk
and 2%, multiplied by the estimated economic value of the association's assets.
That dollar amount is deducted from an association's total capital in
calculating compliance with its risk-based capital requirement. Under the rule,
there is a two quarter lag between the reporting date of an institution's
financial data and the effective date for the new capital requirement based on
that data. A savings association with assets of less than $300 million and
risk-based capital ratios in excess of 12% is exempt from the interest rate risk
component, unless the OTS determines otherwise. The rule also provides that the
OTS may waive or defer an association's interest rate risk component on a
case-by-case basis. Under certain circumstances, a savings association may
request an adjustment to its interest rate risk component if it believes that
the calculated interest rate risk component, as calculated by the OTS,
overstates its interest rate risk exposure. In addition, certain
"well-capitalized" institutions may obtain authorization to use their own
interest rate risk model to calculate their interest rate risk component in lieu
of the amount as calculated by the OTS. The OTS has postponed the date that the
component will first be deducted from an institution's total capital. As of June
30, 2001, Alamogordo Federal was in compliance with all regulatory capital
requirements.

Capital Distributions

        OTS regulations govern capital distributions by savings institutions,
which include cash dividends, stock repurchases and other transactions charged
to the capital account of a savings institution to make capital distributions. A
savings institution must file an application for OTS approval of the capital
distribution if either (1) the total capital distributions for the applicable
calendar year exceed the sum of the institution's net income for that year to
date plus the institution's retained net income for the preceding two years, (2)
the institution would not be at least adequately capitalized following the
distribution, (3) the distribution would violate any applicable statute,
regulation, agreement or OTS-imposed condition, or (4) the institution is not
eligible for expedited treatment of its filings. If an application is not
required to be filed, savings institutions which are a subsidiary of a holding
company, as well as certain other institutions, must still file a notice with
the OTS at least 30 days before the board of directors declares a dividend or
approves a capital distribution.

Loans to One Borrower

        Savings institutions are generally required to follow the national bank
limit on loans to one borrower. Generally, this limit is 15% of its unimpaired
capital and surplus, plus an additional 10% of unimpaired capital and surplus,
if the loan is secured by readily marketable collateral, which is defined to
include certain financial instruments and bullion. The OTS by regulation has
amended the loans to one borrower rule to permit savings associations meeting
certain requirements, including capital requirements, to extend loans to one
borrower in additional amounts under circumstances limited essentially to loans
to develop or complete residential housing units. As of June 30, 2001,
Alamogordo Federal was in compliance with all loans to one borrower limitations.
See "Business of Alamogordo Financial Corporation--Lending Activities" for
further information.

Activities of Associations and Their Subsidiaries

        A savings association may establish operating subsidiaries to engage in
any activity that the savings association may conduct directly and may establish
service corporation subsidiaries to engage in certain pre-approved activities
or, with approval of the OTS, other activities reasonably related to the
activities of financial institutions. When a savings association establishes or
acquires a subsidiary or elects to conduct any new activity through a subsidiary
that the association controls, the savings association must notify the FDIC and
the OTS 30 days in advance and provide the information each agency may, by
regulation, require. Savings associations also must conduct the activities of
subsidiaries in accordance with existing regulations and orders.

        The OTS may determine that the continuation by a savings association of
its ownership control of, or its relationship to, the subsidiary constitutes a
serious risk to the safety, soundness or stability of the association or is
inconsistent with sound banking practices. Based upon that determination, the
FDIC or the OTS has the authority to order the savings association to divest
itself of control of the subsidiary. The FDIC also may determine by regulation
or order that any specific activity poses a serious threat to the Savings
Association Insurance Fund. If so, it may require that no Savings Association
Insurance Fund member engage in that activity directly.

Transactions with Affiliates

        Savings associations must comply with Sections 23A and 23B of the
Federal Reserve Act relative to transactions with affiliates in the same manner
and to the same extent as if the savings association were a Federal Reserve
member bank. A savings and loan holding company, its subsidiaries and any other
company under common control are considered affiliates of the subsidiary savings
association under the Home Owners Loan Act. Generally, Sections 23A and 23B
limit the extent to which the insured association or its subsidiaries may engage
in certain covered transactions with an affiliate to an amount equal to 10% of
the institution's capital and surplus and place an aggregate limit on all
transactions with affiliates to an amount equal to 20% of capital and surplus,
and require that all transactions be on terms substantially the same, or at
least as favorable to the institution or subsidiary, as those provided to a
non-affiliate. The term "covered transaction" includes the making of loans, the
purchase of assets, the issuance of a guarantee and similar types of
transactions.

        Any loan or extension of credit by Alamogordo Federal to an affiliate
must be secured by collateral in accordance with Section 23A.

        Three additional rules apply to savings associations. First, a savings
association may not make any loan or other extension of credit to an affiliate
unless that affiliate is engaged only in activities permissible for bank holding
companies. Second, a savings association may not purchase or invest insecurities
issued by an affiliate, other than securities of a subsidiary. Third, the OTS
may, for reasons of safety and soundness, impose more stringent restrictions on
savings associations but may not exempt transactions from or otherwise abridge
Section 23A or 23B. Exemptions from Section 23A or 23B may be granted only by
the Federal Reserve, as is currently the case with respect to all FDIC-insured
banks.

        Alamogordo Federal's authority to extend credit to executive officers,
directors and 10% shareholders, as well as entities controlled by those persons,
is currently governed by Sections 22(g) and 22(h) of the Federal Reserve Act,
and Regulation O thereunder. Among other things, these regulations require that
loans be made on terms and conditions substantially the same as those offered to
unaffiliated individuals and not involve more than the normal risk of repayment.
Regulation O also places individual and aggregate limits on the amount of loans
Alamogordo Federal may make to those persons based, in part, on Alamogordo
Federal's capital position, and requires certain board approval procedures to be
followed. The OTS regulations, with certain minor variances, apply Regulation O
to savings institutions.

Community Reinvestment Act

        Savings associations are required to follow the provisions of the
Community Reinvestment Act of 1977, which requires the appropriate federal bank
regulatory agency, in connection with its regular examination of a savings
association, to assess the savings association's record in meeting the credit
needs of the community serviced by the savings associations, including low and
moderate income neighborhoods. The regulatory agency's assessment of the savings
association's record is made available to the public. Further, an assessment is
required of any savings associations which has applied, among other things, to
establish a new branch office that will accept deposits, relocate an existing
office or merge or consolidate with, or acquire the assets or assume the
liabilities of, a federally regulated financial institution. Alamogordo Federal
received a "satisfactory" rating as a result of its most recent examination.

Holding Company Regulation

        General. AF Mutual Holding Company and Alamogordo Financial are
nondiversified mutual savings and loan holding companies within the meaning of
the HOLA. As such, AF Mutual Holding Company and Alamogordo Financial are
registered with the OTS and are subject to OTS regulations, examinations,
supervision and reporting requirements. In addition, the OTS has enforcement
authority over AF Mutual Holding Company and Alamogordo Financial and any
nonsavings institution subsidiaries. Among other things, this authority permits
the OTS to restrict or prohibit activities that are determined to be a serious
risk to the subsidiary savings institution. As federal corporations, Alamogordo
Financial and AF Mutual Holding Company are generally not subject to state
business organizations law.

        Permitted Activities. Pursuant to Section 10(o) of the HOLA and OTS
regulations and policy, a mutual holding company and a federally chartered
mid-tier holding company such as Alamogordo Financial may engage in the
following activities: (i) investing in the stock of a savings association; (ii)
acquiring a mutual association through the merger of such association into a
savings association subsidiary of such holding company or an interim savings
association subsidiary of such holding company; (iii) merging with or acquiring
another holding company, one of whose subsidiaries is a savings association;
(iv) investing in a corporation, the capital stock of which is available for
purchase by a savings association under federal law or under the law of any
state where the subsidiary savings association or associations share their home
offices; (v) furnishing or performing management services for a savings
association subsidiary of such company; (vi) holding, managing or liquidating
assets owned or acquired from a savings subsidiary of such company; (vii)
holding or managing properties used or occupied by a savings association
subsidiary of such company properties used or occupied by a savings association
subsidiary of such company; (viii) acting as trustee under deeds of trust; (ix)
any other activity (A) that the Federal Reserve Board, by regulation, has
determined to be permissible for bank holding companies under Section 4(c) of
the Bank Holding Company Act of 1956, unless the Director, by regulation,
prohibits or limits any such activity for savings and loan holding companies; or
(B) in which multiple savings and loan holding companies were authorized (by
regulation) to directly engage on March 5, 1987; and (x) purchasing, holding, or
disposing of stock acquired in connection with a qualified stock issuance if the
purchase of such stock by such savings and loan holding company is approved by
the Director. If a mutual holding company acquires or merges with another
holding company, the holding company acquired or the holding company resulting
from such merger or acquisition may only invest in assets and engage in
activities listed in (i) through (x) above, and has a period of two years to
cease any nonconforming activities and divest of any nonconforming investments.

        The HOLA prohibits a savings and loan holding company, including
Alamogordo Financial and AF Mutual Holding Company, directly or indirectly, or
through one or more subsidiaries, from acquiring another savings institution or
holding company thereof, without prior written approval of the OTS. It also
prohibits the acquisition or retention of, with certain exceptions, more than 5%
of a nonsubsidiary savings institution, a nonsubsidiary holding company, or a
nonsubsidiary company engaged in activities other than those permitted by the
HOLA; or acquiring or retaining control of an institution that is not federally
insured. In evaluating applications by holding companies to acquire savings
institutions, the OTS must consider the financial and managerial resources,
future prospects of the company and institution involved, the effect of the
acquisition on the risk to the insurance fund, the convenience and needs of the
community and competitive factors.

        The OTS is prohibited from approving any acquisition that would result
in a multiple savings and loan holding company controlling savings institutions
in more than one state, subject to two exceptions: (i) the approval of
interstate supervisory acquisitions by savings and loan holding companies, and
(ii) the acquisition of a savings institution in another state if the laws of
the state of the target savings institution specifically permit such
acquisitions. The states vary in the extent to which they permit interstate
savings and loan holding company acquisitions.

        Conversion of AF Mutual Holding Company to Stock Form. OTS regulations
permit AF Mutual Holding Company to convert from the mutual form of organization
to the capital stock form of organization (a "Conversion Transaction"). There
can be no assurance when, if ever, a Conversion Transaction will occur, and the
Board of Directors has no current intention or plan to undertake a Conversion
Transaction. In a Conversion Transaction a new holding company would be formed
as the successor to Alamogordo Financial (the "New Holding Company"), AF Mutual
Holding Company's corporate existence would end, and certain depositors of
Alamogordo Federal would receive the right to subscribe for additional shares of
the New Holding Company. In a Conversion Transaction, each share of Common Stock
held by stockholders other than AF Mutual Holding Company ("Minority
Stockholders") would be automatically converted into a number of shares of
common stock of the New Holding Company determined pursuant an exchange ratio
that ensures that after the Conversion Transaction, the percentage of the to-be
outstanding shares of the New Holding Company issued to Minority Stockholders in
exchange for their Common Stock would be equal to the percentage of the
outstanding shares of Common Stock held by Minority Stockholders immediately
prior to the Conversion Transaction. The total number of shares held by Minority
Stockholders after the Conversion Transaction would also be affected by any
purchases by such persons in the offering that would be conducted as part of the
Conversion Transaction.

Item 2..Properties

Properties

        We conduct our business through our administrative office and one branch
office. We own our administrative office building, and lease our branch office
facility. Our administrative offices are located at 500 10th Street, Alamogordo,
New Mexico. Our branch office is located at 233 New York Street, Alamogordo, New
Mexico. Our premises and equipment had a net book value of $___ million as of
June 30, 2001. We believe that our current facilities are adequate to meet our
present needs.

Item 3..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
these routine legal proceedings, in the aggregate, are immaterial to our
financial condition and results of operations.

Item 4..Submission of Matters to a Vote of Security Holders

        Not applicable.
                                            PART II

Item 5. Market for Registrant's Common Equity and Related Shareholder Matters

        Information included in the 2001 Annual Report to Shareholders is herein
incorporated by reference.

Item 6. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

        Information included in the 2001 Annual Report to Shareholders is herein
incorporated by reference.

Item 7. Financial Statements

        Information included in the 2001 Annual Report to Shareholders is herein
incorporated by reference.

Item 8. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure

        Not applicable.

                                           PART III

Item 9. Directors and Officers of the Registrant

        Information included in the Proxy Statement for the 2001 Annual Meeting
of Shareholders is incorporated herein by reference.

Item 10. Executive Compensation

        Information included in the Proxy Statement for the 2001 Annual Meeting
of Shareholders is incorporated herein by reference.

Item 11. Security Ownership of Certain Beneficial Owners and Management

        Information included in the Proxy Statement for the 2001 Annual Meeting
of Shareholders is incorporated herein by reference.

Item 12. Certain Relationships and Related Transactions

        Information included in the Proxy Statement for the 2001 Annual Meeting
of Shareholders is incorporated herein by reference.

                                            PART IV

Item 13. Exhibits and Reports on Form 8-K

        (a)    The following documents appear in sections of the Registrant's
               2001 Annual Report to Shareholders under the same caption, and
               are incorporated herein by reference. No other sections of the
               2001 Annual Report to Shareholders are incorporated herein by
               this reference.


<PAGE>



(2)     Report to Shareholders

(2)     Selected Financial and Other Data
(3)     Managements Discussion and Analysis of Financial Condition and Results
        of Operations
(4)     Independent Auditors' Report
(5)     Consolidated Financial Statements
               (i)    Consolidated Balance Sheets
               (ii)   Consolidated Statements of Income
               (iii)  Consolidated Statements of Changes in Equity
               (iv)   Consolidated Statements of Cash Flows
               (v)    Notes to Consolidated Financial Statements
(6)     Corporate Information
        (b)    The following exhibits are filed as part of this report.
       3.1     Certificate of Incorporation of Alamogordo Financial Corp.*
       3.2     Bylaws of Alamogordo Financial Corp.*
       4.0     Stock Certificate of Alamogordo Financial Corp.*
    10.1       Alamogordo Financial Corp. Employee Stock Ownership Plan
               and Trust**
    13         Alamogordo Financial Corp.  2001 Annual Report to Shareholders
        (c)                  Reports on Form 8-K
                                            None

*       Incorporated herein by reference into this document from the Exhibits to
        Form SB-2 Registration Statement, initially filed on December 16, 1999,
        Registration No. 333-92913.



<PAGE>


                                   SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) 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.


                                                   ALAMOGORDO FINANCIAL CORP.


Date:  9-25-01                              By:    /s/ R. Miles Ledgerwood
                                                   R. Miles Ledgerwood
                                                   President


        Pursuant to the requirements of the Securities Exchange of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.



By:   /s/ R. Miles Ledgerwood               By:    /s/ Norma J. Clute
      ------------------------------               -----------------------------
      R. Miles Ledgerwood, President               Norma J. Clute, Chief
      and Director                                 Financial Officer and
      (Principal Executive Officer)                 Treasurer
                                                  (Principal Financial and
                                                    Accounting Officer)

Date: 9-25-01                               Date:  9-25-01



By: /s/ Robert W. Hamilton                  By:    /s/ S. Thomas Overstreet
    ------------------------------                 -----------------------------
    Robert W. Hamilton,                            S. Thomas Overstreet,
    Chairman of the Board                          Director and Vice Chairman
Date: 9-25-01                               Date:  9-25-01



By: /s/ Jimmie D. Randall                   By:    /s/ Earl E. Wallin
    ------------------------------                 -----------------------------
    Jimmie D. Randall, Director                    Earl E. Wallin, Director

Date: 9-25-01                               Date:  9-25-01