Exhibit 13


<PAGE>

                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

     The  following  table  sets  forth  certain  financial  and  other  data of
Alamogordo Financial Corporation at the dates and for the periods indicated. For
additional  information  about  Alamogordo  Financial,   reference  is  made  to
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" and the Consolidated  Financial  Statements of Alamogordo  Financial
and related notes included elsewhere herein.

<TABLE>
<CAPTION>

                                                                          At June 30,
                                            -----------------------------------------------------------------------
                                                2004           2003           2002           2001           2000
                                            -----------    -----------    -----------    -----------    -----------
                                                                        (In Thousands)
Selected Financial Condition Data
<S>                                         <C>            <C>            <C>            <C>            <C>
Total assets............................    $   157,747    $   156,999    $   159,570    $   146,579    $   148,394
Loans receivable, net...................        108,964        100,595        116,543        122,995        116,782
Mortgage-backed securities:
 Held to maturity.......................             --             --             --            127            211

 Available for sale.....................            999          1,775          2,857          2,159          2,551
Securities:

 Held to maturity.......................          2,000          5,108            725          1,175          1,626
 Available for sale.....................         32,075         26,062          7,084          3,506         12,918
Deposits................................        116,238        118,823        130,989        118,257        116,298

Total borrowings........................         12,295          8,907             --             --          5,000
Equity..................................         27,976         28,077         27,292         26,817         25,814

</TABLE>

<TABLE>
<CAPTION>

                                                                      Year Ended June 30,
                                            -----------------------------------------------------------------------
                                                2004           2003           2002           2001           2000
                                            -----------    -----------    -----------    -----------    -----------
                                                             (In Thousands Except Per Share Data)
Selected Operating Data:
<S>                                         <C>            <C>            <C>            <C>            <C>
Total interest income.............          $     7,960    $     9,104    $     9,718    $    10,191    $    10,567
Total interest expense............                3,790          4,842          5,893          6,348          6,668
                                            -----------    -----------    -----------    -----------    -----------
 Net interest income....................          4,170          4,262          3,825          3,843          3,899
Provision (credit) for loan losses                  144            390            130             --            (50)
                                            -----------    -----------    -----------    -----------    -----------
 Net interest income after
provision for loan losses.........                4,026          3,872          3,695          3,843          3,949
                                            -----------    -----------    -----------    -----------    -----------

Other income......................                  481            519            433            426            384
Other expenses....................                3,440          3,356          3,282          3,058          3,076
                                            -----------    -----------    -----------    -----------    -----------
Income before income taxes........                1,067          1,035            846          1,211          1,257
                                            -----------    -----------    -----------    -----------    -----------
Provision for income taxes........                  391            379            292            435            428
                                            -----------    -----------    -----------    -----------    -----------
Net income........................          $       676    $       656    $       554    $       776    $       829
                                            ===========    ===========    ===========    ===========    ===========
Net income per share-basic........          $      0.53    $      0.52    $      0.44    $      0.62    $      0.67
                                            ===========    ===========    ===========    ===========    ===========
Net income per share-diluted......          $      0.52    $      0.51    $      0.44    $      0.62    $      0.67
                                            ===========    ===========    ===========    ===========    ===========
Dividends per share...............          $      0.72    $      0.68    $      0.64    $      0.41    $      0.11
                                            ===========    ===========    ===========    ===========    ===========

</TABLE>

                                       1

<PAGE>

<TABLE>
<CAPTION>
                                                                   At or for the Year Ended June 30,
                                                   ----------------------------------------------------------------
                                                     2004          2003          2002          2001          2000
                                                   --------      --------      --------      --------      --------

Key Operating Ratios and Other Data:

Performance Ratios:
<S>                                                    <C>           <C>           <C>           <C>            <C>
Return on assets (ratio of net income to
   average total assets)....................           0.43%         0.41%         0.35%         0.53%          0.53%
Return on equity (ratio of net income to
   average equity)..........................           2.41          2.39          2.05          2.97           3.67
Average interest rate spread................           2.50          2.37          2.03          2.13           2.32
Interest rate spread at end of period.......           2.41          2.00          2.10          2.16           2.19
Net interest margin (1).....................           2.89          2.85          2.65          2.87           2.77
Ratio of operating expenses to average total
   assets...................................           2.21          2.08          2.10          2.10           1.98
Ratio of average interest-earning assets to
   average interest-bearing liabilities.....         114.82        114.90        115.29        115.65         109.41
Efficiency ratio (2)........................          74.99         70.19         77.08         71.63          71.82
Dividend payout ratio.......................         136.36        131.27        144.14         65.01          16.15(3)

Asset Quality Ratio:
Non-performing assets to total assets.......           0.90          0.74          1.69          0.74           0.52
Allowance for loan losses to non-performing
   loans....................................         167.01         87.66         22.34         43.02          58.68
Allowance for loan losses to gross loans
   receivable...............................           0.29          0.53          0.46          0.33           0.35

Capital Ratios:
Equity to total assets at end of period.....          17.73         17.88         17.10         18.30          17.40
Average equity to average assets............          17.76         17.03         17.31         17.93          14.53

Other Data:
Number of full-service offices..............              2             2             2             2              2

-----------------------
<FN>
(1)      Net interest income divided by average interest-earning assets.
(2)      The efficiency ratio represents the ratio of operating expenses divided
         by the sum of net interest income and non-interest income less gain on
         sales of investments.
(3)      Reflects only one quarterly dividend declared.
</FN>
</TABLE>


                                       2
<PAGE>


           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Overview of Financial Condition and Results of Operations

     Alamogordo   Federal  Savings  and  Loan  Association  is  a  full-service,
community-oriented  savings  association  whose primary lending  activity is the
origination  of  loans  secured  by  real  estate,  and,  specifically,  one- to
four-family  residential real estate.  As of June 30, 2004,  $107.8 million,  or
95.3%, of our total loan portfolio consisted of loans secured by real estate. As
of that date, $87.5 million,  or 77.4% of our total loan portfolio  consisted of
one- to four-family residential real estate loans.

     Our results of  operations  depend  primarily on our net  interest  income,
which  is  the  difference  between  the  interest  income  we  receive  on  our
interest-earning assets, such as loans and securities,  and the interest expense
we pay on our deposits and  borrowings.  Results of operations are also affected
by other income and general, administrative and other expense, the provision for
losses on loans and income tax  expense.  Other  income  consists  primarily  of
banking  fees and  service  charges and gains  (losses) on sales of loans,  real
estate, and securities available for sale. Our general, administrative and other
expense  consists  primarily of salaries and employee  benefits,  occupancy  and
office expenses, advertising and promotion expense and data processing expenses.

     Net income increased $20,000,  or 3.0%, to $676,000 for the year ended June
30, 2004,  from  $656,000  for the year ended June 30, 2003.  An increase in net
interest  income was  partially  offset by a decrease in the  provision for loan
losses,  partially  offset by a decrease in total other  income,  an increase in
total other expense and an increase in the provision for income taxes.

     As  the  holding  company  of  a  federally   chartered  savings  and  loan
association,  our results of operations  are  significantly  affected by general
economic and competitive conditions,  and particularly change in market interest
rates,  government  policies  and actions of  regulatory  authorities.  Numerous
factors that are beyond our control can cause market  interest rates to increase
or decline.  In addition,  we are unable to predict future changes in government
policies and actions of regulatory authorities that could have a material impact
on our  financial  performance.  As a result,  we believe that changes in market
interest  rates,  government  policies  and  actions of  regulatory  authorities
represent the primary uncertainties in predicting our future performance.

Forward-Looking Statements

     This discussion and analysis reflects Alamogordo  Financial's  consolidated
financial  statements  and other  relevant  statistical  data and is intended to
enhance your understanding of our financial condition and results of operations.
You should read the  information in this section in conjunction  with Alamogordo
Financial's  consolidated  financial  statements  and their  notes and the other
statistical  data provided in this Annual  Report.  This Annual Report  contains
certain "forward-looking  statements" which may be identified by the use of such
words as "believe," "expect," "anticipate," "should," "planned," "estimated" and
"potential." Examples of forward-looking statements include, but are not limited
to, estimates with respect to our financial condition, results of operations and
business that are subject to various  factors that could cause actual results to
differ  materially from these  estimates and most other  statements that are not
historical in nature. These factors include, but are not limited to, general and
local economic conditions,  changes in interest rates, deposit flows, demand for
mortgage  and other  loans,  real estate  values,  and  competition;  changes in
accounting  principles,  policies,  or  guidelines;  changes in  legislation  or
regulation;  and other  economic,  competitive,  governmental,  regulatory,  and
technological factors affecting our operations,  pricing, products and services.
Alamogordo  Financial  does  not  undertake,   and  specifically  disclaims  any
obligation,  to publicly release the result of any revisions that may be made to

                                       3
<PAGE>


any forward-looking statements to reflect events or circumstances after the date
of such statements or to reflect the occurrence of anticipated or  unanticipated
events.

General

     Alamogordo  Financial's  results of operations  depend  primarily  upon the
results of operations of its wholly-owned subsidiary, Alamogordo Federal Savings
and  Loan  Association.   Alamogordo  Federal's  results  of  operations  depend
primarily on net interest income.  Net interest income is the difference between
the interest income we earn on our interest-earning assets, consisting primarily
of loans and investment and mortgage-backed  securities, and the interest we pay
on our interest-bearing  liabilities,  primarily savings accounts, time deposits
and other  borrowings.  Our  results  of  operations  are also  affected  by our
provision  for loan  losses,  other  income  and other  expense.  Other  expense
consists  primarily of non-interest  expenses,  including  salaries and employee
benefits,   occupancy,   data  processing  fees,  deposit  insurance   premiums,
advertising and other expenses.  Other income consists primarily of non-interest
income,  including  service charges and fees, gain (loss) on sale of real estate
owned  and  other  income.  Our  results  of  operations  may  also be  affected
significantly  by  general  and  local  economic  and  competitive   conditions,
particularly those with respect to changes in market interest rates,  government
policies and actions of regulatory authorities.

Critical Accounting Policies

     Our  accounting  and  reporting  policies are prepared in  accordance  with
accounting  principles  generally  accepted in the United  States of America and
conform to general  practices within the banking industry.  Accounting  policies
considered  critical to our  financial  results  include the  allowance for loan
losses,  accounting  for deferred  income taxes and the  recognition of interest
income.

     The methodology for determining the allowance for loan losses is considered
by  management  to be a critical  accounting  policy  due to the high  degree of
judgment  involved,  the  subjectivity  of  the  assumptions  utilized  and  the
potential for changes in the economic  environment  that could result in changes
to the amount of the allowance for loan losses considered necessary. We evaluate
our assets at least  quarterly,  and review their risk  components  as a part of
that evaluation.  See Note 1, Summary of Significant Accounting  Policies--Loans
in our Notes to Consolidated  Financial  Statements for a discussion of the risk
components.  We consistently  review the risk components to identify any changes
in trends.

     We use the asset and liability method of accounting for income taxes. Under
this method,  deferred tax assets and  liabilities are recognized for the future
tax  consequences  attributable to differences  between the financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases. If current  available  information  raises doubt as to the realization of
the deferred tax assets,  a valuation  allowance  is  established.  Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled.  We exercise  significant  judgment in  evaluating  the
amount and timing of  recognition of the resulting tax  liabilities  and assets,
including  projections of future taxable  income.  These judgments and estimates
are reviewed on a continual basis as regulatory and business factors change.

     Interest income on loans,  securities and other interest-earning  assets is
accrued  monthly  unless  management  considers the collection of interest to be
doubtful.  Loans are placed on nonaccrual status when payments are contractually
past due 90 days or more, or when management has determined that the borrower is
unlikely to meet contractual  principal or interest  obligations.  At such time,
unpaid  interest  is reversed by charging  interest  income.  Interest  payments
received on nonaccrual loans (including impaired loans) are recognized as income

                                       4

<PAGE>

unless future  collections  are doubtful.  Loans are returned to accrual  status
when  collectibility  is no  longer  considered  doubtful  (generally,  when all
payments have been brought current).


Management of Market Risk

     General.  As with  other  savings  and  loan  holding  companies,  our most
significant  form of market risk is interest rate risk.  Our assets,  consisting
primarily  of mortgage  loans,  have  longer  maturities  than our  liabilities,
consisting primarily of deposits.  As a result, a principal part of our business
strategy  is to manage  interest  rate risk and reduce the  exposure  of our net
interest  income to changes in market interest  rates.  Accordingly,  Alamogordo
Federal's  Board of Directors  has  established  an  Asset/Liability  Management
Committee which is responsible for evaluating the interest rate risk inherent in
Alamogordo Federal's assets and liabilities,  determining the level of risk that
is appropriate  given its business  strategy,  operating  environment,  capital,
liquidity and performance objectives, and managing this risk consistent with the
guidelines approved by the Board of Directors.  The  Asset/Liability  Management
Committee consists of senior management  operating under a policy adopted by the
Board of Directors and meets at least quarterly to review  Alamogordo  Federal's
asset/liability policies and interest rate risk position.

     Although we originate a significant  amount of 30-year fixed rate loans, we
believe that the interest  rate risk  generally  associated  with these loans is
mitigated by the  transient  nature of the persons  employed in our market area.
Because our local economy is heavily dependent on two U.S.  Government  military
installations located in Otero 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  those to borrowers  employed by the United  States
Government,  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.  In  addition,  from time to time we have and may  continue  to  purchase
adjustable-rate mortgage loans, and adjustable-rate and shorter-term securities.
We do not engage in trading activities or use derivative  instruments to control
interest rate risk.

     Alamogordo  Financial's  current  investment  strategy  is  to  maintain  a
securities portfolio that provides a source of liquidity and that contributes to
our  overall  profitability  and asset mix within  given  quality  and  maturity
considerations.   The  securities   portfolio   consists  primarily  of  federal
government  and  government  sponsored  corporation  securities.  A  portion  of
Alamogordo Financial's investment securities,  other than Federal Home Loan Bank
stock,  are  classified  as available  for sale to provide  management  with the
flexibility  to make  adjustments  to the  portfolio  in the event of changes in
interest rates, to fulfill  unanticipated  liquidity needs, or to take advantage
of alternative investment opportunities.


                                       5




<PAGE>

     Net Portfolio  Value. We measure interest rate sensitivity by computing the
amounts  by  which  the net  present  value  of an our cash  flow  from  assets,
liabilities and off balance sheet items (our net portfolio value or "NPV") would
change in the event of a range of  assumed  changes  in market  interest  rates.
These  computations  estimate  the  effect  on our NPV  from  instantaneous  and
permanent  100 to 300 basis point  increases  and 100 basis point  decreases  in
market interest rates.  Given the current low level of market interest rates and
the low  probability of further  significant  declines in absolute rates, we did
not calculate NPV for interest rate  decreases of greater than 100 basis points.
A basis point equals one  one-hundredth  of one percentage  point, and 100 basis
points equals one  percentage  point.  A change in interest  rates to 8% from 7%
would mean,  for example,  a 100 basis point  increase in the "Changes in Market
Interest Rates" column below.

     The following table presents Alamogordo  Federal's NPV at June 30, 2004, as
calculated by the Office of Thrift Supervision (the "OTS"),  which is based upon
quarterly information that Alamogordo Federal provided to the OTS.

<TABLE>
<CAPTION>

          Percentage Change in Net Portfolio Value
-----------------------------------------------------------
  Changes in
    Market         Projected                     Amount of
Interest Rates      Change(1)   Estimated NPV     Change
----------------   ----------   -------------   -----------
 (basis points)             (Dollars in Thousands)
    <S>                <C>            <C>           <C>
    300               (28)%          22,560        (8,863)
    200               (19)%          25,573        (5,850)
    100                (9)%          28,598        (2,826)
     --                --            31,423            --
   (100)                7%           33,604         2,181

<FN>
(1)  Calculated  as the  amount of change in the  estimated  NPV  divided by the
     estimated NPV assuming no change in interest rates.
</FN>
</TABLE>

     Certain  shortcomings  are  inherent in the  methodology  used in the above
interest rate risk measurement.  Modeling changes in NPV requires making certain
assumptions  which may or may not reflect the manner in which actual  yields and
costs respond to changes in market interest rates. In this regard, the NPV table
presented  assumes  that  the  composition  of  Alamogordo   Federal's  interest
sensitive  assets and  liabilities  existing at the beginning of a period remain
constant over the period being measured and assumes that a particular  change in
interest rates is reflected  uniformly  across the yield curve regardless of the
duration or re-pricing of specific assets and liabilities. Accordingly, although
the NPV table provides an indication of Alamogordo  Federal's interest rate risk
exposure at a particular  point in time, such  measurements  are not intended to
and do not  provide a  precise  forecast  of the  effect  of  changes  in market
interest rates on its net interest income,  and will differ from actual results.
Additionally,  the  guidelines  established  by the Board of  Directors  are not
strict limitations. While a goal of the Asset/Liability Management Committee and
the Board of  Directors  is to limit  projected  NPV changes  within the Board's
guidelines,  Alamogordo  Federal will not necessarily limit projected changes in
NPV if the required  action would  present  disproportionate  risk to Alamogordo
Federal's continued profitability.

<PAGE>


Average Balance Sheet

     The  following  table  presents for the periods  indicated the total dollar
amount of interest income from average interest-earning assets and the resultant
yields, as well as the interest expense on average interest-bearing liabilities,
expressed both in dollars and rates.  No tax equivalent  adjustments  were made.
All average balances are daily average  balances.  Non-accruing  loans have been
included in the table as loans carrying a zero yield.  Interest  income includes
fees that are considered adjustments to yields.

<TABLE>
<CAPTION>

                                                                  Years Ended June 30,
                                    -------------------------------------------------------------------------------
                                                      2004                                    2003
                                    --------------------------------------   -------------------------------------
                                      Average                    Average      Average                   Average
                                      Balance      Interest    Yield/Cost     Balance      Interest    Yield/Cost
                                    -----------   ----------   -----------   ----------   ----------   -----------
                                                                 (Dollars in Thousands)
Interest-earning assets:
<S>                                 <C>           <C>                 <C>     <C>         <C>                 <C>
  Loans receivable (1)............  $    99,445   $    6,762          6.80%   $ 108,935   $    8,136          7.47%
  Mortgage-backed securities (2)..        1,337           47          3.52%       2,336           94          4.02%
  Securities (2)..................       39,011        1,089          2.79%      21,294          598          2.81%
  Other interest-earning assets (3)       4,519           62          1.37%      16,764          276          1.65%
                                    -----------   ----------                 ----------   ----------
    Total interest-earning assets.      144,312        7,960          5.52%     149,329        9,104          6.10%
                                                  ----------                              ----------
Non-interest-earning assets.......       13,541                                  11,726
                                    -----------                              ----------
      Total assets................  $   157,853                              $  161,055
                                    ===========                              ==========

Interest-bearing liabilities:
  Transaction and savings deposits  $    21,601           41          0.19%  $   19,891          107          0.54%
  Certificate accounts............       92,733        3,422          3.69%     102,763        4,520          4.40%
  Borrowings......................       11,352          327          2.88%       7,306          215          2.94%
                                    -----------   ----------                 ----------   ----------
    Total interest-bearing
      liabilities.................      125,686        3,790          3.02%     129,960        4,842          3.73%
                                                  ----------                              ----------
Non-interest bearing liabilities..        4,129                                   3,667
                                    -----------                              ----------
      Total liabilities...........      129,815                                 133,627
    Equity........................       28,038                                  27,428
                                    -----------                              ----------
      Total liabilities and equity  $   157,853                              $  161,055
                                    ===========                              ==========
Net interest income ..............                $    4,170                              $    4,262
                                                  ==========                              ==========
Net interest rate spread (4)......                                    2.50%                                   2.37%
                                                               ===========                             ===========
Net interest-earning assets.......  $    18,626                              $   19,369
                                    ===========                              ==========
Net yield on average interest-
  earning assets (5)..............                      2.89%                                   2.85%
                                                  ==========                              ==========

Average interest-earning assets to
  average interest-bearing
  liabilities.....................       114.82%                                 114.90%
                                    ===========                              ==========
----------------------------------------
<FN>
(1)      Amounts are net of allowance for loan losses but include non-accrual
         loans. Interest is recognized on non-accrual loans only as and when
         received.
(2)      Securities are included at carrying value.
(3)      Other interest-earning assets include Federal Home Loan Bank of Dallas
         stock.
(4)      Net interest rate spread represents the difference between the weighted
         average yield on interest-earning assets and the weighted average cost
         of interest-bearing liabilities.
(5)      Net interest margin represents net interest income as a percentage of
         average interest-earning assets. .
</FN>
</TABLE>


                                       9
<PAGE>


Rate/Volume Analysis

     The  following  table  presents  the dollar  amount of changes in  interest
income and interest expense for major components of interest-earning  assets and
interest-bearing  liabilities.  It distinguishes  between the changes related to
outstanding  balances  and that due to the changes in interest  rates.  For each
category   of   interest-earning   assets  and   interest-bearing   liabilities,
information is provided on changes  attributable to (i) changes in volume (i.e.,
changes in volume multiplied by old rate),  (ii) changes in rate (i.e.,  changes
in rate multiplied by old volume),  and (iii) changes in rate/volume  (change in
rate multiplied by change in volume).

<TABLE>
<CAPTION>

                                                 2004 vs. 2003                                  2003 vs. 2002
                                  --------------------------------------------------------------------------------------
                                        Increase/(Decrease)                         Increase/(Decrease)
                                             Due to                                      Due to
                                  -------------------------------     Total   -------------------------------     Total
                                                          Rate/     Increase                                     Rate/
                                   Volume      Rate      Volume    (Decrease)  Volume       Rate      Volume
                                  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                                                        (In Thousands)
Interest-earning assets:
<S>                               <C>         <C>       <C>        <C>        <C>        <C>        <C>        <C>
  Loans receivable...........     $    (235)  $   (379) $    (760) $  (1,374) $     302  $    (299) $    (905) $    (902)
  Mortgage-backed securities.            (2)        (7)       (38)       (47)         4        (12)       (39)       (47)

  Investment securities......           (29)       233        287        491         (1)       388        104        491
  Other interest-earning assets          (3)       (21)      (190)      (214)        22       (183)         5       (156)
                                  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
    Total interest-earning
      assets.................          (269)      (174)      (701)    (1,144)       327       (106)      (835)      (614)
                                  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------

Interest-bearing liabilities:
  Transactions and savings
    deposits.................            (4)       (75)        13        (66)        10       (149)         8       (131)
  Certificate accounts.......          (102)       850     (1,846)    (1,098)       192       (952)      (375)    (1,135)
  Borrowings.................           (11)        42         81        112         --        215         --        215
                                  ---------  ---------  ---------  ---------  ---------   --------  ---------  ---------
Total interest-bearing
  liabilities..................        (117)       817     (1,752)    (1,052)       202       (886)      (367)    (1,051)
                                  ---------  ---------  ---------  ---------  ---------   --------  ---------  ---------

Net interest income..........     $    (152) $    (991) $   1,051  $     (92) $     125   $   (780) $    (468) $     437
                                  =========  =========  =========  =========  =========   ========  =========  =========

</TABLE>

Financial Condition

     Alamogordo  Financial's  total assets  increased by $748,000,  or 0.5%,  to
$157.7  million at June 30,  2004,  from $157.0  million at June 30,  2003.  The
increase resulted primarily from increases in securities,  loans receivable, and
real estate  owned,  partially  offset by  decreases in cash and due from banks,
interest-bearing deposits with banks, and stock in the Federal Home Loan Bank of
Dallas ("FHLB"). Securities,  including mortgage-backed securities, increased by
$2.2  million,  or 6.7%,  to $35.1  million  from  $32.9  million as a result of
purchases,  partially offset by sales, maturities,  calls and repayments.  Loans
receivable  increased by $8.4 million,  or 8.3%,  to $109.0  million from $100.6
million as a result of new loan originations and purchases  exceeding  principal
repayments and loan payoffs. Real estate owned increased by $674,000, or 120.6%,
to $1.2 million from $544,000 due to  foreclosures.  Cash and due from banks and
interest-bearing  deposits with banks  decreased by $9.6 million,  or 75.0%,  to
$3.2 million from $12.8  million  primarily due to efforts to deploy excess cash
into higher yielding investments. FHLB stock decreased by $779,000, or 48.7%, to
$832,000 from $1.6 million due to a mandatory repurchase by the FHLB of members'
excess stock.

     Total  deposits  decreased by $2.6 million,  or 2.2%, to $116.2  million at
June 30,  2004 from $118.8  million at June 30,  2003 as a result of  maturities
surpassing new account  openings.  Total borrowings  increased $3.4 million,  or
38.2%,  to $12.3  million  from  $8.9  million  as  advances  from the FHLB were
obtained in order to match the funding of two  commercial  real estate loans and
to  partially  fund the  purchase of a  residential  real estate  mortgage  loan
package, which were partially offset by principal repayments on these advances.

     Equity  decreased by $101,000 to $28.0  million at June 30, 2004 from $28.1
million  at June 30,  2003.  The  decrease  resulted  primarily  from a $603,000

                                       8


<PAGE>

decrease in accumulated other comprehensive  income related to unrealized losses
on securities available for sale and dividends paid to stockholders of $368,000,
partially  offset by  earnings  over the period of  $676,000  and the release of
$102,000  in ESOP  stock.  As of June 30,  2004,  Alamogordo  Federal  had $27.0
million of tangible capital or 17.1% of tangible  assets,  $27.0 million of core
capital or 17.1% of total  adjusted  assets,  and $27.4  million  of  risk-based
capital or 33.5% of risk-weighted assets.

Comparison of Operating Results for the Years Ended June 30, 2004 and 2003

     General.  Net income  increased  by $20,000,  or 3.0%,  to $676,000 for the
fiscal year ended June 30,  2004,  from  $656,000 for the fiscal year ended June
30,  2003.  The  increase  resulted  from a decrease in the  provision  for loan
losses,  partially  offset by a decrease in total other  income,  an increase in
total other expense and an increase in the provision for income taxes.

     Total Interest Income.  Total interest income decreased by $1.1 million, or
12.1%, to $8.0 million for the fiscal year ended June 30, 2004 from $9.1 million
for the fiscal year ended June 30, 2003. The decrease resulted from decreases in
interest and fees on loans  receivable  and  interest on other  interest-earning
assets,  and was  partially  offset by an increase  in  interest on  securities.
Interest and fees on loans  receivable  decreased by $1.3 million,  or 16.0%, to
$6.8 million from $8.1  million.  The  decrease  resulted  from a 67 basis point
decrease in the average  yield on the loan  portfolio  to 6.80% from 7.47% and a
$9.5 million,  or 8.7%,  decrease in the average balance of loans  receivable to
$99.4  million  from  $108.9   million.   Interest  on   securities   (including
mortgage-backed  securities)  increased by $444,000,  or 64.2%,  to $1.1 million
from $692,000.  This increase resulted from a $16.7 million, or 70.8%,  increase
in the average  balance of securities  and was  partially  offset by an 11 basis
point  decrease  in the  average  yield from 2.93% to 2.82%.  Interest  on other
interest-earning  assets  decreased  by  $214,000,  or 77.5%,  to  $62,000  from
$276,000.  This decrease  resulted from a $12.3 million  decrease in the average
balance of other interest-earning  assets and a decrease in the average yield of
28 basis points.  The decrease in the average  yield on  Alamogordo  Financial's
interest-earning  assets  was due to a  general  decrease  in  market  rates  of
interest.

     Total  Interest  Expense.  Interest  expense on deposits  decreased by $1.1
million or 23.9%,  to $3.5  million for the fiscal year ended June 30, 2004 from
$4.6  million  for the  fiscal  year ended June 30,  2003.  Interest  expense on
transaction  and savings  accounts  decreased to $41,000 from  $107,000,  as the
average  cost  decreased  to 0.19% from 0.54%,  and was  partially  offset by an
increase in the average  balance of  transaction  and savings  accounts to $21.6
million from $19.9 million.  Interest expense on certificate  accounts decreased
by $1.1  million  as the  average  cost  decreased  to 3.69%  from 4.40% and the
average balance decreased to $92.7 million from $102.8 million.  The decrease in
the average  cost of deposits is a result of a general  decrease in market rates
of interest. Interest expense on borrowings increased by $112,000 as the average
balance of FHLB  advances  increased by $4.1 million to $11.4  million from $7.3
million,  and was  partially  offset by a decrease in the average  cost to 2.88%
from 2.94%.

     Net Interest  Income.  Net interest income decreased by $92,000 or 2.2%, to
$4.2  million for the fiscal year ended June 30, 2004 from $4.3  million for the
fiscal year ended June 30,  2003.  Net  interest  rate  spread,  the  difference
between  the yield on  average  total  interest-earning  assets  and the cost of
average  total  interest-bearing  liabilities,  increased  by 13 basis points to
2.50%  from  2.37%,  and  net  interest  margin,  or net  interest  income  as a
percentage of average interest-earning assets, increased by four basis points to
2.89% from 2.85%.

     Provision for Loan Losses. We establish  provisions for loan losses,  which
are charged to operations, in order to maintain the allowance for loan losses at
a level that we believe is  appropriate  to absorb future  charge-offs  of loans
deemed uncollectible.  In determining the appropriate level of the allowance for
loan losses,  management  considers loss experience,  evaluations of real estate


                                       9

<PAGE>

collateral,  economic  conditions,  volume and type of lending and the levels of
nonperforming  and other classified  loans. The amount of the allowance is based
on estimates and the ultimate  losses may vary from such  estimates.  Management
assesses the allowance for loan losses on a quarterly basis and makes provisions
for loan losses as necessary in order to maintain the adequacy of the allowance.
In  addition,  various  regulatory  agencies,  as  an  integral  part  of  their
examination  process,  periodically review the allowance for loan losses and may
require  us to  recognize  additional  provisions  based  on their  judgment  of
information  available  to them at the time of their  examination.  Based on our
evaluation of these factors, a provision of $144,000 was made for the year ended
June 30, 2004,  and a provision of $390,000 was made for the year ended June 30,
2003.  The  allowance  for  loan  losses  was  $329,000,   or  167.0%  of  total
nonperforming  loans  at  June  30,  2004,  and  $540,000,  or  87.7%  of  total
nonperforming loans at June 30, 2003. Management analyzes the allowance for loan
losses on a quarterly  basis and will  recommend  an  additional  expense if its
review indicates the need for additional reserves.

     Other Income. Total other income decreased by $38,000, or 7.3%, to $481,000
from  $519,000.  Loss on sale of real estate owned totaled  $41,000 for the year
ended June 30, 2004 as compared  to a loss of $10,000  for the  previous  fiscal
year.  Gain on sale of loans  totaled  $1,000 as  compared  to  $62,000  for the
previous fiscal year as $5.1 million of loans were sold in the secondary  market
during the previous fiscal year. Gain on sale of investments totaled $49,000 for
the year ended June 30, 2004 as compared to no gain for the previous fiscal year
as securities were sold during the current fiscal year.

     Other Expense.  Total other expense increased by $84,000,  or 2.5%, to $3.4
million  for the fiscal year ended June 30,  2004.  Increases  in  salaries  and
benefits,  data  processing,  advertising,  and other were  partially  offset by
decreases in occupancy and insurance.

     Provision  for Income Taxes.  The  provision for income taxes  increased to
$391,000, or 36.6% of net income before income taxes, from $379,000, or 36.6% of
net income before income taxes.  The increase in the provision  resulted from an
increase in income before income taxes.


Liquidity and Capital Resources

     Our  liquidity  management  objective  is to  ensure  the  availability  of
sufficient  cash flows to meet all  financial  commitments  and to capitalize on
opportunities for expansion.  Liquidity management addresses the ability to meet
deposit withdrawals on demand or at contractual maturity, to repay borrowings as
they mature,  and to fund new loans and investments as opportunities  arise. Our
primary  sources  of  internally  generated  funds are  principal  and  interest
payments on loans  receivable,  cash flows generated from  operations,  and cash
flows generated by investments.  External sources of funds include  increases in
deposits and advances from the FHLB of Dallas.

     Alamogordo  Federal is required by OTS  regulations to maintain  sufficient
liquidity to ensure its safe and sound operation. This requirement, which varies
from time to time depending upon economic conditions and deposit flows, is based
upon a  percentage  of deposits  and  short-term  borrowings.  At June 30, 2004,
Alamogordo Federal's liquidity, as measured for regulatory purposes, was 27.9%.

     At June 30, 2004,  Alamogordo  Federal had loan commitments of $2.7 million
and unused lines of credit of $1.8 million.  Alamogordo Federal believes that it
has adequate  resources to fund loan  commitments  as they arise.  If Alamogordo
Federal  requires  funds beyond its internal  funding  capabilities,  additional
advances from the FHLB of Dallas are available. At June 30, 2004,  approximately
$53.0 million of time deposits  were  scheduled to mature within a year,  and we
expect that a portion of these time deposits will not be renewed upon maturity.


                                       10

<PAGE>

     Alamogordo Financial has not and does not currently intend to engage in any
significant  business  activity other than owning the common stock of Alamogordo
Federal.  In order to provide  sufficient  funds for its operations,  Alamogordo
Financial  retained and  invested 50% of the net proceeds of the stock  offering
remaining  after  making  the  loan  to  the  ESOP.  In the  future,  Alamogordo
Financial's  primary source of funds, other than income from its investments and
principal  and interest  payments  received  with  respect to the ESOP loan,  is
expected to be dividends from  Alamogordo  Federal.  As a stock savings and loan
association,  Alamogordo  Federal is subject to  regulatory  limitations  on its
ability to pay cash dividends.

Impact of Inflation and Changing Prices

     The  consolidated  financial  statements  and related  notes of  Alamogordo
Financial have been prepared in accordance with accounting  principles generally
accepted in the United States of America ("GAAP").  GAAP generally  requires the
measurement of financial  position and operating  results in terms of historical
dollars without  consideration  for changes in the relative  purchasing power of
money over time due to  inflation.  The impact of  inflation is reflected in the
increased cost of our operations.  Unlike industrial  companies,  our assets and
liabilities  are primarily  monetary in nature.  As a result,  changes in market
interest  rates  have a  greater  impact  on  performance  than the  effects  of
inflation.


                        SELECTED QUARTERLY FINANCIAL DATA

     A summary of selected quarterly financial data for the years ended June 30,
2004 and 2003 is as follows:

<TABLE>
<CAPTION>

                                          First             Second              Third             Fourth
                                         Quarter            Quarter            Quarter            Quarter
                                    -----------------  -----------------  -----------------  -----------------
                                                       (In Thousands Except Per Share Data)
Fiscal 2004
<S>                                 <C>                <C>                <C>                <C>
Interest income.................    $      2,053       $      2,004       $      1,953       $      1,950
Net interest income.............           1,040              1,022              1,032              1,076

Provision for losses............              36                 36                 36                 36
Income before provision for
  income taxes..................             338                247                273                209
Net income......................             214                159                173                130

Net income per common share:

  Basic.........................            0.17               0.13               0.13               0.10
  Diluted.......................            0.17               0.12               0.13               0.10


Fiscal 2003
Interest income.................    $      2,356       $      2,377       $      2,233       $      2,138
Net interest income.............           1,023              1,093              1,083              1,063
Provision for losses............             182                 22                 36                150
Income before provision for
  income taxes..................              72                355                378                230
Net income......................              56                223                239                138

Net income per common share:
  Basic.........................            0.04               0.18               0.19               0.11
  Diluted.......................            0.04               0.17               0.19               0.11
</TABLE>


                        COMMON STOCK AND RELATED MATTERS

     Alamogordo  Financial's  common  stock trades  over-the-counter  on the OTC
Bulletin  Board under the symbol  "ALMG." As of September  10, 2004,  Alamogordo

                                       11

<PAGE>


Financial had 149  stockholders  of record  (excluding  the number of persons or
entities  holding  stock in street name  through  various  brokerage  firms) and
1,308,911 shares outstanding, including 918,000 shares held by AF Mutual Holding
Company.

     The following  table sets forth market price and dividend  information  for
the common stock for the last two fiscal years.

<TABLE>
<CAPTION>

     Fiscal Year Ended                                                        Cash Dividends
       June 30, 2004                  High                   Low                 Declared
---------------------------  ---------------------  ---------------------  ---------------------
<S>                          <C>                    <C>                    <C>
First quarter                $       30.00          $       28.03          $   0.17 per share
Second quarter               $       35.10          $       28.00          $   0.17 per share
Third quarter                $       45.00          $       31.00          $   0.19 per share
Fourth quarter               $       45.00          $       40.00          $   0.19 per share
</TABLE>


<TABLE>
<CAPTION>

     Fiscal Year Ended                                                        Cash Dividends
       June 30, 2003                  High                   Low                 Declared
---------------------------  ---------------------  ---------------------  ---------------------
<S>                           <C>                   <C>                    <C>
First quarter                 $      29.75          $       24.25          $   0.17 per share
Second quarter                $      24.75          $       23.00          $   0.17 per share
Third quarter                 $      26.75          $       23.25          $   0.17 per share
Fourth quarter                $      30.00          $       27.00          $   0.17 per share
</TABLE>

     Payment of dividends on Alamogordo  Financial's  common stock is subject to
determination  and  declaration by the Board of Directors and will depend upon a
number of factors, including capital requirements, regulatory limitations on the
payment of dividends, Alamogordo Financial's results of operations and financial
condition,  tax  considerations  and  general  economic  conditions.  Alamogordo
Financial may look to Alamogordo  Federal as a source of funds with which to pay
dividends.  Alamogordo  Federal  is  limited by the OTS in the amount of and the
circumstances under which it may distribute capital to Alamogordo Financial.  No
assurance can be given that dividends will be declared or, if declared, what the
amount of dividends  will be, or whether such  dividends,  once  declared,  will
continue. Cash dividends of $0.13 per share were paid on the 918,000 shares held
by AF  Mutual  Holding  Company  at June 30,  2004 and 2003.  AF Mutual  Holding
Company waived receiving the balance of its dividends.


                                       12