EXHIBIT 13


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                                TABLE OF CONTENTS

                                                                         Page

MESSAGE TO OUR SHAREHOLDERS.................................................1

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA..............................3

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
 CONDITIONAND RESULTS OF OPERATIONS ........................................5

SELECTED QUARTERLY FINANCIAL DATA..........................................14

COMMON STOCK AND RELATED MATTERS...........................................14

CORPORATE INFORMATION......................................................15

STOCKHOLDER INFORMATION....................................................16



<PAGE>


                           MESSAGE TO OUR SHAREHOLDERS


                [LETTERHEAD OF ALAMOGORDO FINANCIAL CORPORATION]




Dear Shareholder,

Since I joined our family 18 years ago, the main focus of our Company has been
to capitalize on the many opportunities that come before us to provide financing
here in Otero County, while at the same time returning to our depositors and
shareholders, a return that is tangible. Achieving this goal requires that we
have the vision necessary to lead, and that we manage, execute and drive our
Company towards these goals.

In this my second letter to shareholders as President of our Company, I would
like to provide a framework for where we are going and why, and discuss the
context for the accomplishments of this past year.

As a community based organization, we operate in a market that contains diverse
ethnic backgrounds that require varying economic wants, needs, financial
services and consumer preferences. This diverse market does share one thing in
common. They desire financial services that offer tangible benefits. This
fundamental belief underlies what we consider to be substantial growth
opportunities.

In most communities, financial institutions have broadened the array of
financial products and services they offer. No longer can we continue to offer a
limited number of products, we must and are starting the process of widening our
scope of products and we see great potential growth opportunities. For example,
we are offering new deposit products that allow customers to add to a
certificate of deposit. We additionally are expanding our list of loan products
to include both consumer and commercial loans. These strategic initiatives will
position us to remain competitive and create additional revenues for our
Company.

The Year in Review

Our results for the past year reflect both the improvements we have made to our
Company as well as the challenges we continue to face. The driving force behind
our Company continues to be Alamogordo Federal Savings and Loan Association.
Still dedicated to its principle of providing mortgage loan financing, the
Association originated $23 million in mortgage loans this past year. Consumer
and Commercial financing increased to $7 million, up 12 %. Although the
financing of single family residences has remained Alamogordo Federal's
mainstay, its increased activity in the Consumer and Commercial areas is most
evident and offers greater potential for growth.

With declining interest rates this past year, our deposit base increased by 1.68
%. Deposits at year end totaled $118 million. Efforts to grow deposits are
presently underway.


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                                       13


Total net income equaled $776,138 and earnings per share were $0.62. Our
strength remains our equity which now totals $26,817,109.



We appreciate the continued support of all our shareholders and customers and
wish to thank our officers, directors and employees for their continued hard
work and the innovative ideas they generate every day. I am excited about the
tremendous prospects that lie ahead for Alamogordo Financial Corporation and can
only imagine our future as being a bright one!

Sincerely,

/s/ R. Miles Ledgerwood

R. Miles Ledgerwood
President & Chief Executive Officer





<PAGE>



                        SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

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

                                                                   At June 30,
                                                    ------------------------------------------
                                                     2001        2000       1999        1998
                                                    ------      ------     ------      -------
                                                                 (In Thousands)
Selected Financial Condition Data
<S>                                                  <C>       <C>        <C>        <C>
Total assets...........................              $146,579  $148,394   $156,158   $160,368
Loans receivable, net..................              122,995    116,782   115,949    109,766
Mortgage-backed securities:
  Held to maturity.....................                  127        211       319        976
  Available for sale...................                2,159      2,551     3,114      3,957
Securities:
  Held to maturity.....................                1,175      1,626     3,154      3,047
  Available for sale...................                3,506     12,918    13,916     24,733
Deposits...............................              118,257    116,298   122,469    126,659
Total borrowings.......................                   --      5,000    10,000     19,151
Equity.................................               26,817     25,814    22,441     22,066
</TABLE>

<TABLE>
<CAPTION>

                                                                 Year Ended June 30,
                                                      ---------------------------------------------------
                                                       2001           2000          1999           1998
                                                      ------         ------        ------         -------
          (In Thousands Except Per Share Data)
Selected Operating Data:
<S>                                                <C>           <C>          <C>           <C>
Total interest income.................             $  10,191     $  10,567    $  11,016     $  11,225
Total interest expense................                 6,348         6,668        7,279         7,176
 Net interest income..................                 3,843         3,899        3,737         4,049
Provision (credit) for loan losses....                    --           (50)          --            --
 Net interest income after provision for
  loan losses.........................                 3,843         3,949        3,737         4,049

Other income..........................                   426           384          260           213
Other expenses.......................                  3,058         3,076        3,022         2,611
Income before income taxes............                 1,211         1,257          975         1,651
Provision for income taxes............                   435           428          296           536
Net income............................             $     776     $     829    $     679     $   1,115
Net income per share-basic............             $    .623     $   0.665          N/M           N/M
Net income per share-diluted..........             $    .623     $   0.665          N/M           N/M
Dividends per share...................             $    .405     $   0.105          N/M           N/M
Number of shares used in per share
 calculation-basic and diluted........             1,246,440(1)  1,246,440(1)       N/M           N/M

</TABLE>
_______________________

N/M Not meaningful; no public shareholders during the year.
(1) Number of shares outstanding at June 30, 2001 and 2000 excludes 28,560
shares held by the employee stock ownership plan trust for Alamogordo Federal
Savings and Loan Association.


<PAGE>

<TABLE>
<CAPTION>
                                                        At or for the Year Ended June 30,
                                                     --------------------------------------
                                                     2001        2000       1999       1998
                                                     ----       ------     ------     -----
Key Operating Ratios and Other Data:

Performance Ratios:
<S>                                                 <C>        <C>        <C>        <C>
   Return on assets (ratio of net income
     to average total assets)....................   0.53%      0.53%      0.42%      0.72%
   Return on equity (ratio of net income
     to average equity)..........................   2.97       3.67       3.03       5.18
   Average interest rate spread..................   2.13       2.32       2.06       2.28
 Interest rate spread at end of period...........   2.10       2.16       2.19       2.23
 Net interest margin (1).........................   2.87       2.77       2.53       2.81
 Ratio of operating expenses to average
   total assets..................................   2.10       1.98       1.89       1.69
 Ratio of average interest-earning assets to
   average interest-bearing liabilities.......... 115.65     109.41     109.54     110.50
 Efficiency ratio (2)............................  71.63      71.82      75.61      61.26
 Dividend payout ratio...........................  65.01      16.15(3)      --         --

Asset Quality Ratio:
 Non-performing assets to total assets...........   0.74       0.52       0.33       0.51
 Allowance for loan losses to
   non-performing loans..........................  43.02      58.68      88.72      60.83
 Allowance for loan losses to gross
   loans receivable..............................   0.33       0.35       0.39       0.43

Capital Ratios:
 Equity to total assets at end of period.........  18.30      17.40      14.37      13.76
 Average equity to average assets................  17.93      14.53      13.96      13.89

Other Data:
 Number of full-service offices..................      2          2          2          1
</TABLE>

________________________

(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)     Includes only one quarterly dividend declared.




<PAGE>


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

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 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.

Management of Market Risk



<PAGE>


        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 if the borrower is 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 FHLB 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.

        Net Portfolio Value. In past years, many savings associations measured
interest rate sensitivity by computing the "gap" between the assets and
liabilities which were expected to mature or reprice within certain time
periods, based on assumptions regarding loan prepayment and deposit decay rates
formerly provided by the OTS. However, the OTS now requires the computation of
amounts by which the net present value of an institution's cash flow from
assets, liabilities and off balance sheet items (the institution's 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 an
institution's NPV from instantaneous and permanent 100 to 300 basis point
increases and decreases in market interest rates. A basis point equals one
one-hundreth 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.


<PAGE>



        The following table presents Alamogordo Federal's NPV at June 30, 2001,
as calculated by the OTS, which is based upon quarterly information that
Alamogordo Federal provided to the OTS.

                    Percentage Change in Net Portfolio Value
               -----------------------------------------------------
                   Changes
                  in Market     Projected     Estimated   Amount of
               Interest Rates    Change(1)       NPV       Change
               --------------   ----------    ---------- -----------
               (basis points)      (Dollars in Thousands)
                   300           (37)%        $17,557    $(10,379)
                   200           (25)          20,998      (6,938)
                   100           (12)          24,557      (3,379)
                    --            --           27,936          --
                  (100)            8           30,042       2,106
                  (200)           10           30,741       2,805
                  (300)           12           31,329       3,393
_______________________
(1) Calculated as the amount of change in the estimated NPV divided by the
estimated NPV assuming no change in interest rates.

        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 repricing 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,
                             ------------------------------------------------------------------------------------------------
                                          2001                            2000                           1999
                             -----------------------------   ---------------------------    ---------------------------------
                                                  Average                       Average                              Average
                             Average               Yield/     Average            Yield/      Average                 Yield/
                             Balance    Interest   Cost       Balance  Interest   Cost       Balance    Interest      Cost
                             -------   ---------- --------    -------  -------- --------    ---------   --------    ---------
                                                                 (Dollars in Thousands)

Interest-earning assets:
<S>                          <C>        <C>        <C>       <C>       <C>       <C>         <C>        <C>            <C>
 Loans receivable (1)......  $116,273   $ 9,126    7.85%     $117,055  $ 9,106   7.78%       $112,294   $ 8,994        8.01%
 Mortgage-backed
   securities (2)..........     2,538       156    6.15         3,058      171   5.59           4,010       219        5.46
 Securities (2)............    11,123       638    5.74        16,260      948   5.83          22,606     1,295        5.73
 Other interest-earning
   assets (3)..............     4,047       271    6.70         4,595      342   7.44           8,776       508        5.79
   Total interest-earning
     assets................   133,981    10,191    7.61       140,968   10,567   7.50         147,686    11,016        7.46
Non-interest-earning assets    11,956                          14,523                          12,569
     Total assets..........  $145,937                        $155,491                        $160,255

Interest-bearing liabilities:
 Transaction and savings
   deposits................   $17,191       442    2.57%     $ 18,531      446   2.41%       $ 18,181       430        2.37
 Certificate accounts......    96,492     5,765    5.97       101,477    5,738   5.65         106,572     6,354        5.96
 Borrowings................     2,165       141    6.51         8,840      484   5.48          10,075       495        4.91
   Total interest-bearing
     liabilities...........   115,848     6,348    5.48       128,848    6,668   5.18         134,828     7,279        5.40
Non-interest bearing
  liabilities..............     3,92                            4,049                           3,049
     Total liabilities.....  $119,772                        $132,897                        $137,877
   Equity..................  $ 26,165                        $ 22,594                        $ 22,378
     Total liabilities
       and equity..........  $145,937     3,843              $155,491    3,899               $160,255     3,737
Net interest income .......
Net interest rate spread (4)                       2.13%                         2.32%                                 2.06%
Net interest-earning assets  $18,133                         $ 12,120                       $  12,858
Net yield on average
 interest-earning
 assets (5)................                        2.87%                         2.77%                                 2.53%
Average interest-earning assets
 to average interest-bearing
 liabilities                  115.65%                          109.41%                         109.54%
</TABLE>

________________________________________
(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.



<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>

                                                      Years Ended June 30,
                          --------------------------------------------------------------------------------
                                        2001 vs. 2000                       2000 vs. 1999
                          ---------------------------------------   --------------------------------------
                                 Increase/(Decrease)                    Increase/(Decrease)
                                      Due to                               Due to
                           ---------------------------    Total     --------------------------     Total
                                                Rate/   Increase                        Rate/    Increase
                             Volume    Rate    Volume  (Decrease)   Volume     Rate    Volume   (Decrease)
                           --------    ----    ------  ----------   ------     ----    ------   ----------

                                                      (In Thousands)
Interest-earning assets:
<S>                          <C>      <C>      <C>       <C>        <C>       <C>       <C>         <C>
 Loans receivable........    $(460)   $  66    $ 414     $  20      $(482)    $   8     $ 586       $ 112
 Mortgage-backed
  securities.............       (8)      15      (22)      (15)        (8)        6       (46)        (48)
 Investment securities...      (37)      (8)    (265)     (310)       (44)       30      (333)       (347)
 Other interest-earning
  assets.................      (15)     (54)      (2)      (71)       (13)       73      (226)       (166)
   Total interest-earning
    assets...............     (520)      19      125      (376)      (547)      117       (19)       (449)

Interest-bearing liabilities:
  Transactions and savings
   deposits..............     (22)       18       --        (4)       (20)       40        (4)         16
  Certificate accounts...     (293)     336      (16)       27       (296)     (281)      (39)       (616)
  Borrowings.............       (6)      32     (369)     (343)       (21)       52       (42)        (11)
   Total interest-bearing
    liabilities..........     (321)     386     (385)     (320)      (337)     (189)      (85)       (611)

Net interest income......    $(199)   $(367)   $ 510     $ (56)     $(210)    $ 306     $  66       $ 162
</TABLE>


Financial Condition

        Alamogordo Financial's total assets decreased by $1.8 million, or 1.2%,
to $146.6 million at June 30, 2001, from $148.4 million at June 30, 2000. The
decrease resulted primarily from a decrease in securities, partially offset by
an increase in loans receivable and cash and cash equivalents. Securities,
including mortgage-backed securities, decreased by $10.3 million, or 59.5%, to
$7.0 million from $17.3 million as a result of maturities, repayments, calls,
and sales. Cash and cash equivalents increased by $2.5 million, or 78.1%, to
$5.7 million from $3.2 million primarily due to the proceeds from securities and
an increase in deposits, partially offset by the payoff of advances from Federal
Home Loan Bank and the funding of new loans. Loans receivable increased by $6.2,
or 5.3%, to $123.0 million from $116.8 million as a result of new loan
originations surpassing principal repayments and loan payoffs.

        Total deposits increased by $2.0 million, or 1.7%, to $118.3 million at
June 30, 2001 from $116.3 million at June 30,2000. The increase resulted from a
$1.2 million, or 6.4%, increase in transaction and savings deposits to $20.0
million from $18.8 million, and a $800,000 or .8%, increase in term certificates
to $98.3 million from $97.5 million. Total borrowings decreased by $5.0 million
as the result of the payoff of advances from Federal Home Loan Bank.



<PAGE>


        Equity increased by $1.0 million, or 3.9%, to $26.8 million from $25.8
million primarily due to earnings over the period and a $410,000 increase in
accumulated other comprehensive income related to unrealized gains on securities
available for sale, the effects of which were partially offset by dividends paid
of $223,000. As of June 30, 2001, Alamogordo Federal had $24.6 million of
tangible capital or 16.8% of tangible assets, $24.6 million of core capital or
16.8% of total adjusted assets, and $25.0 million of risk-based capital or 31.7%
of risk-weighted assets.

Comparison of Operating Results for the Years Ended June 30, 2001 and 2000

        General. Net income decreased by $53,000, or 6.4%, to $776,000 for the
fiscal year ended June 30, 2001, from $829,000 for the fiscal year ended June
30, 2000. The decrease resulted from a decrease in net interest income after the
provision (credit) for loan losses, partially offset by an increase in total
other income and a decrease in total other expenses.

        Total Interest Income. Total interest income decreased by $376,000, or
3.6%, to $10.1 million for the fiscal year ended June 30, 2001 from $10.5
million for the fiscal year ended June 30, 2000. The decrease resulted from
decreases in interest on securities and other interest-earning assets partially
offset by an increase in interest and fees on loans receivable. Interest and
fees on loans receivable increased by $20,000, or .2%, to $9.12 million from
$9.10 million. The increase resulted from a 7 basis point increase in the
average yield on the loan portfolio to 7.85% from 7.78%, partially offset by a
$800,000, or .7%, decrease in the average balance of loans receivable to $116.3
million from $117.1 million. Interest on securities (including mortgage-backed
securities) and other interest-earning assets decreased by $396,000, or 26.4%,
to $1.1 million from $1.5 million. This decrease resulted from a $6.2 million,
or 26.0%, decrease in the average balance of securities and other
interest-earning assets primarily due to maturities, repayments, calls, and
sales of securities, and a 10 basis point decrease in the average yield.

        Interest Expense. Interest cost of deposits increased by $23,000, or
 .4%, to $6.20 million for the fiscal year ended June 30, 2001 from $6.18 million
for the fiscal year ended June 30, 2000. The cost of deposits decreased as a
result of the decrease in the average balance of interest-bearing deposits to
$114.7 million from $120.0 million, partially offset by an increase in the
average cost of deposits to 5.46% from 5.15%. Interest expense on transaction
and savings accounts decreased to $442,000 from $446,000, as the average balance
of transaction and savings accounts decreased to $17.2 million from $18.5
million, and was partially offset by an increase in the average cost to 2.57%
from 2.41%. Interest expense on certificate accounts increased by $27,000, as
the average cost increased to 5.97% from 5.65%, and was partially offset by a
decrease in the average balance to $96.5 million from $101.5 million. Interest
expense on borrowings decreased by $343,000 due to a $6.7 million decrease in
average borrowings partially offset by a 103 basis point increase in average
cost of borrowings.

        Net Interest Income. Net interest income decreased by $56,000 or 1.4%,
to $3.8 million for the fiscal year ended June 30, 2001 from $3.9 million for
the fiscal year ended June 30, 1999. Net interest rate spread, the difference
between the yield on average total interest-earning assets and the cost of
average total interest-bearing liabilities, decreased by 19 basis points to
2.13% from 2.32%, and net interest margin, or net interest income as a
percentage of average interest-earning assets, increased by 10 basis points to
2.87% from 2.77%.



<PAGE>


        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 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. While management uses available information to recognize losses on
loans, future loan loss provisions may be necessary based on changes in economic
conditions. 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 judgement of
information available to them at the time of their examination. Based on our
evaluation of these factors, and our net loan charge-offs of $9,000 and $3,000
for the years ended June 30, 2001 and 2000, respectively, we made no provision
for loan losses during these periods. Additionally, and after consultation with
our independent auditors, we recognized a credit for loan losses of $50,000 for
the year ended June 30, 2000. The allowance for loan losses was $410,000, or
43.0% of total nonperforming loans at June 30, 2001 and $419,000, or 58.7% of
total nonperforming loans at June 30, 2000. Management believes that the
allowance for loan losses at June 30, 2001 and 2000 was adequate.

        Other Income. Total other income increased by $42,000, or 10.9%, to
$426,000 from $384,000. Service charges and fees increased by $68,000 primarily
due to deposit account service charges, loan late charges, and credit card
commissions. Gain on sale of premises and equipment totaled $29,000 for the year
ended June 30, 2000, as compared to no gain for the current period as a result
of the sale of land.

        Other Expense. Total other expense decreased by $18,000, or .6%, to
$3.06 million for the fiscal year ended June 30, 2001 from $3.08 million for the
year ended June 30, 2000. Salaries and benefits expense decreased by $21,000 and
other expense increased by $53,000. Federal insurance premiums and other
insurance expense decreased $25,000, primarily due to the fact that the Federal
Deposit Insurance Corporation assessment rate for savings associations was
lowered effective January 1, 2000. Advertising expense decreased by $37,000
primarily due to additional marketing programs in the previous period. In
aggregate, other expense decreased by $80,000, pursuant to an expense sharing
agreement entered into between Alamogordo Financial and AF Mutual Holding
Company. Alamogordo Financial is a majority owned subsidiary of AF Mutual
Holding Company.

        Provision for Income Taxes. The provision for income taxes increased to
$435,000, or 35.9% of net income before income taxes, from $428,000, or 34.0% of
net income before income taxes. The increase in the provision and the effective
tax rate reflects a decrease in tax-exempt securities and other changes in
deferred tax items, partially offset by a decrease in net income before income
taxes.


Comparison of Operating Results for the Years Ended June 30, 2000 and 1999

        General. Net income increased by $150,000, or 22.1%, to $829,000 for the
fiscal year ended June 30, 2000, from $679,000 for the fiscal year ended June
30, 1999. The increase resulted from an increase in net interest income after
the provision (credit) for loan losses and an increase in total other income,
partially offset by an increase in total other expenses and the provision for
income taxes.

        Total Interest Income. Total interest income decreased by $449,000, or
4.1%, to $10.6 million for the fiscal year ended June 30, 2000 from $11.0
million for the fiscal year ended June 30, 1999. The decrease resulted from
decreases in interest on securities and other interest-earning assets partially
offset by an increase in interest and fees on loans receivable.



<PAGE>


        Interest and fees on loans receivable increased by $112,000, or 1.2%, to
$9.1 million from $9.0 million. The increase resulted from a $4.8 million, or
4.3%, increase in the average balance of loans receivable to $117.1 million from
$112.3 million, partially offset by a 23 basis point decrease in the average
yield on the loan portfolio to 7.78% from 8.01%. The increase in average balance
of loans receivable resulted from a decrease in the prepayment of loans and a
decrease in loans sold, partially offset by a decrease in loan originations and
loans purchased.

        Interest on securities (including mortgage-backed securities) and other
interest-earning assets decreased by $561,000, or 28.1%, to $1.5 million from
$2.0 million. This decrease resulted from a $7.3 million, or 27.4%, decrease in
the average balance of securities due to maturities and repayment of principal,
the effects of which were partially offset by a 10 basis point increase in the
average yield on securities. The average balance of other interest-earning
assets decreased by $4.2 million, the effects of which were partially offset by
an increase in the average yield of 165 basis points.

        Interest Expense. Interest cost of deposits decreased by $600,000, or
8.8%, to $6.2 million for the fiscal year ended June 30, 2000 from $6.8 million
for the fiscal year ended June 30, 1999. The cost of deposits decreased as a
result of the decrease in the average balance of deposits to $120.0 million from
$124.8 million as well as a decrease in the average cost of deposits to 5.15%
from 5.44%. Interest expense on transaction and savings accounts increased to
$466,000 from $430,000, as the average balance of transaction and savings
accounts increased to $18.5 million from &18.2 million, and the average cost
increased to 2.41% from 2.37%. Interest expense on certificate accounts
decreased by $616,000, as the average balance decreased to $101.5 million from
$106.6 million, and the average cost decreased to 5.65% from 5.96%. Interest
expense on borrowings decreased by $11,000 due to a $1.2 million decrease in
average borrowings partially offset by a 56 basis point increase in average cost
of borrowings due to a general increase in shorter-term market rates of
interest.

        Net Interest Income. Net interest income increased by $162,000 or 4.4%,
to $3.9 million for the fiscal year ended June 30, 2000 from $3.7 million for
the fiscal year ended June 30, 1999. 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 26 basis points to
2.32% from 2.06%, and net interest margin, or net interest income as a
percentage of average interest-earning assets, increased by 24 basis points to
2.77% from 2.53%.

        Provision for Loan Losses. Based on the factors described above, and our
net loan charge-offs of $3,000 and $14,000 for the years ended June 30, 2000 and
1999, respectively, we made no provision for loan losses during these periods.
Additionally, and after consultation with our independent auditors, we
recognized a credit for loan losses of $50,000 for the year ended June 30, 2000.
This resulted in the allowance for loan losses decreasing to $419,000, or 58.7%
of total nonperforming loans at June 30, 2000 from $472,000, or 88.7% of total
nonperforming loans at June 30, 1999. Management believes that the allowance for
loan losses at June 30, 2000 and 1999 was adequate.

        Other Income. Total other income increased by $124,000, or 47.7%, to
$384,000 from $260,000. Service charges and fees increased by $90,000 primarily
due to ATM fee income and deposit account service charges. Gain on sale of
premises and equipment totaled $29,000 for the year ended June 30, 2000, as
compared to no gain for the previous period as a result of the sale of land.



<PAGE>


        Other Expense. Total other expense increased by $54,000, or 1.8%, to
$3.1 million for the fiscal year ended June 30, 2000 from $3.0 million for the
year ended June 30, 1999. Salaries and benefits expense increased by $95,000,
primarily due to a $47,000 increase in compensation expense, $30,000 of which
was attributable to the release of ESOP shares, and a $39,000 decrease in the
deferral of loan origination costs, as new loan originations decreased during
the latter period. Occupancy expense increased $39,000 in part due to a
recognition of a full year of branch office expenses in the latter period. Data
processing fees decreased by $70,000 due to Alamogordo Federal's conversion of
its data processing system during the earlier period. Federal insurance premiums
and other insurance expense decreased $29,000, primarily due to the fact that
the Federal Deposit Insurance Corporation (FDIC) assessment rate for SAIF
(Savings Association Insurance Fund) insured institutions was lowered effective
January 1, 2000. Advertising expense increased by $29,000 primarily due to
additional marketing programs.

        Provision for Income Taxes. The provision for income taxes increased to
$428,000, or 34.0% of net income before income taxes, from $296,000, or 30.4% of
net income before income taxes. The increase in the provision resulted from an
increase in net income before income taxes. The increase in effective tax rate
reflects a change in the mix of tax-exempt securities and other changes in
deferred tax items.

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, 2001,
Alamogordo Federal's liquidity, as measured for regulatory purposes, was 8.7%.

        At June 30, 2001, Alamogordo Federal had loan commitments of $1,508,000
and unused lines of credit of $405,000. 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, 2001, approximately $46.1
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.

        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



<PAGE>


        The consolidated financial statements and related notes of Alamogordo
Financial have been prepared in accordance with generally accepted accounting
principles ("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.

Impact of New Accounting Standards

        There are no recently issued accounting standards anticipated to have an
impact on future consolidated financial statements.


                        SELECTED QUARTERLY FINANCIAL DATA

        A summary of selected quarterly financial data for the years ended June
30, 2001 and 2000 is as follows:
<TABLE>
<CAPTION>

                                  First         Second         Third         Fourth
                                 Quarter        Quarter       Quarter        Quarter
                               -------------------------------------------------------
                                          (In Thousands Except Per Share Data)
<S>                              <C>           <C>            <C>           <C>
Fiscal 2001
Interest income............      $ 2,564       $ 2,560        $ 2,522       $ 2,545
Net interest income........          913           931            966         1,033
Provision for losses.......            0             0              0             0
Income before provision
 for income taxes..........          239           244            368           360
Net income.................          143           160            240           233

Net income per common share:
 Basic.....................      $  .115       $  .128        $  .193       $  .187
 Diluted...................         .115          .128           .193          .187

Fiscal 2000
Interest income............      $ 2,634       $ 2,647        $ 2,652       $ 2,634
Net interest income........          980           973            971           975
Provision for losses.......            0             0              0           (50)
Income before provision
 for income taxes..........          322           261            353           321
Net income.................          229           159            231           210

Net income per common share:
 Basic.....................      $  .184       $  .128       $   .185       $  .168
 Diluted.................           .184          .128           .185          .168
</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 15, 2001, Alamogordo
Financial had 152 stockholders of record (excluding the number of persons or
entities holding stock in street name through various brokerage firms) and
1,292,317 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 since Alamogordo Financial's initial public offering in May
2000.

Fiscal Year Ended                                            Cash Dividends
  June 30, 2001              High             Low              Declared
-----------------            ----             ---              --------
First quarter             $  11.7500     $  10.3750          $.105 per share
Second quarter            $  12.5000     $  11.6875          $.130 per share
Third quarter             $  17.5000     $  12.5000          $.170 per share
Fourth quarter            $  20.0000     $  17.0000          $.170 per share

 Fiscal Year Ended                                            Cash Dividends
  June 30, 2000              High             Low              Declared
-----------------            ----             ---              --------
Fourth quarter            $  10.6250     $  10.0000          $.105 per share


        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. AF Mutual Holding Company has waived the right to
receive all dividends declared on the 918,000 shares of Alamogordo Financial
that it owns.

<PAGE>

                        ALAMOGORDO FINANCIAL CORPORATION

                        CONSOLIDATED FINANCIAL STATEMENTS
                                  AND REPORT OF
                    INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

                             JUNE 30, 2001 AND 2000


<PAGE>




                        ALAMOGORDO FINANCIAL CORPORATION


                                Table of Contents

                                                                          Page

Report of Independent Certified Public Accountants                            1

Consolidated Financial Statements

       Consolidated Balance
       Sheets,                                                                2
       As of June 30, 2001 and 2000

       Consolidated Statements of Income
          Years Ended June 30, 2001, 2000 and 1999                            3

       Consolidated Statements of Changes in Equity,
          Years Ended June 30, 2001, 2000 and 1999                            4

       Consolidated Statements of Cash Flows,
          Years Ended June 30, 2001, 2000 and 1999                            5

Notes to Consolidated Financial Statements                                    7
























                                       ii


<PAGE>













               Report of Independent Certified Public Accountants



The Board of Directors
ALAMOGORDO FINANCIAL CORPORATION
Alamogordo, New Mexico

We have audited the consolidated balance sheets of Alamogordo Financial
Corporation and subsidiary (the Company) as of June 30, 2001 and 2000, and the
related consolidated statements of income, changes in equity and cash flows for
the years ended June 30, 2001, 2000 and 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Alamogordo Financial
Corporation and subsidiary as of June 30, 2001 and 2000, and the results of its
operations and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.





August 27, 2001
Alamogordo, New Mexico

                                       1
<PAGE>


                        ALAMOGORDO FINANCIAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                             JUNE 30, 2001 AND 2000
<TABLE>
<CAPTION>
                                                                           2001               2000
                                                                     ---------------      --------------
                               ASSETS

<S>                                                                <C>                  <C>
Cash and cash equivalents (Note 1)                                 $      5,724,038     $     3,159,098

Securities
      Available-for-sale (Note 2)                                         5,664,589          15,468,333
      Held-to-maturity (Note 2)                                           1,301,986           1,837,254

Loans, net (Note 3)                                                     122,995,101         116,781,986
Real estate owned                                                           132,987              52,471
Premises and equipment, net (Note 4)                                      8,183,930           8,491,526
Stock in Federal Home Loan Bank, at cost                                  1,519,600           1,435,400
Accrued interest                                                            781,482             911,749
Income taxes receivable                                                      14,861             -
Deferred income taxes (Note 9)                                             -                     26,942
Other assets                                                                260,629             229,729
                                                                     ---------------      --------------

                   TOTAL ASSETS                                    $    146,579,203     $   148,394,488
                                                                     ===============      ==============
</TABLE>

<TABLE>
<CAPTION>
                    LIABILITIES AND EQUITY

LIABILITIES

<S>                                                                <C>                  <C>
Deposits (Note 5)                                                  $    118,257,054     $   116,298,212
Escrows                                                                   1,063,288           1,035,321
Accrued interest and other liabilities                                      210,282             226,472
Deferred income taxes (Note 9)                                              231,470             -
Advances from Federal Home Loan Bank (Note 6)                              -                  5,000,000
Income taxes payable                                                       -                     20,163
                                                                     ---------------      --------------
          Total Liabilities                                             119,762,094         122,580,168

Contingent liabilities and commitments (Note 8)

EQUITY

Common Stock, $.10 par value, 10,000,000 shares authorized,
      1,275,000 shares outstanding                                          127,500             127,500
Additional paid in capital                                                3,187,379           2,857,154
Retained earnings, substantially restricted                              24,070,627          23,506,374
Unearned ESOP shares and stock awards                                     (558,705)           (257,040)
Accumulated other comprehensive income                                      (9,692)           (419,668)
                                                                     ---------------      --------------
          Total Equity                                                   26,817,109          25,814,320
                                                                     ---------------      --------------

                   TOTAL LIABILITIES AND EQUITY                    $    146,579,203    $   148,394,488
                                                                     ===============      ==============
</TABLE>


           See accompanying notes to consolidated financial statements

                                       2
<PAGE>

                                        ALAMOGORDO FINANCIAL CORPORATION
                                       CONSOLIDATED STATEMENTS OF INCOME
                                    YEARS ENDED JUNE 30, 2001, 2000 and 1999
<TABLE>
<CAPTION>

                                                                  2001               2000               1999
                                                              -------------      -------------      -------------
Interest income
<S>                                                         <C>                <C>                <C>
      Interest and fees on loans                            $    9,125,831     $    9,106,381     $    8,993,713
      Interest on securities                                       637,975            947,500          1,294,612
      Interest on mortgage-backed securities                       156,074            170,416            219,678
      Interest on other interest-earning assets                    271,242            342,178            508,279
                                                              -------------      -------------      -------------
          Total interest income                                 10,191,122         10,566,475         11,016,282

Interest expense
      Interest on deposits                                       6,206,593          6,183,890          6,783,713
      Interest on FHLB and other borrowings                        141,288            483,792            495,611
                                                              -------------      -------------      -------------
          Total interest expense                                 6,347,881          6,667,682          7,279,324
                                                              -------------      -------------      -------------
          Net interest income                                    3,843,241          3,898,793          3,736,958

Provision (credit) for loan losses (Note 3)                        -                 (50,000)            -
                                                              -------------      -------------      -------------
          Net interest income after provision for loan           3,843,241          3,948,793          3,736,958
          losses

Other income (loss)
      Service charges and fees                                     291,938            223,704            134,010
      Gain (loss) on sale of real estate owned                       2,779            (2,222)           (10,429)
      Gain on sale of premises and equipment                       -                   29,109            -
      Loss on sale of securities                                   (4,950)            -                  -
      Other                                                        136,463            133,093            135,850
                                                              -------------      -------------      -------------
          Total other income                                       426,230            383,684            259,431
                                                              -------------      -------------      -------------

Other expenses
      Salaries and benefits                                      1,342,670          1,363,944          1,269,169
      Occupancy                                                    693,535            688,500            650,785
      Data processing fees                                         273,953            266,060            335,658
      Federal insurance premiums and other insurance                67,056             91,690            120,846
      expense
      Advertising                                                   53,604             90,741             61,053
      Other                                                        627,634            575,114            584,095
                                                              -------------      -------------      -------------
          Total other expenses                                   3,058,452          3,076,049          3,021,606
                                                              -------------      -------------      -------------
          Income before income taxes                             1,211,019          1,256,428            974,783

Provision for income taxes (Note 9)                                434,881            427,517            296,299
                                                              -------------      -------------      -------------
          Net Income                                        $      776,138     $      828,911     $      678,484
                                                              =============      =============      =============

Net income per common share-basic (Note 13)                 $        0.623     $        0.665     $          N/A
                                                              =============      =============      =============
Minority shareholders cash dividends
  per common share (Note 13)                                $        0.405     $        0.105     $          N/A
                                                              =============      =============      =============
Number of shares used in per-share calculation-basic             1,246,440          1,246,440                N/A
(Note 13)                                                     =============      =============      =============
</TABLE>




           See accompanying notes to consolidated financial statements

                                        3

<PAGE>

<TABLE>
<CAPTION>


                                                     ALAMOGORDO FINANCIAL CORPORATION
                                               CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
                                                 YEARS ENDED JUNE 30, 2001, 2000 and 1999

                                                                                          Unearned      Accumulated
                                                          Additional                 ESOP Shares        Other
                                                            Paid-In     Retained       & Stock       Comprehensive         Total
                                             Stock          Capital     Earnings        Awards         Income             Equity
                                             ---------    -----------  ------------  -------------   --------------    -------------
<S>                                       <C>          <C>          <C>           <C>             <C>               <C>
Balances at June 30, 1998                  $       10   $      -     $  22,131,677 $      -        $      (65,950)   $   22,065,737
Dividends                                      -               -         (100,000)        -               -
                                                                                                                           (100,000)
Comprehensive income
   Net income                                  -               -           678,484        -               -
                                                                                                                            678,484
   Other comprehensive income,
     net of tax:
       Change in unrealized loss
         on securities available-for-sale,
         net of deferred income taxes of
         $(135,417)                            -               -            -             -              (203,133)         (203,133)
                                                                                                                       -------------
   Total comprehensive income
                                                                                                                            475,351
                                             ---------    -----------  ------------  -------------   --------------    -------------
Balances at June 30, 1999                          10          -        22,710,161        -              (269,083)       22,441,088
Net proceeds from stock offering              127,490       2,857,154       -             -               -               2,984,644
Sale of ESOP Stock                             -               -            -           (285,600)         -                (285,600)
Payment on ESOP Stock note                     -               -            -             28,560          -
                                                                                                                             28,560
Release of ESOP Stock                          -               -             1,788        -               -
                                                                                                                              1,788
Dividends                                      -               -           (34,486)       -               -                 (34,486)
Comprehensive income
   Net income                                  -               -           828,911        -               -                 828,911
   Other comprehensive income,
     net of tax:
       Change in unrealized loss
         on securities available-for-sale,
         net of deferred income taxes of
         $(100,393)                            -               -            -             -              (150,585)         (150,585)
                                                                                                                       -------------
   Total comprehensive income
                                                                                                                            678,326
                                             ---------    -----------  ------------  -------------   --------------    -------------
Balances at June 30, 2000                     127,500       2,857,154   23,506,374      (257,040)        (419,668)       25,814,320
Issuance of stock awards                       -              330,225       -           (330,225)         -                  -
Payment on ESOP stock note                     -               -            -             28,560         -
                                                                                                                             28,560
Release of ESOP stock                          -               -            10,638        -               -
                                                                                                                             10,638
Dividends                                      -               -          (222,523)       -               -                (222,523)
Comprehensive income
   Net income                                  -               -           776,138        -               -                 776,138
   Other comprehensive income,
     net of tax:
       Change in unrealized loss
         on securities available-for-sale,
         net of deferred income taxes of
         $273,317                              -               -            -             -               409,976           409,976
                                                                                                                       -------------
   Total comprehensive income                                                                                             1,186,114
                                             ---------    -----------  ------------  -------------   --------------    -------------
Balances at June 30, 2001                  $  127,500   $   3,187,379 $ 24,070,627 $    (558,705)  $       (9,692)   $   26,817,109
                                             =========    ===========  ============  =============   ==============    =============
</TABLE>

See accompanying notes to consolidated financial statements


                                       4
<PAGE>

                        ALAMOGORDO FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    YEARS ENDED JUNE 30, 2001, 2000 and 1999

<TABLE>
<CAPTION>

                                                            2001               2000               1999
                                                         ------------      -------------      -------------
Cash flows from operating activities:
<S>                                                   <C>               <C>                <C>
      Net income                                      $      776,138    $       828,911    $       678,484
      Adjustments to reconcile net income to net cash
          provided by operating activities
               Depreciation and amortization                 368,089            361,602            346,224
               Net amortization of premiums and
                 discounts on securities                      15,821             17,552             15,842
               (Gain) loss on sales of other real            (2,779)              2,222             10,429
               estate
                 owned
               Deferred income taxes                         258,412           (26,942)            -
               Gain on sales of premises and                  -                (29,109)            -
               equipment
               Loss on sale of securities                      4,950            -                  -
               Decrease in provision for loan losses          -                (50,000)            -
      (Increase) decrease in accrued interest               130,267             43,269           (188,076)
      Increase in other assets                              (30,900)           (27,954)              (858)
      Increase in income taxes receivable                   (14,861)            -                  -
      Decrease in accrued interest and other                (20,049)           (23,980)          (260,709)
      liabilities
      Increase (decrease) in income taxes payable           (16,304)            20,163             -
                                                         ------------      -------------      -------------
          Net cash provided by operating activities       1,468,784          1,115,734            601,336

Cash flows from investing activities:
      Proceeds from sales of securities                    4,994,000            -                  -
      available-for-sale
      Proceeds from maturities of securities               5,734,217         2,919,450         29,783,020
      available-for-sale
      Proceeds from maturities of securities
          held-to-maturity                                    -                109,668            949,002
      Purchases of securities available-for-sale              -                 -             (18,342,278)
      Purchases of securities held-to-maturity                -                 -                (399,299)
      Acquisition of FHLB stock                             (84,200)          (103,300)           (72,200)
      Net increase in loans                              (6,213,115)          (782,566)        (6,183,909)
      Proceeds from sales of premises and equipment           -                  63,947            -
      Purchases of premises and equipment                   (60,493)          (142,762)          (447,204)
      Net proceeds from sales of real estate owned          (77,737)           (54,693)            14,571
                                                         ------------      -------------      -------------
          Net cash provided by investing activities       4,292,672          2,009,744          5,301,703

Cash flows from financing activities:
      Net increase (decrease) in deposits                 1,958,842        (6,161,910)        (4,198,896)
      Net increase in escrows                                27,967            29,051             24,825
      Payments on note payable
                                                              -                 -               (150,500)
      Payments on advances from Federal Home Loan
        bank                                             (5,000,000)        (5,000,000)            -
      Cash dividends paid on common stock                  (222,523)           (34,486)         (100,000)
      Proceeds from stock offering                            -              2,984,644             -
      Release of ESOP shares                                 10,638              1,788             -
      Unearned ESOP shares                                    -               (285,600)            -
      Payments on unearned ESOP shares                       28,560             28,560             -
                                                         ------------      -------------      -------------
          Net cash used in financing activities          (3,196,516)        (8,437,953)        (4,424,571)
                                                         ------------      -------------      -------------
</TABLE>

                                       5

<PAGE>


                        ALAMOGORDO FINANCIAL CORPORATION
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                    YEARS ENDED JUNE 30, 2001, 2000 and 1999
<TABLE>
<CAPTION>

                                                            2001               2000               1999
                                                         ------------      -------------      -------------

<S>                                                        <C>              <C>                  <C>
Net increase in cash and cash equivalents                  2,564,940        (5,312,475)          1,478,468

Cash and cash equivalents, beginning of year               3,159,098          8,471,573          6,993,105
                                                         ------------      -------------      -------------

Cash and cash equivalents, end of year                $    5,724,038    $     3,159,098    $     8,471,573
                                                         ============      =============      =============

Non-cash investing and financing activities
      Transfers of loans to real estate owned         $      367,306    $       143,665    $       140,804
      FHLB stock dividends                                    84,200            103,300             72,200


Supplemental disclosures of cash flow information
      Income taxes paid                               $      449,100    $       359,000    $       278,000
      Interest expense                                     6,359,468          6,667,330          7,272,584

</TABLE>

See accompanying notes to consolidated financial statements

                                       6

<PAGE>


                        ALAMOGORDO FINANCIAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                       YEARS ENDED JUNE 30, 2001 AND 2000


NOTE 1  SIGNIFICANT ACCOUNTING POLICIES

               NATURE OF OPERATIONS

               Alamogordo Financial Corporation is a stock holding company that
               owns 100% of Alamogordo Federal Savings and Loan Association (the
               Association). The Association is a federally chartered stock
               savings association and has a wholly owned subsidiary, Space Age
               City Service Corporation. Space Age City Service Corporation was
               organized to hold, purchase and sell real estate assets.
               Alamogordo Financial Corporation was incorporated on April 30,
               1997 and is a majority owned subsidiary of AF Mutual Holding
               Company.

               The Company provides a variety of banking services to individuals
               and businesses through their location in Alamogordo, New Mexico.
               Their primary deposit products are demand deposits, certificates
               of deposit, NOW and money market accounts. Their primary lending
               products are real estate mortgages and commercial loans. The
               Company is subject to competition from other financial
               institutions and to regulation by certain federal agencies and
               undergoes periodic examinations by these regulatory authorities.

               Over 75% of the Company's 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. Accordingly, the ultimate collectibility of the
               Company's loan portfolio is susceptible to changes in market
               conditions in southern New Mexico. In addition, the Company's
               investment portfolio is directly impacted by fluctuations in
               market interest rates.

               Rising and falling interest rate environments can have various
               impacts on an association's net interest income, depending on the
               short-term interest rate gap that an association maintains, the
               relative changes in interest rates that occur when an
               association's various assets and liabilities reprice, unscheduled
               repayments of loans, early withdrawals of deposits, and other
               factors.

               BASIS OF CONSOLIDATION

               The consolidated financial statements include the accounts of the
               Company and its subsidiary. Significant intercompany accounts and
               transactions have been eliminated.




                                        7
<PAGE>


NOTE 1  SIGNIFICANT ACCOUNTING POLICIES, Continued

               BASIS OF FINANCIAL STATEMENT PRESENTATION

               The preparation of financial statements in conformity with
               generally accepted accounting principles requires management to
               make estimates and assumptions that affect the reported amounts
               of assets and liabilities and disclosure of contingent assets and
               liabilities at the date of the financial statements and the
               reported amounts of revenues and expenses during the reporting
               period. Actual results could differ from these estimates.

               Material estimates that are particularly susceptible to
               significant change relate to the determination of the allowance
               for losses on loans and the valuation of real estate acquired in
               connection with foreclosures or in satisfaction of loans. In
               connection with the determination of the allowances for losses on
               loans and foreclosed real estate, management obtains independent
               appraisals for significant properties.


               CASH AND CASH EQUIVALENTS

               For the purpose of reporting cash flows, the Company defines cash
               and cash equivalents as cash on hand and investments in
               certificates of deposits with original maturities of three months
               or less. Included in cash and cash equivalents are
               interest-bearing deposits with the Federal Home Loan Bank of
               $3,003,109 and $807,798 at June 30, 2001 and 2000, respectively.

               SECURITIES

               The Company's investments in securities are classified in two
               categories and accounted for as follows:

                      Securities Held-to-Maturity: Bonds, notes and debentures
                      for which the Company has the positive intent and ability
                      to hold to maturity are reported at cost, adjusted for
                      amortization of premiums and accretion of discounts which
                      are recognized in interest income using the interest
                      method over the period to maturity.





                                       8
<PAGE>


NOTE 1  SIGNIFICANT ACCOUNTING POLICIES, Continued

               SECURITIES, continued

                      Securities Available-for-Sale: Securities
                      available-for-sale consist of bonds, notes, debentures,
                      and certain equity securities not classified as securities
                      to be held-to-maturity. These securities are carried at
                      estimated fair value. Discounts and premiums are accreted
                      or amortized using the interest method.

               Unrealized holding gains and losses, net of tax, on securities
               available for sale are reported as a net amount in a separate
               component of equity until realized. Gains and losses on the sale
               of securities available for sale are determined using the
               specific-identification method.

               LOANS

               Loans are stated net of loan participations sold, the allowance
               for loan losses and deferred loan fees, net of deferred loan
               costs. Interest on other loans is accrued based on the principal
               amounts outstanding. Unearned interest on home improvement loans
               is amortized into income by the interest method. The Company
               discontinues accruing interest on loans when the loans become
               ninety days past due and when management believes that the
               borrower's financial condition is such that collection of
               interest is doubtful.

               Because some loans may not be repaid in full, an allowance for
               loan losses is maintained. Increases to the allowance are
               recorded by a provision for loan losses charged to expense.
               Estimating the risk of loss and the amount of loss on any loan is
               necessarily subjective. Accordingly, the valuation allowance is
               maintained at levels considered adequate to cover losses based on
               delinquencies, property appraisals, past loss experience, general
               economic conditions, information about specific borrower
               situations including their financial position, and other factors
               and estimates which are subject to change over time. While
               management may periodically allocate portions of the allowance
               for specific problem loan situations, including impaired loans
               discussed below, the whole allowance is available for any
               charge-offs that occur.

               Loans considered to be impaired are reduced to the present value
               of expected future cash flows or to the fair value of collateral,
               by allocating a portion of the allowance for loan losses to such
               loans. If these allocations cause the allowance for loan losses
               to require increase, such increase is reported as a provision for
               loan losses.





                                        9


<PAGE>


NOTE 1  SIGNIFICANT ACCOUNTING POLICIES, Continued

               Smaller balance homogenous loans are defined as residential first
               mortgage loans secured by one-to-four-family residences,
               residential construction loans, and share loans and are evaluated
               collectively for impairment. Commercial real estate loans are
               evaluated individually for impairment. Normal loan evaluation
               procedures, as described in the second preceding paragraph, are
               used to identify loans, which must be evaluated for impairment.
               Depending on the relative size of the credit relationship, late
               or insufficient payments of 30 to 90 days will cause management
               to reevaluate the credit under its normal loan evaluation
               procedures. While the factors which identify a credit for
               consideration for measurement of impairment or nonaccrual are
               similar, the measurement considerations differ. A loan is
               impaired when management believes it is probable they will be
               unable to collect all amounts due according to the contractual
               terms of the loan agreement. A loan is placed on nonaccrual when
               payments are more than 90 days past due unless the loan is
               adequately collateralized and in the process of collection.


               PREMISES AND EQUIPMENT

               Premises and equipment are stated at cost less accumulated
               depreciation and amortization. Depreciation and amortization are
               computed using the straight line method in amounts sufficient to
               relate the cost of depreciable assets to operations over the
               estimated useful lives of the assets which range from three to
               seven years for equipment and fifteen to forty years for
               leasehold improvements and buildings. Maintenance and repairs
               that do not extend the useful lives of premises and equipment are
               charged to expense as incurred.

               REAL ESTATE OWNED

               Real estate properties acquired through, or in lieu of, loan
               foreclosures are initially recorded at the lower of cost or fair
               value, less estimated selling expenses, at the date of
               foreclosure. Costs relating to improvement of property are
               capitalized, whereas cost relating to the holding of property is
               expensed.







                                       10


<PAGE>


NOTE 1  SIGNIFICANT ACCOUNTING POLICIES, Continued

               INCOME TAXES

               The Company records income tax expense based on the amount of
               taxes due on its tax return, plus deferred taxes computed based
               on the expected future tax consequences of temporary differences
               between the carrying amounts and tax bases of assets and
               liabilities, using enacted tax rates. A valuation allowance has
               been recorded to reduce deferred tax assets to the amount
               expected to be realized.

               LOAN ORIGINATION FEES AND COSTS

               Loan origination fees and certain direct origination costs are
               capitalized and recognized as an adjustment of the yield over the
               contractual life of the related loan.

               COMPREHENSIVE INCOME

               Comprehensive income consists of net income and unrealized gains
               and losses on securities available for sale.

               RECLASSIFICATIONS

               Some items in these financial statements have been reclassified
for comparability.
























                                       11


<PAGE>


NOTE 2  SECURITIES

         The amortized cost and fair value were as follows:
<TABLE>
<CAPTION>

                                                              Gross           Gross
                                           Amortized       Unrealized      Unrealized         Fair
        June 30, 2001:                        Cost            Gains          Losses           Value
                                          -------------    ------------    ------------    ------------
<S>                                          <C>        <C>             <C>             <C>
        Securities available-for-sale
          U.S.Government agencies            3,500,000  $        5,469  $       -       $    3,505,469
          Mortgage-backed securities
             FHLMC                             691,258          -             (15,004)         676,254
             GNMA                              403,670          -              (2,752)         400,918
             FNMA                            1.085,816          -              (3,868)       1,081,948
                                          -------------    ------------    ------------    ------------
                                          $  5,680,744  $        5,469  $     (21,624)  $    5,664,589
                                          =============    ============    ============    ============

        Securities held-to-maturity
          Mortgage-backed securities
             FHLMC                             126,827          -                (803)  $      126,024
          Securities issued by states
            and political subdivisions       1,175,159          12,186          -            1,187,345
                                          -------------    ------------    ------------    ------------
                                          $  1,301,986  $       12,186  $        (803)  $    1,313,369
                                          =============    ============    ============    ============


                                                              Gross           Gross
                                           Amortized       Unrealized      Unrealized         Fair
        June 30, 2000:                        Cost            Gains          Losses           Value
                                          -------------    ------------    ------------    ------------
        Securities available-for-sale
          U.S.Government agencies       $   13,498,793  $       -       $    (580,980)  $   12,917,813
          Mortgage-backed securities
            FHLMC                              843,136          -             (41,572)         801,564
            GNMA                               519,686          -             (13,279)         506,407
            FNMA                             1,306,166          -             (63,617)       1,242,549
                                          -------------    ------------    ------------    ------------
                                        $   16,167,781  $       -       $    (699,448)  $   15,468,333
                                          =============    ============    ============    ============

        Securities held-to-maturity
          Mortgage-backed securities
            FHLMC                       $      211,484  $       -       $      (3,160)  $      208,324
          Securities issued by states
            and political subdivisions       1,625,770             200        (11,965)       1,614,005
                                          -------------    ------------    ------------    ------------
                                        $    1,837,254  $          200  $     (15,125)  $    1,822,329
                                          =============    ============    ============    ============



</TABLE>






                                       12


<PAGE>


NOTE 2  SECURITIES, Continued

               Securities, carried at approximately $2,044,000 and $3,350,000 at
               June 30, 2001 and 2000, respectively, were pledged to secure
               public and private deposits. The public depositor was Otero
               County.

               Gross proceeds from the sale of an available-for-sale security
               and the gross realized loss on this sale were $4,994,000 and
               $4,950, respectively, for the year ended June 30, 2001. No
               securities were sold during the years ended June 30, 2000 and
               1999.

               Amortized cost and fair value of debt securities by contractual
               maturity are shown below. Expected maturities may differ from
               contractual maturities because borrowers may call or prepay
               obligations.

                                                        June 30, 2001

                                               Amortized Cost        Fair
                                                                    Value
                                               --------------- -----------------
           Due in one year or less           $        450,036 $         451,125
           Due in one year to five years            4,230,592         4,241,689
           Mortgage-backed securities               2,285,947         2,285,144
                                               --------------- -----------------
                                             $      6,966,575 $       6,977,958
                                               =============== =================















                                       13
<PAGE>

NOTE 3  LOANS AND THE ALLOWANCE FOR LOAN LOSSES

        Loans reflected in the balance sheets consist of the following:

                                                                June 30
                                                 2001                  2000
                                            ----------------      --------------
          Mortgage Loans
            One-to-four family             $    108,661,166    $  104,587,499
            Multi-family and nonresidential       8,815,715         7,410,258
            Construction                            290,870           259,556
            Land                                    363,644           530,782
                                            ----------------      --------------
               Total first mortgage loans
          Consumer & other loans
             Second mortgage                      2,008,328         1,830,181
             Consumer                             1,502,792         1,347,353
             Commercial                           1,995,597         1,362,263
             Deposit account                      1,471,465         1,693,119
                                            ----------------      --------------
               Total non-mortgage loans           6,978,182         6,232,916
                                            ----------------      --------------
          Gross Loans                           125,109,577       119,021,011
          Less
             Deferred loan fees
               & discounts                        (569,656)          (527,828)
             Loans in process                   (1,135,692)        (1,291,502)
             Allowance for loan loss              (409,128)          (419,695)
                                            ----------------      --------------
                Net loans                  $   122,995,101     $  116,781,986
                                            ================      ==============

        An analysis of the allowance for loan losses follows:

                                                          June 30
                                                2001                  2000
                                          ------------------    ----------------
          Balance at beginning of year    $         419,695   $         472,553
             Provision (credit) for loan          -                    (50,000)
          losses
             Loans charged off, net
          of recoveries                             (10,567)            (2,858)
                                          ------------------    ----------------
          Balance at end of year          $         409,128   $         419,695
                                          ==================    ================

        Certain loans within the Company's loan and real estate owned
        portfolios are guaranteed by the Veterans Administration (VA). In
        the event of default by the borrower, the VA can elect to pay the
        guaranteed amount or take possession of the property. If the VA
        takes possession of the property, the Company is entitled to be
        reimbursed for the outstanding principal balance, accrued
        interest and certain other expenses. There were no commitments
        from the VA to take title to foreclosed VA







                                       14

<PAGE>



NOTE 3  LOANS AND THE ALLOWANCE FOR LOAN LOSSES, Continued

               properties at June 30, 2001 and 2000.

               Included in net loans were loans on nonaccrual status. Such loans
               approximated $816,000 and $714,000 at June 30, 2001 and 2000,
               respectively. For the years ended June 30, 2001, 2000 and 1999,
               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, $46,600 and $34,000, respectively. No
               amounts were included in interest income on such loans for the
               years ended June 30, 2001, 2000 and 1999, respectively.

               As of or for the periods ended June 30, 2001 and 2000, there were
               no loans considered to be impaired.



NOTE 4  PREMISES AND EQUIPMENT

               Premises and equipment reflected in the balance sheets consist of
the following:

                                                            June 30
                                                   2001               2000
                                               --------------   ---------------
              Land                          $     895,330         $  895,330
              Buildings                         7,466,648          7,464,195
              Leasehold improvements              214,178            210,036
              Furniture and equipment           1,211,401          1,157,502
                                               --------------   ---------------
                                                9,787,557          9,729,064
              Less
                 Accumulated depreciation      (1,603,627)        (1,235,537)
                                               --------------   ---------------
              Balance at end of year        $   8,183,930          8,491,526
                                               ==============   ===============









<PAGE>


                                       15

NOTE 5  DEPOSITS

        Deposits include non-interest-bearing accounts of $2,454,596 and
        $1,999,825 at June 30, 2001 and 2000, respectively.

        Certificates of deposit are scheduled to mature as follows:


        One year or less                      $     46,122,432
        Over one year to two years                  21,008,930
        Over two years to three years               17,319,788
        Over three years                            13,840,036
                                                ---------------
                                              $     98,291,186
                                                ===============

        Interest expense by major category of deposits is as follows (dollars in
thousands):

                                                        June 30
                                      ------------------------------------------
                                      -------------  -------------  ------------
                                          2001           2000          1999
                                      -------------  -------------  ------------

       Transaction & saving deposits  $    442,094   $    446,064   $   429,925
       Certificate accounts              5,764,499      5,737,826     6,353,788
                                      -------------  -------------  ------------
                                      $  6,206,593   $  6,183,890   $ 6,783,713
                                      =============  =============  ============


        Deposits of $100,000 or more totaled $25,190,000 and $26,104,000
        at June 30, 2001 and 2000, respectively. Deposits greater than
        $100,000 are not federally insured. The Company held deposits of
        approximately $1,576,000 and $1,643,000 for related parties at
        June 30, 2001 and 2000, respectively. The related parties consist
        of officers and directors of the Company and are made on the same
        terms and conditions as other non-related parties.


NOTE 6  ADVANCES FROM FEDERAL HOME LOAN BANK

               The Association has the ability to borrow funds from the Federal
               Home Loan Bank of Dallas (FHLB) of up to 50% of total assets.
               Advances are secured by a blanket-floating lien on qualifying
               first mortgage loans. There were no advances as of June 30, 2001.
               Advances from FHLB were $5,000,000 at June 30, 2000. These
               advances had an interest rate of 6.69% and matured on July 31,
               2000.








                                       16
<PAGE>

NOTE 7  EMPLOYEE RETIREMENT BENEFIT PLAN

               The Company has established a profit-sharing 401(k) type salary
               reduction plan for all employees that meet the necessary
               eligibility requirements for participation in the plan.
               Participants fully vest after six years of service. Annual
               contributions are at the discretion of the Board of Directors of
               the Company. Contributions to the plan were made by the Company
               of $12,721, $17,152 and $13,950 for the period ended June 30,
               2001, 2000 and 1999, respectively.

               The Company also participates in a multi-employer defined benefit
               pension plan. The pension plan is available to all employees
               completing one year of service. Segregated statements of plan
               assets or separate actuarial valuations are not available. Total
               pension expense was $570, $3,204 and $2,792 for the period ended
               June 30, 2001, 2000 and 1999, respectively.

NOTE 8  CONTINGENT LIABILITIES AND COMMITMENTS

               In the normal course of business, various commitments are
               outstanding, such as commitments to extend credit. These
               financial instruments with off-balance sheet risk are not
               reflected in the consolidated financial statements. Management
               does not anticipate any significant losses as a result of these
               transactions. The following summarizes these financial
               instruments:
                                                               June 30,
                                                        2001             2000
                                                     ------------     ----------
                Commitments to extend credit      $   1,508,000      $  310,000
                Unused line of credit
                                                        405,000         211,000

               Since certain commitments to make loans and fund lines of credit
               expire without being used, the amounts do not necessarily
               represent future cash commitments. In addition, commitments used
               to extend credit are agreements to lend to a customer as long as
               there is no violation of any condition established in the
               contract. The Company's exposure to credit loss in the event of
               nonperformance by the other party to these financial instruments
               is represented by the contractual amount of these instruments.
               The Company follows the same credit policy to make such
               commitments as is followed for those loans recorded on the
               consolidated balance sheet.

               As of June 30, 2001, variable rate and fixed rate commitments to
               make loans amounted to approximately $0 and $1,508,000. The
               interest rates on fixed rate commitments ranged from 6.75% to
               9.5%. As of June 30, 2000, variable rate and fixed rate
               commitments to make loans amounted to approximately $0 and
               $310,000. The interest rates on fixed rate commitments ranged
               from 8.50% to 9.50.

               The Company is required by regulatory authorities to maintain
               certain daily cash balances. The Company's reserve requirements
               were met through vault cash at June 30, 2001 and 2000.


                                       17
<PAGE>

NOTE 9  INCOME TAXES

        The Company and subsidiaries file a consolidated income tax
        return. The Company recognizes deferred tax assets and
        liabilities for future tax consequences of events that have been
        previously recognized in the Company's financial statements or
        tax returns. The measurement of deferred tax assets and
        liabilities is based on provisions of the currently enacted tax
        law. The effects of future changes in tax laws or rates are not
        anticipated.

        The provision for income taxes consists of the following:

                                                      June 30
                             ---------------------------------------------------
                                 2001                2000              1999
                             --------------      -------------     -------------
                             --------------      -------------     -------------
        Current
           Federal         $      406,725     $       371,900   $      303,290
           State                   29,725              16,700          (10,390)
                             --------------      -------------     -------------
                                  436,450             388,600          292,900
        Deferred
           Federal                 (2,538)             36,956            3,236
           State                      969               1,961              163
                             --------------      -------------     -------------
                                   (1,569)             38,917            3,399
                             --------------      -------------     -------------
                           $      434,881     $       427,517   $      296,299
                             ==============      =============     =============
        Effective Tax Rate           35.9%                34%               30%
                             ==============      =============     =============


        The income tax differs from the amounts computed by applying the
        statutory federal income tax rate of 34% to income before income
        taxes as follows:

                                           2001         2000           1999
                                        -----------  ------------   ------------
        Expense at statutory rate       $  411,746   $   427,186    $  331,426
        State income taxes, net of
           federal tax benefit              20,591        11,022        (6,898)
        Nontaxable municipal
           Interest income                 (13,537)      (21,921)      (32,462)
        Other, net                          16,081        11,230         4,233
                                        -----------  ------------   ------------
                                        $  434,881   $   427,517    $  296,299
                                        ===========  ============   ============












                                       18
<PAGE>

NOTE 9  INCOME TAXES, Continued


        The tax effects of temporary differences that give rise to
        significant portions of the deferred tax assets and liabilities
        are as follows:
<TABLE>
<CAPTION>
                                                                          June 30
                                                              -------------------------------
                                                                  2001              2000
                                                              -------------      ------------
<S>                                                        <C>                <C>
           Deferred tax assets
              Unrealized loss on available-for-sale
                 securities                                $       6,461      $    279,779
              Other than temporary loss on
                 investment in mutual fund                       291,885           291,885
              Bad debt reserve                                   185,103           148,831
              Reorganization expenses                              8,128             8,128
              Non-accrual loan interest                           20,013            18,629
                                                              -------------      ------------
           Total gross deferred tax assets
           Less valuation allowance                             (291,885)         (291,885)
                                                              -------------      ------------
            Total deferred tax assets                             219,705

           Deferred tax liabilities
              FHLB stock dividends                                328,718          295,038
              Loan origination costs                               58,598           62,023
              Book/tax depreciation                                63,859           71,364
                                                              -------------      ------------
           Total deferred tax liabilities                         451,175          428,425
                                                              -------------      ------------

              Net deferred tax assets (liabilities)        $     (231,470)    $     26,942
                                                              =============      ============
</TABLE>


        A valuation allowance was established at June 30, 1996 for the
        portion of the deferred tax asset created by the other than
        temporary loss on investment securities in a mutual fund.
        Management believes that a tax benefit will not be realized.

        Equity of the Association at June 30, 2001 and 2000 includes
        approximately $2,700,000 of bad debt deductions for tax years
        prior to 1987 for which no deferred federal income tax liability
        has been recorded. Tax legislation passed in August 1996 requires
        all thrift institutions to deduct a provision for bad debts for
        tax purposes based on the actual loss experience and recapture
        the excess bad debt reserve accumulated in the tax years between
        1987 and 1995 over a six-year period.


NOTE 10 CONCENTRATIONS OF CREDIT

        All of the Company's loans, commitments, and standby letters of
        credit have been granted to customers in the Company's market
        area. Investments in state and municipal securities also involve
        governmental entities within the Company's market area. The
        concentrations of credit by type of loan are set forth in Note 3.
        The distribution of commitments to extend credit approximates the
        distribution of loans outstanding. Standby letters of credit were
        granted primarily to commercial borrowers.

                                       19
<PAGE>

NOTE 11 REGULATORY CAPITAL


        The Association is subject to various regulatory capital
        requirements administered by the federal thrift agencies. Failure
        to meet minimum capital requirements can initiate certain
        mandatory, and possibly discretionary, actions by regulators
        that, if undertaken, could have a direct material effect on the
        Association's financial statements. Under capital adequacy
        guidelines and the regulatory framework for prompt corrective
        action, the Association must meet specific capital guidelines
        that involve quantitative measures of the Association's assets,
        liabilities, and certain off-balance sheet items as calculated
        under regulatory accounting practices. The Association's capital
        amounts and classification are also subject to qualitative
        judgements by the regulators about components, risk weightings,
        and other factors.

        Quantitative measures established by regulation to ensure capital
        adequacy require the Association to maintain minimum amounts and
        ratios (set forth below) of total and Tier I capital (as defined
        in the regulations) to risk-weighted assets (as defined) and of
        Tier I capital (as defined) to average assets (as defined).
        Management believes, as of June 30, 2001 and June 30, 2000, that
        the Association meets all capital adequacy requirements to which
        it is subject.

        As of June 30, 2001, the most recent notification from the Office
        of Thrift Supervision categorized the Association as well
        capitalized under the regulatory framework for prompt corrective
        action. There are no conditions or events since that notification
        that management believes have changed the Association's category.

        The following is a reconciliation of the Association's equity
        under generally accepted accounting principles (GAAP) to
        regulatory capital:

                                                             June 30
                                                    2001               2000
                                                --------------      ------------
        GAAP equity                          $   24,918,993      $  23,677,361
        Investment in subsidiary                   (295,143)          (299,246)
        Unrealized loss on securities
          available for sale                          9,692            419,668
                                                --------------      ------------
        Tier I (Core) capital                    24,633,542         23,797,783
        Equity investments and other assets
          required to be deducted                   (40,034)           (40,686)
        General allowance for loan losses           409,128            419,695
                                                --------------      ------------
        Total Risk-Based Capital             $    25,002,636     $  24,176,792
                                                ==============      ============






                                       20
<PAGE>

NOTE 11 REGULATORY CAPITAL, Continued


        The Association's OTS capital ratios were (dollars in thousands):
<TABLE>
<CAPTION>

                                                                            Requirements to be
                                                      Requirements to be     well capitalized
                                                          Adequately           under prompt
                                     Actual              Capitalized        corrective action
                                                                                provisions
                              ---------------------  --------------------- ---------------------
                               Amount   Percentage    Amount   Percentage   Amount   Percentage
                              --------- -----------  --------- ----------- --------- -----------
         June 30, 2001
<S>                             <C>          <C>   <C>               <C>      <C>          <C>
           Core capital         24,634       16.8% $    4,392        3.0%     7,320        5.0%
           Tier1 (Core)
            capital             24,634       16.8%      4,392        3.0%     8,783        6.0%

           Total Risk-based     25,003       31.7%      6,302        8.0%     7,878       10.0%
            capital

         June 30, 2000
           Core capital         23,798       16.0% $    4,466        3.0%     7,444        5.0%
           Tier1 (Core)         23,798       16.0%      4,466        3.0%     8,932        6.0%
            capital
           Total Risk-based     24,177       32.5%      5,950        8.0%     7,438       10.0%
            capital

</TABLE>


NOTE 12 DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS


        Statement of Financial Accounting Standards No. 107, Disclosures
        about Fair Value of Financial Instruments (FAS 107) requires that
        the Company disclose estimated fair values for its financial
        instruments. Fair value estimates, methods and assumptions are
        set forth below for the Company's financial instruments.

        Cash and Cash Equivalents

        The carrying amount approximates fair value because of the short
        maturity of these instruments.

        Securities

        The fair value of securities is estimated based on market values
        received from a securities broker.








                                       21
<PAGE>

NOTE 12 DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, Continued


        Loans

        The fair value of one-to-four-family fixed-and adjustable-rate
        mortgages is calculated by using the option-based pricing
        approach that makes use of the Monte Carlo simulation. The Monte
        Carlo model uses an interest rate simulation program to generate
        numerous random interest rate paths that, in conjunction with a
        prepayment model, are used to estimate mortgage cash flows along
        each path.
        The fair value of other loans in the portfolio is calculated by
        using the static discounted cash flow approach. Under the static
        discounted cash flow approach, the economic value of a financial
        instrument is estimated by calculating the present value of the
        instrument's expected cash flows. The present value is determined
        by discounting the cash flows the instrument is expected to
        generate by the yield currently available to investors from an
        instrument of comparable risk and duration.

        Deposits

        The fair value of deposits with no stated maturity, such as
        noninterest bearing demand deposits, NOW accounts, money market
        demand and savings accounts, is equal to the amount payable on
        demand. The fair value of certificate accounts is based on the
        static discounted cash flow approach. The discount rate is
        estimated using the rates currently offered for deposits of
        similar remaining maturities.

        Note Payable

        The fair value of the note payable is based on the static
        discounted cash flow approach. The discount rate used is the rate
        currently available to investors from an instrument of comparable
        risk and duration.

        Off-Balance Sheet Financial Instruments

        The fair value of financial instruments with off-balance sheet
        risk is based on the credit quality and relationship, probability
        of funding and other requirements. Fair values of off-balance
        sheet financial instruments are not material to the consolidated
        financial statements.









                                       22


<PAGE>


NOTE 12 DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, Continued


         Limitations

         Fair value estimates are made at a specific point in time, based
         on relevant market information and information about the
         financial instrument. These estimates do not reflect any premium
         or discount that could result from offering for sale at one time
         the Company's entire holdings of a particular financial
         instrument. Because no market exists for a significant portion of
         the Company's financial instruments, fair value estimates are
         based on judgments regarding future expected loss experience,
         current economic conditions, risk characteristics of various
         financial instruments and other factors. These estimates are
         subjective in nature and involve uncertainties and matters of
         significant judgment and, therefore, cannot be determined with
         precision. Changes in assumptions could significantly affect the
         estimates.

         Fair value estimates are based on existing on-and off-balance
         sheet financial instruments without attempting to estimate the
         value of anticipated future business and the value of assets and
         liabilities that are not considered financial instruments. For
         example, significant assets that are not considered financial
         instruments include premises and equipment. In addition, the tax
         ramifications related to the realization of the unrealized gains
         and losses can have a significant effect on fair value estimates
         and have not been considered in any of the estimates.

         The estimated fair values of the Company's financial instruments
are as follows:
<TABLE>
<CAPTION>
                                          June 30, 2001                     June 30, 2000
                                      Carrying      Estimated            Carrying        Estimated
                                       Value        Fair Value             Value         Fair Value
<S>                                <C>                <C>             <C>                  <C>
      Financial Assets
         Cash and cash
           Equivalents             $   5,724,038      5,724,038       $    3,159,098       3,159,098
         Securities                    6,966,575      6,977,958           17,305,587      17,290,662
         Loans                       122,995,101    124,304,902          116,781,986     113,918,677
         Accrued interest                781,482        781,482              911,749         911,749

      Financial Liabilities
         Deposits                    118,257,054    120,141,804          116,298,212     116,298,237
         Escrows                       1,063,288      1,060,419            1,035,321       1,034,118
         Accrued interest                 65,753         65,753               77,340          77,340
         Advances from FHLB              -              -                  5,000,000       5,000,000

      Off-balance
      sheet                              -              -                    -               -
      instruments

</TABLE>



                                       23


<PAGE>


NOTE 13 NET INCOME AND DIVIDENDS PER SHARE

        The Company completed a public stock offering on May 16, 2000,
        issuing an additional 1,274,900 shares of its $.10 par value
        common stock. Net income per share of $.62 and $.665,
        respectively is calculated based on the net income for the years
        ended June 30, 2001 and 2000 divided by the shares outstanding at
        June 30, 2001 and 2000 of 1,246,440 (1,275,000 less 28,560 shares
        held in trust for the ESOP Plan).

        Minority shareholders were paid cash dividends per share of $.405
        and $.105 on their 357,000 shares of common stock outstanding at
        June 30, 2001 and 2000, respectively. Cash dividends of $.0975
        and $0 were paid on the 918,000 shares held by AF Mutual Holding
        Company at June 30, 2001 and 2000, respectively. AF Mutual
        Holding Company waived receiving the balance of its dividends.

        Earnings per share and dividends per share have not been
        calculated for the year ended June 30, 1999 because the
        presentation would not be meaningful.


NOTE 14 STOCK-BASED COMPENSATION PLANS

        The Company adopted an employee stock ownership plan (ESOP)
        effective January 1, 2000 for all employees meeting certain age
        and service requirements. Participants begin vesting after three
        years of employment and fully vest after seven years of service.
        The plan acquired 28,560 shares of the Company's common stock at
        $10 per share during the Company's initial public offering. The
        Company borrowed $285,600 from the Association which is payable
        at $28,560 per year with interest at 8% through June 30, 2009.
        The ESOP shares are held in trust and released to the Plan pro
        rata as principal payments are made. On June 30, 2001 and 2000,
        the trust allocated 2,856 shares of stock to participant
        accounts.

        The Company's unallocated shares are accounted for as a reduction
        of stockholders equity and amounted to $228,480 and $257,040 at
        June 30, 2001 and 2000, respectively.

        Information related to the ESOP for the years ended June 30, 2001
and 2000 was:

                                                        2001           2000
                                                    -------------   ------------
         Shares committed to be released                   2,856          2,856
         Average fair value of shares committed
           to be released                           $     13.725    $    10.625
         Compensation expense                       $     39,198    $    30,345






                                       24


<PAGE>


NOTE 14 STOCK-BASED COMPENSATION PLANS Continued

        Shares held by the ESOP at June 30 are as follows:
                                            2001                2000
                                        -------------        ------------
        Allocated shares                       5,712               2,856
        Unallocated shares                    22,848              25,704
                                        -------------        ------------

            Total ESOP shares                 28,560              28,560
                                        =============        ============

        The Company adopted a Stock Option Plan effective June 25, 2001.
        Under the terms of the plan, the Company authorized for the
        awarding of 35,700 shares of the Company's common stock to
        directors and key employees at an exercise price of $18.50 per
        share. The directors are 100% vested in the options becoming
        exercisable as of June 25, 2001. The options become exercisable
        for the key employees at a vesting rate of 20% per year over five
        years beginning July 1, 2002. The exercise price equaled the
        market price on the date the options were granted. There were no
        options exercised or forfeited as of June 30, 2001.

        The Company  applies APB Opinion No. 25 and related Interpretations  in
        accounting  for its stock option plan.  Accordingly,  no  compensation
        cost has been  recognized  at the date of grant. Under SFAS No. 123,
        "Accounting for Stock-Based  Compensation," the compensation cost would
        be determined based on the fair value at the grant date for awards under
        the plan.  Compensation cost reported as of June 30, 2001 under SFAS
        No. 123 was zero.

        A $6.76 per share fair value of the options granted was estimated
        at the date of grant using the Black-Scholes option pricing model
        using the following assumptions: expected volatility factor of
        the expected market price of the Company's common stock of 5.07%,
        risk-free interest rate of 4.97%, expected option term of ten
        years and a dividend yield of .27%. The Black-Scholes option
        pricing valuation model was developed for use in estimating the
        fair value of traded options, which have no vesting restrictions
        and are fully transferable. In addition, option valuation models
        require the input of highly subjective assumptions including the
        expected stock price volatility. Because changes in the
        subjective input assumptions can materially affect the fair value
        estimate, in management's opinion, the existing models do not
        necessarily provide a reliable single measure of the fair value
        of its stock options.

        The Company adopted a Recognition and Retention Plan (RRP)
        effective June 25, 2001. In 2001, the Company contributed
        $330,225 allowing the RRP to acquire 17,850 shares of common
        stock of the Company, at $18.50 per share, awarded to directors
        and key employees. Stock awards for 7,586 shares to the directors
        will vest 50% on November 1, 2001 and 50% on November 1, 2002.
        Stock awards for 10,264 shares to key employees will vest at 20%
        per year over five years beginning July 1, 2002. The unamortized
        cost of shares not yet earned (vested) is reported as a reduction
        of stockholders' equity. RRP compensation expense was $0 for the
        year ended June 30, 2001. Unearned shares and unawarded shares
        under the RRP are not considered outstanding for earnings per
        share calculations.

                                       25

<PAGE>







                              CORPORATE INFORMATION

DIRECTORS

Robert W. Hamilton                               S. Thomas Overstreet
Chairman                                         Vice Chairman
Alamogordo Financial Corporation                 Alamogordo Financial
                                                 Corporation
Retired Owner                                    Attorney at Law
Hamilton Funeral Home                            Overstreet and Associates, P.C.

Earl E. Wallin                                   Jimmie D. Randall
Retired President                                Retired Owner
Alamogordo Federal Savings and Loan              Sacramento Motors

R. Miles Ledgerwood
President
Alamogordo Financial Corporation

OFFICERS

R. Miles Ledgerwood
President

Julia A. Eggleston
Vice President, Secretary

Norma J. Clute
Chief Financial Officer, Treasurer

EXECUTIVE OFFICES

Alamogordo Federal Savings & Loan Association
2nd Floor
500 Tenth Street


<PAGE>



Alamogordo, New Mexico 88310
(505) 437-9334

BANKING OFFICES

Main Office                                        Branch Office
500 Tenth Street                                   233 S. New York
Alamogordo, New Mexico 88310                       Alamogordo, New Mexico 88310



                             STOCKHOLDER INFORMATION




<PAGE>


Annual Meeting

The Annual Meeting of Stockholders will be held at 11:00 a.m., on November 21,
2001, at Alamogordo Federal's office at 500 10th Street, Alamogordo, New Mexico.

Stock Listing

Alamogordo Financial's Common Stock trades over-the-counter on the OTC Bulletin
Board under the symbol "ALMG."

Counsel

Overstreet & Associates, P.C.
1011 New York Avenue
Alamogordo, New Mexico   88310

Special Securities Counsel

Luse Lehman Gorman Pomerenk & Schick, P.C.
5335 Wisconsin Avenue, N.W.
Washington, D.C.  20015

Stockholder Relations

Norma J. Clute
Chief Financial Officer & Treasurer
Alamogordo Financial Corporation
500 Tenth Street
Alamogordo, New Mexico 88310
(505) 437-9334

Independent Auditors

The Accounting & Consulting Group, L.L.P.
P.O. Box 898
Alamogordo, New Mexico 88310

Transfer Agent

Computershare
P.O. Box 1596
Denver, Colorado   80201-1596

Annual Report on Form 10-KSB

A copy of Alamogordo Financial's Form 10-KSB for the fiscal year ended June 30,
2001, will be furnished to stockholders, without charge, upon written request to
Alamogordo Financial Corporation, 500 10th Street, Alamogordo, New Mexico 88310,
Attn: Norma J. Clute.