SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934.

     For the fiscal year ended June 30, 2004
                               -------------

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
    ACT OF1934

       For the transition period from _______ to ______.

                        Commission file number: 000-29655

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

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

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

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

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


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

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

     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the  preceding  twelve  months (or for such shorter  period that the
Registrant  was required to file such  reports) and (2) has been subject to such
requirements for the past 90 days.

     YES      X        NO
          ---------        -----------

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [x]

     The  Issuer's  revenues  for the fiscal  year ended June 30, 2004 were $8.4
million.

     The aggregate market value of the voting stock held by nonaffiliates of the
Registrant,  computed  by  reference  to the  average of the closing bid and ask
price  of such  stock  on the OTC  Bulletin  Board  on  September  22,  2004 was
approximately $11.6 million.

     The number of shares outstanding of the Issuer's Common Stock, the issuer's
only class of outstanding capital stock, as of September 22, 2004 was 1,308,911.

                       Documents Incorporated by Reference

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

I.   Portions of the Alamogordo  Financial  Corp.  Proxy  Statement for the 2004
     Annual Meeting of Shareholders  are  incorporated by reference into certain
     items of Part III.

II.  Portions  of  the  Alamogordo   Financial  Corp.  2004  Annual  Report  are
     incorporated by reference into certain items of Part II.

     Transitional Small Business Disclosure Format: YES         NO   X
                                                        -----      -----



<PAGE>

                                     PART I

Item 1.       Business
-------       --------

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

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

Market Area

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

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

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

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

     Other larger employers  include the Alamogordo  Public Schools,  Inn of the
Mountain Gods,  Wal-Mart Super Center,  Gerald Champion Regional Medical Center,
City of Alamogordo and 1-800-Flowers.com.

Lending Activities

     Loan Portfolio Composition.  At June 30, 2004, we had total loans of $113.1
million, of which $87.5 million, or 77.4%, were one- to four-family  residential
mortgages.  The remainder of our mortgage  loans at June 30, 2004,  consisted of
multi-family and nonresidential,  land and construction  loans. In addition,  we
originate  consumer and other loans including second mortgage loans,  commercial
business loans, and deposit account loans. As of June 30, 2004, $9.5 million, or
8.4%, of our total loans have adjustable rates of interest.

     Our loans are  subject  to  federal  and  state  law and  regulations.  The
interest  rates we charge on loans are  affected  principally  by the demand for


<PAGE>


loans, the supply of money available for lending purposes and the interest rates
offered by our competitors.  These factors are, in turn, affected by general and
local  economic  conditions,   monetary  policies  of  the  federal  government,
including the Federal Reserve Board,  legislative tax policies and  governmental
budgetary matters.

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

<TABLE>
<CAPTION>

                                                        June 30,
                                    ------------------------------------------------
                                             2004                      2003
                                    ----------------------    ----------------------
                                     Amount       Percent      Amount       Percent
                                                               (Dollars in Thousands)

Mortgage loans:
<S>                                 <C>            <C>        <C>             <C>
  One- to four-family............   $87,528        77.4%      $79,456         77.6%
  Multifamily and nonresidential.    14,460        12.8%       14,040         13.7%
  Construction...................     5,700         5.0%        2,664          2.6%
  Land...........................       136         0.1%           93          0.1%
                                    -------      -------      -------      -------
   Total mortgage loans..........   107,824        95.3%       96,253         94.0%
                                    -------      -------      -------      -------
Consumer and other loans:
  Second mortgage................     1,283         1.1%        1,305          1.3%
  Consumer.......................     1,311         1.2%        1,746          1.7%
  Commercial business............     1,866         1.6%        1,924          1.9%
  Deposit account................       825         0.7%        1,145          1.1%
                                    -------      -------      -------      -------
   Total consumer and other loans     5,285         4.7%        6,120          6.0%
                                    -------      -------      -------      -------

    Total loans..................   113,109       100.0%      102,373        100.0%
                                                 =======                   =======

Less:
  Loans in process...............    (3,438)                     (807)
  Deferred fees and discounts....      (378)                     (431)
  Allowance for losses...........      (329)                     (540)
                                    --------                  --------
   Total loans receivable, net...   $108,964                  $100,595
                                    ========                  ========
</TABLE>

     Loan Maturity Schedules.  The following table sets forth the dollar amounts
of fixed- and adjustable-rate  loans at June 30, 2004 that are contractually due
after June 30, 2005.

<TABLE>
<CAPTION>

                                                          Fixed            Adjustable           Total
                                                       -----------         -----------       -----------
                                                                          (In thousands)

Mortgage loans:
<S>                                                    <C>                 <C>               <C>
   One- to four-family.........................        $    79,273         $       800       $    80,073
   Multi-family and nonresidential.............              7,834               5,103            12,937
   Construction................................              2,652               1,577             4,229
   Land........................................                 22                  --                22
Consumer and other loans.......................              2,335                  --             2,335
Add back: Loans in process.....................              3,438                  --             3,438
                                                       -----------         -----------       -----------
Total loans due after one year.................        $    95,554         $     7,480       $   103,034
                                                       ===========         ===========       ===========
</TABLE>



                                       2
<PAGE>



     Maturity  of  Loan  Portfolio.  The  following  table  sets  forth  certain
information  at June 30, 2004  regarding the dollar amount of loans  maturing in
Alamogordo  Financial's  portfolio based on their contractual terms to maturity,
but does not include scheduled payments or potential prepayments.  Demand loans,
over draft loans and loans with no stated  maturity are reported as becoming due
within  one year.  Loan  balances  do not  include  undisbursed  loan  proceeds,
unearned discounts, unearned income and allowance for loans losses.
<TABLE>
<CAPTION>

                                                Multi-Family and
                         One- to Four-Family     Nonresidential          Construction             Land           Consumer and Other
                         -------------------   -------------------   -------------------   -------------------   -------------------
                                    Weighted              Weighted              Weighted              Weighted              Weighted
                                     Average               Average               Average               Average               Average
                          Amount      Rate      Amount      Rate      Amount      Rate      Amount      Rate      Amount      Rate
                         --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
                                                                     (Dollars in thousands)
Due During the Years
Ending June 30,
<C>                      <C>            <C>    <C>            <C>    <C>            <C>    <C>            <C>    <C>           <C>
2005...................  $  4,035       6.40%  $  1,523       6.10%  $  1,453       5.75%  $    114       7.19%  $  2,950      7.06%
2006...................     3,650       6.47      4,505       5.70      4,229       5.82          6       7.35        820      7.03
2007...................     3,758       6.48      1,711       5.81         --         --          4       7.52        553      6.99
2008 and 2009..........     7,100       6.46      1,101       5.81         --         --          8       7.81        468      7.01
2010 to 2014...........    18,618       6.44      3,061       5.99         --         --          4       7.89        449      7.11
2015 to 2029...........    40,634       6.52      2,559       5.90         --         --         --         --         45      7.13
2030 and following.....     6,313       6.48         --         --         --         --         --         --         --        --
Add back:
  loans in process.....     3,420                    --         --         18         --         --         --         --        --
                         --------   --------   --------   --------   --------   --------   --------   --------   --------   -------

   Total loans.........  $ 87,528       6.23%  $ 14,460       5.86%  $  5,700       5.78%  $    136       7.27%  $  5,285      7.05%
                         ========   ========   ========   ========   ========   ========   ========   ========   ========   =======
</TABLE>
<TABLE>
<CAPTION>

                                Total
                         -------------------
                                    Weighted
                                     Average
                          Amount      Rate
                         --------   --------

Due During the Years
Ending June 30,
<C>                      <C>            <C>
2005...................  $ 10,075       6.46%
2006...................    13,210       6.19
2007...................     6,026       6.24
2008 and 2009..........     8,677       6.27
2010 to 2014...........    22,132       6.34
2015 to 2029...........    43,238       6.41
2030 and following.....     6,313       6.45
Add back:
  loans in process.....     3,438         --
                         --------   --------

   Total loans.........  $113,109       6.16%
                         ========   ========
</TABLE>


                                       3
<PAGE>


     One- to  Four-Family  Residential  Real  Estate  Loans.  We  emphasize  the
origination  of mortgage loans secured by one- to  four-family  properties  that
serve as the  primary  residence  of the owner,  although  we also  offer  loans
secured by properties  that do not serve as the primary  residence of the owner.
We  currently  hold most of the loans that we  originate  in our  portfolio  and
intend to continue to do so, although in the past we have sold loans.  From time
to time we purchase one- to four-family  residential  mortgage  loans,  and have
purchased  loans that are  secured  by  properties  that are not  located in our
market area.  During the fiscal year ended June 30, 2004, we purchased  thirteen
fixed-rate loans totaling $8.2 million secured by one-to four-family residential
real estate located in  California.  During the fiscal year ended June 30, 2003,
we purchased  one $563,000  fixed-rate  loan secured by  commercial  real estate
located in New Mexico. As of June 30, 2004, loans secured by one- to four-family
residential  properties accounted for $87.5 million, or 77.4%, of our total loan
portfolio.

     We originate a significant  amount of 30-year  fixed-rate  residential real
estate loans that are  partially  guaranteed  as to  repayment of principal  and
interest by the  Department of Veterans  Affairs (the "VA").  The  Department of
Veterans  Affairs  guarantees a portion of the mortgage loan  principal  balance
against default by the borrower.  VA guaranteed  loans may be repaid at any time
without  penalty,  and are assumable by another borrower at the same rate if the
borrower sells a home. At June 30, 2004, $11.2 million, or 12.8%, of our one- to
four-family residential real estate loans were VA guaranteed loans.

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

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

     We also offer  adjustable-rate  mortgage, or ARM, loans with a maximum term
of  30  years.  The  adjustable-rate  loans  that  we  offer  generally  include
limitations on the maximum  increases and decreases in interest  rates,  and may
have "teaser"  rates,  or relatively  low initial rates of interest.  We believe
that  adjustable-rate  mortgage  loans help  reduce our  exposure  to changes in
interest rates.  However,  there are unquantifiable  credit risks resulting from
potential  increased  costs  to the  borrower  as a  result  of the  pricing  of
adjustable-rate  mortgage loans.  During periods of rising  interest rates,  the
risk of default on adjustable-rate mortgage loans may increase due to the upward
adjustment  of  interest  cost  to  the  borrower.  We  did  not  originate  any
adjustable-rate  one- to  four-family  residential  real estate loans during the
fiscal year ended June 30, 2004.

     During the fiscal year ended June 30,  2004,  we purchased  two  adjustable
rate loans  totaling $3.2 million  secured by commercial  real estate located in
New  Mexico.  During the fiscal  year ended June 30,  2003,  we  purchased  five
adjustable  rate loans totaling $1.9 million  secured by commercial  real estate
located in New Mexico. At June 30, 2004, our loan portfolio included $837,000 of
adjustable-rate  one- to four-family  residential mortgage loans, or 0.7% of our
total loan portfolio.  Almost all of the adjustable-rate loans that we currently
own were  purchased  from another  lender and are secured by real estate located
outside of our market area.

     Multifamily and  Nonresidential  Real Estate  Lending.  Our multifamily and
nonresidential  real estate loans include real estate loans secured primarily by
first liens on commercial  real estate and apartment  buildings.  The commercial
real estate  properties  are  predominantly  nonresidential  properties  such as
office  buildings,  retail  stores  and  more  specialized  properties  such  as
churches,  mobile home parks and  restaurants.  Loans secured by commercial real

                                       4
<PAGE>


estate totaled $11.7 million,  or 10.3%,  of our total loan portfolio as of June
30, 2004, and consisted of 37 loans  outstanding with an average loan balance of
approximately  $316,000.  Loans secured by multifamily  residential  real estate
totaled $2.8 million,  or 2.4%, of our total loan portfolio as of June 30, 2004,
and  consisted  of three  loans  outstanding  with an  average  loan  balance of
approximately  $919,000.  Substantially  all of our  commercial  real estate and
multifamily loans are secured by properties  located in our primary market area.
As of June 30, 2004,  we had one  multifamily  residential  real estate loan and
seven  commercial real estate loans with balances in excess of $500,000.  One of
the commercial real estate loans was restructured during the year ended June 30,
2003, as discussed below in "--Asset  Quality--Non-Performing Loans." As of June
30, 2004,  each of our loans with balances in excess of $500,000 was  performing
in accordance with its contractual terms.

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

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

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

     Construction  and Land Loans.  We originate  acquisition,  development  and
construction loans to builders in our market area. Acquisition loans are made to
help finance the purchase of land  intended for further  development,  including
single-family houses, multifamily housing, and commercial income property. Loans
for the  acquisition  of land are  generally  limited  to our most  creditworthy
customers.  In general,  the maximum  loan-to-value ratio for a land acquisition
loan is 60% of the appraised value of the property.  Development loans are often
made in conjunction with development and construction  loans.  Acquisition loans
may also be made to  borrowers  who  already own the  property,  but who require
additional financing to develop the property.

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

                                       5

<PAGE>

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

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

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

     Consumer  and Other  Loans.  The Bank  originates a variety of consumer and
other loans,  including second mortgage loans,  consumer loans,  deposit account
loans and commercial  business  loans.  As of June 30, 2004,  consumer and other
loans  totaled $5.3  million,  or 4.7% of the total loan  portfolio.  Our second
mortgage loans include  fixed-rate,  fixed-term  second mortgage and home equity
loans.  Our  second  mortgage  loans are  offered  in  amounts  up to 90% of the
appraised value of the property  (including  prior liens).  Other consumer loans
primarily include loans secured by personal property such as autos, recreational
vehicles and boats,  although we make a small number of unsecured loans that are
personally guaranteed. Our procedures for underwriting consumer loans include an
assessment  of an  applicant's  credit  history and the ability to meet existing
obligations  and  payments  on  the  proposed  loan.   Although  an  applicant's
creditworthiness  is a primary  consideration,  the  underwriting  process  also
includes a comparison of the value of the  collateral  security,  if any, to the
proposed  loan  amount.  Consumer  loans  generally  entail  greater  risk  than
residential mortgage loans,  particularly in the case of consumer loans that are
unsecured or secured by assets that tend to depreciate,  such as automobiles. In
such cases, repossessed collateral for a defaulted consumer loan may not provide
an adequate  source of  repayment  for the  outstanding  loan and the  remaining
deficiency often does not warrant further substantial collection efforts against
the  borrower.  In  addition,  the  repayment of consumer  loans  depends on the
borrower's continued financial stability, as their repayment is more likely than
a single  family  mortgage loan to be adversely  affected by job loss,  divorce,
illness or personal bankruptcy.  Furthermore, the application of various federal
and state laws (including  bankruptcy and insolvency  laws) may limit the amount
that can be recovered on such loans.

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

     We base our commercial  credit decisions upon a complete credit  assessment
of the loan applicant.  We try to  comprehensively  assess the risks involved in

                                       6
<PAGE>

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

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

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

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


                                       7

<PAGE>



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

<TABLE>
<CAPTION>

                                                           Years Ended June 30,
                                                       ---------------------------
                                                           2004            2003
                                                       -----------     -----------
                                                              (In Thousands)

<S>                                                    <C>             <C>
Loans receivable, net, at beginning of period........  $ 100,595       $ 116,543
Loans originated:
 Mortgage loans:
   One- to four-family ..............................     21,388           9,082
   Multifamily and nonresidential....................      1,464           4,270
   Construction......................................      6,279           3,009
   Land..............................................      1,132             977
                                                       ---------       ---------
     Total mortgage loans originated.................     30,263          17,338
                                                       ---------       ---------
  Consumer and other loans:
   Commercial........................................      1,826           1,332
   Second mortgage, consumer and deposit account.....      1,158           2,237
                                                       ---------       ---------
    Total consumer and other loans originated........      2,984           3,569
                                                       ---------       ---------
Loans purchased:
  Mortgage loans:
   One- to four-family...............................      8,158              --
   Multifamily and nonresidential....................      3,058           2,474
   Construction......................................         --              --
   Land..............................................         --              --
                                                       ---------       ---------
    Total loans purchased............................     11,216           2,474
                                                       ---------       ---------
Loans sold:
 Mortgage loans:
   One- to four-family...............................        (56)         (5,095)
   Multifamily and nonresidential....................         --              --
   Construction......................................         --              --
   Land..............................................         --              --
                                                       ---------      ----------
    Total loans sold.................................        (56)         (5,095)
                                                       ---------      ----------

    Principal repayments.............................    (33,671)        (34,006)
                                                       ---------      ----------

Increase (decrease) in other items, net..............     (2,367)           (228)
                                                       ---------      ----------

Loans receivable, net, at end of period..............  $ 108,964       $ 100,595
                                                       =========       =========
</TABLE>


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

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


Asset Quality

     One of our  key  operating  objectives  has  been  and  continues  to be to
maintain  a high  level of asset  quality.  Through  a  variety  of  strategies,

                                       8

<PAGE>

including,  but not limited to,  borrower  workout  arrangements  and aggressive
marketing of foreclosed properties, we have been proactive in addressing problem
and non-performing  assets. These strategies,  as well as our high proportion of
one- to four-family  mortgage loans,  our maintenance of sound credit  standards
for  new  loan  originations  and  our  loan  administration  procedures,   have
historically  resulted  in  low  delinquency  ratios  and  low  levels  of  non-
performing assets. These factors have helped strengthen our financial condition.

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

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

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

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




                                       9

<PAGE>


     Delinquent Loans. The following table sets forth our loan  delinquencies by
type, by amount and by percentage of type at June 30, 2004.

<TABLE>
<CAPTION>

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

Mortgage loans:
<S>                                 <C>  <C>            <C>           <C> <C>            <C>         <C>  <C>            <C>
   One- to four-family...           12   $    370       0.42%         4   $    196       0.22%       16   $    566       0.65%
   Multifamily and
     nonresidential......           --         --         --         --         --         --         --         --         --
   Construction..........           --         --         --         --         --         --         --         --         --

   Land..................           --         --         --         --         --         --         --         --         --
                              --------   --------   --------   --------         --   --------   --------         --
Total mortgage loans.....           12        370       0.34%         4        196       0.18%        16        566       0.52%
                              --------   --------   --------   --------   --------   --------   --------   --------   --------
Consumer and other loans:
   Second mortgage.......           --   $     --         --         --   $     --         --         --   $     --         --
   Consumer..............            2          3       0.23%         1          1       0.08%         3          4       0.31%
   Commercial business...           --         --         --         --         --         --         --         --         --
   Deposit account.......           --         --         --         --         --         --         --         --         --
                              --------   --------   --------   --------   --------   --------   --------   --------   --------
     Total consumer and
       other loans.......            2          3       0.06%         1          1       0.02%         3          4       0.08%
                              --------   --------   --------   --------   --------   --------   --------   --------   --------
Total delinquent loans:..           14   $    373       0.33%         5   $    197       0.17%        19   $    570       0.50%
                              ========   ========              ========   ========              ========   ========

</TABLE>


                                       10
<PAGE>



     Non-performing Loans. The table below sets forth the amounts and categories
of non-performing assets in our loan portfolio.  Loans are placed on non-accrual
status when the collection of principal and/or interest become doubtful.  During
the year  ended  June 30,  2003,  a  nonresidential  real  estate  loan  with an
aggregate  principal  balance of $1.6  million was  restructured.  For all other
years presented, we have had no troubled debt restructurings.  Foreclosed assets
include assets acquired in settlement of loans.

<TABLE>
<CAPTION>

                                                                              June 30,
                                                                     --------------------------
                                                                        2004           2003
                                                                     -----------    -----------
                                                                       (Dollars in Thousands)
Non-accruing loans:
  Mortgage loans:
<S>                                                                  <C>            <C>
   One- to four-family..........................................     $   196        $    112
   Multifamily and nonresidential...............................          --             504
   Construction.................................................          --              --
   Land.........................................................          --              --
  Consumer and other loans:
   Second mortgage..............................................          --              --
   Consumer.....................................................           1              --
   Commercial...................................................          --              --
   Deposit account..............................................          --              --
                                                                     -------        --------
     Total non-accruing loans...................................         197             616
                                                                     -------        --------
Accruing loans delinquent more than 90 days:
  Mortgage loans:
   One- to four-family..........................................          --              --
   Multifamily and nonresidential...............................          --              --
   Construction.................................................          --              --
   Land.........................................................          --              --
  Consumer and other loans:
   Second mortgage..............................................          --              --
   Consumer.....................................................          --              --
   Commercial...................................................          --              --
   Deposit account..............................................          --              --
                                                                     -------        --------
     Total accruing loans more than 90 days delinquent..........          --              --
                                                                     -------        --------
Total non-performing loans......................................         197             616
                                                                     -------        --------
Foreclosed assets:
  Mortgage loans:
   One- to four-family..........................................         450             180
   Multifamily and nonresidential...............................         649             180
   Construction.................................................          --              --
   Land.........................................................         119             184
                                                                     -------        --------
Other loans:
   Other repossessed assets.....................................           1               1

  Total foreclosed assets.......................................       1,219             545
                                                                     -------        --------
Total non-performing assets.....................................     $ 1,416        $  1,161
                                                                     =======        ========
  Total nonperforming assets as a percentage of total assets....        0.90%           0.74%
                                                                     =======        ========
Allowance for loan losses as a percentage of nonperforming loans      167.01%          87.66%
                                                                     =======        ========
Allowance for loan losses as a percentage of gross loans receivable     0.29%           0.53%
                                                                     =======        ========
</TABLE>



     For the year ended June 30,  2004 gross  interest  income  which would have
been recorded had the  non-accruing  loans been current in accordance with their
original terms amounted to $11,800.

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

     At June 30, 2004 we had no loans classified as impaired.  Impaired loans at
June 30, 2003 amounted to  approximately  $1.6  million,  which  represents  one
commercial loan. The allowance for loan losses related to this one loan amounted

                                       11
<PAGE>


to $180,000.  These loans are  individually  assessed to determine  the carrying
value in relation to the fair value of the  collateral  or the present  value of
the loan's cash flow.  Management believes that the allowance for these loans is
sufficient.

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

     Classification  of  Assets.   Our  policies,   consistent  with  regulatory
guidelines,  provide for the  classification  of loans and other  assets such as
securities that are considered to be of lesser quality as substandard, doubtful,
or loss  assets.  An  asset  is  considered  substandard  if it is  inadequately
protected by the current net worth and paying  capacity of the obligor or of the
collateral  pledged,  if any.  Substandard assets include those characterized by
the distinct  possibility that the savings institution will sustain some loss if
the  deficiencies are not corrected.  Assets  classified as doubtful have all of
the  weaknesses  inherent  in  those  classified   substandard  with  the  added
characteristic  that the  weaknesses  present make  collection or liquidation in
full, on the basis of currently existing facts,  conditions,  and values, highly
questionable  and  improbable.  Assets  classified as loss are those  considered
uncollectible  and of such little value that their  continuance as assets is not
warranted.  Assets  that  do  not  expose  us  to  risk  sufficient  to  warrant
classification in one of the aforementioned  categories,  but which possess some
weaknesses,  are required to be designated as special mention by management.  As
of June 30, 2004, we had $866,000 of assets designated as special mention.

     When we classify  assets as either  substandard  or doubtful,  we allow for
analytical  purposes a portion of general valuation  allowances or loss reserves
to such assets as deemed prudent by  management.  General  allowances  represent
loss  allowances  that have been  established  to recognize  the  inherent  risk
associated  with  lending  activities,  but  which  have not been  allocated  to
particular  problem  assets.  When we classify  problem  assets as loss,  we are
required  either to establish a specific  allowance  for losses equal to 100% of
the  amount of the assets so  classified,  or to  charge-off  such  amount.  Our
determination  as to the  classification  of its  assets  and the  amount of its
valuation allowance is subject to review by regulatory agencies, which can order
the  establishment of additional loss allowances.  Management  regularly reviews
Alamogordo  Federal's  asset  portfolio to determine  whether any assets require
classification  in  accordance  with  applicable  regulations.  On the  basis of
management's review of Alamogordo Federal's assets at June 30, 2004,  classified
assets  consisted of  substandard  assets of $2.5 million.  There were no assets
classified as doubtful or loss at June 30, 2004.

                                       12
<PAGE>


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

<TABLE>
<CAPTION>

                                                           Years Ended June 30,
                                                       ---------------------------
                                                           2004           2003
                                                       -----------     -----------
                                                          (Dollars In Thousands)

<S>                                                    <C>             <C>
Balance at beginning of year.......................    $     540       $     540

Charge-offs:
  Mortgage loans:
    One- to four-family............................           23              --
    Multifamily and nonresidential.................           52              --
    Construction...................................           --              --
    Land...........................................           --              --
  Consumer and other loans:
    Second mortgage................................           --              --
    Consumer.......................................           --              --
    Commercial.....................................           --             346
    Deposit account................................           --              --
  Repossessed Assets
    Other Repossessed Assets.......................          280              44
Real estate held for investment....................           --              --
                                                       ---------       ---------
      Total charge-offs............................          355             390
                                                       ---------       ---------

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

Net charge-offs....................................          355             390
Provision (credit) for loan losses.................          144             390
                                                       ---------       ---------
Balance at end of year.............................    $     329       $     540
                                                       =========       =========

Ratio of net charge-offs during the year to
  average loans outstanding during the year........         0.33%           0.35%
                                                       =========       =========

Ratio of net charge-offs during the year to
  average non-performing assets....................        63.51%          35.36%
                                                       =========       ==========
</TABLE>

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

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

     In addition,  various  regulatory  agencies,  as an integral  part of their
examination  process,  periodically  review our loan and foreclosed  real estate
portfolios and the related allowance for loan losses and valuation allowance for
foreclosed real estate.  These agencies may require us to increase the allowance

                                       13
<PAGE>


for loan losses or the valuation  allowance for foreclosed  real estate based on
their  judgments  of  information  available  to  them  at  the  time  of  their
examination, thereby adversely affecting our results of operations.

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

<TABLE>
<CAPTION>

                                                                At June 30,
                          ---------------------------------------------------------------------------------------
                                             2004                                         2003
                          ------------------------------------------   ------------------------------------------
                                                        Percent of                                   Percent of
                           Amount of                   Loans in Each    Amount of                   Loans in Each
                           Loan Loss    Loan Amounts    Category to     Loan Loss    Loan Amounts    Category to
                           Allowance     by Category    Total Loans     Allowance     by Category    Total Loans
                          -----------    -----------    -----------    -----------    -----------    -----------
                                                           (Dollars in thousands)

<S>                       <C>            <C>                  <C>      <C>            <C>                  <C>
Mortgage loans.......     $       319    $   107,823          95.33%   $       530    $    96,253          94.02%
Consumer and other loans           10          5,285           4.67%            10          6,120           5.98
                          -----------    -----------    -----------    -----------    -----------    -----------

   Total.............     $       329    $   113,108         100.00%   $       540    $   102,373         100.00%
                          ===========    ===========    ===========    ===========    ===========    ===========
</TABLE>

Investment Activities

     Alamogordo  Federal is  permitted  under  federal  law to invest in various
types of liquid assets,  including U.S.  Government  obligations,  securities of
various federal agencies and of state and municipal governments, deposits at the
Federal Home Loan Bank of Dallas,  certificates of deposit of federally  insured
institutions,  certain  bankers'  acceptances and federal funds.  Within certain
regulatory limits, Alamogordo Federal may also invest a portion of its assets in
commercial  paper and  corporate  debt  securities.  Savings  institutions  like
Alamogordo  Federal are also  required to maintain an  investment in FHLB stock.
Alamogordo  Federal is required under federal  regulations to maintain a minimum
amount of liquid assets. At June 30, 2004 Alamogordo  Federal's  liquidity ratio
(liquid assets as a percentage of net withdrawable  savings deposits and current
borrowings) was 27.9%.

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

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

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

                                       14

<PAGE>

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

     The  following   table  sets  forth  the   composition  of  our  investment
securities,  net of premiums and discounts,  at the dates indicated.  As of June
30, 2004, the average remaining life of our securities was 1.7 years.

<TABLE>
<CAPTION>

                                                                 June 30,
                                                 -----------------------------------------
                                                         2004                  2003
                                                 -------------------   -------------------
                                                 Carrying     % of     Carrying     % of
                                                   Value      Total      Value      Total
                                                 --------   --------   --------   --------
                                                           (Dollars in Thousands)
Securities held to maturity:
<S>                                                 <C>        <C>        <C>        <C>
   Securities issued by states and political
     subdivisions                                $                          225       0.53
   Certificates of deposit..................        2,000       5.49      4,883      11.49
Securities available for sale:
U.S. treasury securities....................           --         --      5,268      12.39
Federal Farm Credit Bureau Note.............        3,392       9.32         --
U.S. government agency securities...........        5,092      13.98      5,427      12.76
Mutual funds................................       23,591      64.78     15,367      36.14
                                                 --------   --------   --------   --------
  Total investment securities...............       34,075      93.57     31,170      73.31
                                                 --------   --------   --------   --------
FHLB stock..................................          832       2.29      1,610       3.79
                                                 --------   --------   --------   --------
   Total securities and FHLB stock..........       34,907      95.86     32,780      77.10
                                                 --------   --------   --------   --------
Other interest-earning assets:
  Interest-bearing deposits with banks......        1,509       4.14      9,737      22.90
                                                 --------   --------   --------   --------
Total investment securities,
    FHLB stock and other....................     $ 36,416     100.00%  $ 42,517     100.00%
                                                 ========   ========   ========   ========
</TABLE>


         The following table presents the composition of our mortgage-backed
securities portfolios.

<TABLE>
<CAPTION>

                                                                 June 30,
                                                 -----------------------------------------
                                                         2004                  2003
                                                 -------------------   -------------------
                                                 Carrying     % of     Carrying     % of
                                                   Value      Total      Value      Total
                                                 --------   --------   --------   --------
                                                          (Dollars in Thousands)

Mortgage-backed securities available for sale:
<S>                                              <C>           <C>     <C>           <C>
  Ginnie Mae................................     $    523      52.35   $    924      52.06
  Fannie Mae................................          276      27.63        515      29.01
  Freddie Mac...............................          200      20.02        336      18.93
                                                 --------   --------   --------   --------
   Total mortgage-backed securities.........     $    999     100.00%  $  1,775     100.00%
                                                 ========   ========   ========   ========
</TABLE>


                                       15
<PAGE>


     Carrying Values, Yields and Maturities.  The following table sets forth the
scheduled maturities,  carrying values, market value and weighted average yields
for our investment securities at June 30, 2004.

<TABLE>
<CAPTION>

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


<S>                                        <C>        <C>        <C>        <C>        <C>        <C>
U.S. government agency securities.....     $     --   $  5,092   $     --   $     --   $  5,092   $  5,092
Certificates of deposit...............           --      2,000         --         --      2,000      2,003
Mortgage-backed securities............           --         --         --        999        999        999
Federal Farm Credit Bureau Note.......           --         --      3,392         --      3,392      3,392
Mutual funds..........................       23,591         --         --         --     23,591     23,591
Equity securities.....................           --         --         --         --         --         12
                                           --------   --------   --------   --------   --------   --------

Total securities......................     $ 23,591   $  7,092   $  3,392   $    999   $ 35,074   $ 35,089
                                           ========   ========   ========   ========   ========   ========

Weighted average yield................         2.21%      3.27%      4.39%      3.76%      2.68%

</TABLE>

Sources of Funds

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

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

     We are not currently using brokers to obtain deposits. Our deposit products
include demand and NOW, money market, savings, and term certificate accounts. We
establish  interest  rates paid,  maturity  terms,  service fees and  withdrawal
penalties on a periodic basis.  Management  determines the rates and terms based
on rates paid by competitors, our needs for funds or liquidity, growth goals and
federal and state regulations.

     Deposit  Activity.  The following table sets forth our savings flows during
the periods indicated.

<TABLE>
<CAPTION>

                                                                 Years Ended June 30,
                                                                 --------------------
                                                                   2004        2003
                                                                 --------    --------
                                                                (Dollars in Thousands)

<S>                                                              <C>         <C>
        Opening balance......................................    $118,823    $130,989
        Deposits.............................................     250,481     238,570
        Withdrawals..........................................    (256,555)   (255,399)
        Interest credited....................................       3,489       4,663
                                                                 --------    --------
        Ending balance.......................................    $116,238    $118,823
                                                                 ========    ========

        Net decrease.........................................    $ (2,585)   $(12,166)
                                                                 ========    ========

        Percent decrease.....................................       -2.18%      -9.29%
                                                                 ========    ========
</TABLE>


                                       16

<PAGE>


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

<TABLE>
<CAPTION>

                                                        June 30,
                                    ------------------------------------------------
                                             2004                      2003
                                    ----------------------    ----------------------
                                     Amount       Percent      Amount       Percent
                                    ---------    ---------    ---------    ---------
                                                 (Dollars in Thousands)

Transaction and savings deposits:
<S>                                 <C>              <C>      <C>               <C>
  Demand and NOW (0% to 2.60%)...   $  11,792        10.14%   $  10,824         9.11%
  Money market (0% to 3.75%).....       6,810         5.86%       6,074         5.11%
  Savings deposits (0% to 3.00%).       7,656         6.59%       6,096         5.13%
                                    ---------    ---------    ---------    ---------
   Total transaction and
        savings deposits.........      26,258        22.59%      22,994        19.35%
                                    ---------    ---------    ---------    ---------

Term certificates:
  0.00 - 4.00%...................      59,072        50.82%      46,310        38.97%
  4.01 - 5.00%...................      11,693        10.06%      12,890        10.85%
  5.01 - 6.00%...................      10,468         9.00%      17,330        14.59%
  6.01 - 7.00%...................       6,692         5.76%      18,856        15.87%
  7.01 and above.................       2,055         1.77%         443         0.37%
                                    ---------    ---------    ---------    ---------
   Total term certificates.......      89,980        77.41%       95,82        80.65%
                                    ---------    ---------    ---------    ---------
Total deposits...................   $ 116,238       100.00%   $ 118,823       100.00%
                                    =========    =========    =========    =========
</TABLE>

     Large  Certificates.  The  following  table  indicates  the  amount  of our
certificates  of deposit and other deposits by time remaining  until maturity as
of June 30, 2004.

<TABLE>
<CAPTION>

                                                                             Maturity
                                                 ------------------------------------------------------------
                                                                 Over          Over
                                                 3 Months      3 to 12      12 to 36      Over
                                                  or Less      Months        Months     36 Months      Total
                                                 ---------    ---------    ---------    ---------    --------

<S>                                              <C>          <C>          <C>          <C>          <C>
Certificates of deposit less than $100,000.....  $  11,065    $  22,923    $  21,794    $   5,505    $ 61,287
Certificates of deposit of $100,000 or more....      4,784       10,845        8,495        1,259      25,383
Deposits from governmental and other public
   entities                                            500        2,810           --          --        3,310
                                                 ---------    ---------    ---------    ---------    --------
Total certificates of deposit..................  $  16,349    $  36,578    $  30,289    $   6,764    $ 89,980
                                                 =========    =========    =========    =========    ========
</TABLE>


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

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

<TABLE>
<CAPTION>

                                                           Years Ended June 30,
                                                       ---------------------------
                                                          2004            2003
                                                       -----------     -----------
                                                              (In Thousands)
Maximum balance:
<S>                                                    <C>             <C>
   FHLB advances.................................      $  14,808       $  10,000
   Other borrowings..............................             --              --

Average balance:
   FHLB advances.................................      $   7,140       $   7,306
   Other borrowings..............................             --              --

</TABLE>


                                       17

<PAGE>

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

<TABLE>
<CAPTION>


                                                                                June 30,
                                                                       --------------------------
                                                                          2004           2003
                                                                       -----------    -----------
                                                                             (In Thousands)

<S>                                                                    <C>               <C>
FHLB advances.....................................................     $  12,295         $  8,907
Other borrowings..................................................            --               --
                                                                       ---------         --------
Total borrowings..................................................     $  12,295         $  8,907
                                                                       =========         ========

Weighted average interest rate of FHLB advances...................          2.71%            2.93%

Weighted average interest rate of other borrowings................           n/a              n/a

</TABLE>

Subsidiary Activities

     Alamogordo  Financial  has no direct  subsidiaries  other  than  Alamogordo
Federal.  As a federally  chartered savings  association,  Alamogordo Federal is
permitted by OTS  regulations  to invest up to 2% of its assets in the stock of,
or loans to, service corporation subsidiaries.  Alamogordo Federal may invest an
additional 1% of its assets in service  corporations where such additional funds
are used for inner-city or community  development  purposes and up to 50% of its
total capital in conforming loans to service  corporations in which it owns more
than  10%  of  the  capital  stock.   In  addition  to  investments  in  service
corporations,  federal  associations are permitted to invest an unlimited amount
in  operating  subsidiaries  engaged  solely  in  activities  in which a federal
association may engage. At June 30, 2004, Alamogordo Federal had one subsidiary,
Space Age City  Service  Corporation.  Alamogordo  Federal's  investment  in its
subsidiary  was  $166,000 as of June 30, 2004.  As of June 30, 2004,  Alamogordo
Federal  had  an  outstanding  note  receivable  from  Space  Age  City  Service
Corporation  of  $112,000.  The  subsidiary  has been  involved in a real estate
development  project for the purpose of  development  of real estate lots. As of
June 30, 2004, Space Age City Service  Corporation owns real estate it values at
approximately  $228,000.  Gross rental  income from its  investment  amounted to
$6,000 for the fiscal year ended June 30, 2004.

Competition

     We face intense  competition both in making loans and attracting  deposits.
New  Mexico,   and  Otero  County  have  a  high   concentration   of  financial
institutions,  many of which are  branches  of large money  center and  regional
banks which have resulted from the  consolidation of the banking industry in New
Mexico and surrounding  states. Some of these competitors have greater resources
than we do and may offer services that we do not provide.

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

Personnel

     As of  June  30,  2004,  we had 46  full-time  employees  and no  part-time
employees. The employees are not represented by a collective bargaining unit and
we consider our relationship with our employees to be good.

                                   REGULATION

General

     Alamogordo Federal is regulated, examined and supervised by the OTS, as its
chartering agency, and the FDIC, as the insurer of its deposits.  The activities
of federal  savings  institutions  are governed by the Home Owners' Loan Act, as
amended and, in certain  respects,  the Federal  Deposit  Insurance  Act and the
regulations  issued by the OTS and the FDIC to implement these  statutes.  These

                                       18
<PAGE>


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

Federal Regulation of Savings Associations

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

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

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

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

Standards for Safety and Soundness

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

     Qualified Thrift Lender Test. All savings associations are required to meet
a  qualified  thrift  lender  test  to  avoid  certain   restrictions  on  their
operations.  A savings  institution  that fails to become or remain a  qualified

                                       19

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

     The  qualified  thrift  lender test  requires  that  either an  institution
qualify as a domestic  building and loan association  under the Internal Revenue
Code or that 65% of an  institution's  "portfolio  assets"  consist  of  certain
housing and  consumer-related  assets on a monthly  average basis in nine out of
every 12 months. At June 30, 2004, Alamogordo Federal was in compliance with the
qualified thrift lender test.

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

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

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

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

                                       20

<PAGE>


     The  OTS  has  incorporated  an  interest  rate  risk  component  into  its
regulatory  capital  rule.  Under the rule,  savings  associations  with  "above
normal"  interest rate risk exposure  would face a deduction  from total capital
for purposes of calculating  their risk-based  capital  requirements.  A savings
association's interest rate risk is measured by the decline in the net portfolio
value of its assets, or the difference between incoming and outgoing  discounted
cash flows from assets,  liabilities and off-balance sheet contracts, that would
result  from a  hypothetical  200 basis  point  increase  or  decrease in market
interest  rates divided by the  estimated  economic  value of the  association's
assets,  as  calculated  in  accordance  with  guidelines  of the OTS. A savings
association whose measured interest rate risk exposure exceeds 2% must deduct an
interest  rate  risk  component  in  calculating  its  total  capital  under the
risk-based  capital rule. The interest rate risk component is an amount equal to
one-half of the difference between the institution's measured interest rate risk
and 2%, multiplied by the estimated economic value of the association's  assets.
That  dollar  amount  is  deducted  from  an  association's   total  capital  in
calculating compliance with its risk-based capital requirement.  Under the rule,
there is a two  quarter  lag  between  the  reporting  date of an  institution's
financial data and the effective date for the new capital  requirement  based on
that data.  A savings  association  with  assets of less than $300  million  and
risk-based capital ratios in excess of 12% is exempt from the interest rate risk
component,  unless the OTS determines otherwise. The rule also provides that the
OTS may  waive or defer an  association's  interest  rate  risk  component  on a
case-by-case  basis.  Under certain  circumstances,  a savings  association  may
request an adjustment  to its interest  rate risk  component if it believes that
the  calculated  interest  rate  risk  component,  as  calculated  by  the  OTS,
overstates   its   interest   rate   risk   exposure.   In   addition,   certain
"well-capitalized"  institutions  may  obtain  authorization  to use  their  own
interest rate risk model to calculate their interest rate risk component in lieu
of the amount as  calculated by the OTS. The OTS has postponed the date that the
component will first be deducted from an institution's total capital. As of June
30, 2004,  Alamogordo  Federal was in  compliance  with all  regulatory  capital
requirements.

Capital Distributions

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

Loans to One Borrower

     Savings  institutions  are  generally  required to follow the national bank
limit on loans to one borrower.  Generally,  this limit is 15% of its unimpaired
capital and surplus,  plus an additional 10% of unimpaired  capital and surplus,
if the loan is  secured by readily  marketable  collateral,  which is defined to
include certain  financial  instruments  and bullion.  The OTS by regulation has
amended the loans to one borrower rule to permit  savings  associations  meeting
certain  requirements,  including capital  requirements,  to extend loans to one
borrower in additional amounts under circumstances  limited essentially to loans
to  develop  or  complete  residential  housing  units.  As of  June  30,  2004,
Alamogordo Federal was in compliance with all loans to one borrower limitations.
See "Business of Alamogordo  Financial  Corporation  - Lending  Activities"  for
further information.

Transactions with Affiliates

     Savings  associations  must comply with Sections 23A and 23B of the Federal
Reserve Act relative to  transactions  with affiliates in the same manner and to
the same  extent as if the savings  association  were a Federal  Reserve  member
bank. A savings and loan holding company, its subsidiaries and any other company
under  common  control  are  considered  affiliates  of the  subsidiary  savings
association  under the Home Owners  Loan Act.  Generally,  Sections  23A and 23B
limit the extent to which the insured association or its subsidiaries may engage
in certain covered  transactions  with an affiliate to an amount equal to 10% of
the  institution's  capital  and  surplus  and place an  aggregate  limit on all

                                       21

<PAGE>


transactions  with  affiliates to an amount equal to 20% of capital and surplus,
and require that all  transactions  be on terms  substantially  the same,  or at
least as favorable to the  institution  or  subsidiary,  as those  provided to a
non-affiliate.  The term "covered transaction" includes the making of loans, the
purchase  of  assets,   the  issuance  of  a  guarantee  and  similar  types  of
transactions.

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

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

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

Community Reinvestment Act

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

The USA PATRIOT Act

     The USA  PATRIOT  Act  gives  the  federal  government  powers  to  address
terrorist  threats  through  enhanced  domestic  security   measures,   expanded
surveillance  powers,  increased  information  sharing and broadened  anti-money
laundering  requirements.  Title III of the USA  PATRIOT  Act  amended  the Bank
Secrecy Act to encourage  information sharing among bank regulatory agencies and
law  enforcement  bodies.  Moreover,  certain  provisions  of Title  III  impose
affirmative  obligations on a broad range of financial  institutions,  including
banks, savings  associations,  brokers,  dealers,  credit unions, money transfer
agents and parties registered under the Commodity Exchange Act.

     Among  other  requirements,  Title III of the USA  PATRIOT  Act imposes the
following requirements with respect to financial institutions:

     o    Pursuant to Section 352, all  financial  institutions  must  establish
          anti-money  laundering  programs  that  include,  at  a  minimum:  (i)
          internal policies, procedures, and controls; (ii) specific designation
          of an anti-money laundering compliance officer; (iii) ongoing employee
          training programs;  and (iv) an independent audit function to test the
          anti-money laundering program.

                                       22

<PAGE>


     o    Section 326 authorizes the Secretary of the Department of Treasury, in
          conjunction  with other bank  regulators,  to issue  regulations  that
          provide for minimum standards with respect to customer  identification
          at the time new accounts are opened.  On July 23, 2002,  the Office of
          Thrift  Supervision  and the other  federal  bank  regulators  jointly
          issued  proposed  rules to implement  Section 326. The proposed  rules
          require  financial  institutions  to  establish  a program  specifying
          procedures  for  obtaining  identifying   information  from  customers
          seeking to open new accounts.  This identifying  information  would be
          essentially the same information  currently obtained by most financial
          institutions for individual customers.

     o    Section 312 requires financial institutions that establish,  maintain,
          administer,  or manage  private  banking  accounts  or  correspondence
          accounts in the United States for  non-United  States persons or their
          representatives  (including  foreign  individuals  visiting the United
          States) to establish  appropriate,  specific,  and,  where  necessary,
          enhanced due diligence policies,  procedures, and controls designed to
          detect and report money laundering.

     o    Effective  December 25, 2001,  financial  institutions  are prohibited
          from    establishing,    maintaining,    administering   or   managing
          correspondent  accounts for foreign shell banks (foreign banks that do
          not have a physical  presence in any country),  and will be subject to
          certain  record  keeping  obligations  with  respect to  correspondent
          accounts of foreign banks.

     Bank regulators are directed to consider a holding company's  effectiveness
in combating money laundering when ruling on Federal Reserve Act and Bank Merger
Act applications.

Holding Company Regulation

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

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


                                       24
<PAGE>


holding company,  the holding company acquired or the holding company  resulting
from such  merger  or  acquisition  may only  invest  in  assets  and  engage in
activities  listed in (i)  through  (x) above,  and has a period of two years to
cease any nonconforming activities and divest of any nonconforming investments.

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

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

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

Sarbanes-Oxley Act of 2002

     The   Sarbanes-Oxley  Act  of  2002  (the  "Act")  provides  for  corporate
governance,  disclosure and accounting reforms intended to address corporate and
accounting  fraud.  The Act  established  an  accounting  oversight  board  that
enforces auditing,  quality control and independence standards, and is funded by
fees  from  all  publicly  traded   companies.   The  Act  also  places  certain
restrictions  on the scope of services that may be provided by accounting  firms
to their public company audit clients.  Any non-audit services being provided to
a public company audit client will require  preapproval  by the company's  audit
committee.  In addition,  the Act makes certain changes to the  requirements for
audit  partner  rotation  after a period of time.  The Act also  requires  chief
executive officers and chief financial officers, or their equivalent, to certify
to the  accuracy of periodic  reports  filed with the  Securities  and  Exchange
Commission,  subject  to civil  and  criminal  penalties  if they  knowingly  or
willingly violate this certification  requirement.  In addition,  under the Act,
counsel will be required to report to the chief executive officer or chief legal
officer of the company,  evidence of a material violation of the securities laws
or a breach  of  fiduciary  duty by a  company  and,  if such  officer  does not
appropriately  respond,  to report such evidence to the audit committee or other
similar committee of the board of directors or the board itself.


                                       24
<PAGE>

     Under the Act,  longer prison terms will apply to corporate  executives who
violate federal  securities laws; the period during which certain types of suits
can be brought against a company or its officers is extended; and bonuses issued
to top executives  prior to restating a company's  financial  statements are now
subject to  disgorgement if such  restatement  was due to corporate  misconduct.
Executives  are also  prohibited  from insider  trading during  retirement  plan
"blackout"  periods,  and  loans to  company  executives  (other  than  loans by
financial   institutions   permitted  by  federal  rules  and  regulations)  are
restricted.  In addition, a provision directs that civil penalties levied by the
Securities and Exchange Commission as a result of any judicial or administrative
action under the Act be deposited to a fund for the benefit of harmed investors.
The Federal  Accounts  for  Investor  Restitution  provision  also  requires the
Securities and Exchange  Commission to develop  methods of improving  collection
rates.  The  legislation  accelerates  the time frame for  disclosures by public
companies,  as they must  immediately  disclose  any  material  changes in their
financial  condition or operations.  Directors and executive  officers must also
provide  information  for most  changes in  beneficial  ownership in a company's
securities within two business days of the change.

     The Act also increases the oversight of, and codifies certain  requirements
relating to, audit committees of public companies and how they interact with the
company's  "registered  public accounting firm." Audit Committee members must be
independent  and are absolutely  barred from accepting  consulting,  advisory or
other  compensatory  fees from the public company.  In addition,  companies must
disclose  whether at least one member of the  committee  is an "audit  committee
financial expert" (as defined by Securities and Exchange Commission regulations)
and if not, why not.  Under the Act, a company's  registered  public  accounting
firm will be prohibited from performing  statutorily mandated audit services for
a company if such company's chief executive  officer,  chief financial  officer,
comptroller,  chief  accounting  officer  or any person  serving  in  equivalent
positions had been employed by such firm and  participated  in the audit of such
company during the one-year period  preceding the audit initiation date. The Act
prohibits  any officer or director of a company or any other person acting under
their  direction  from  taking any  action to  fraudulently  influence,  coerce,
manipulate  or mislead any  independent  accountant  engaged in the audit of the
company's  financial  statements  for the  purpose of  rendering  the  financial
statements  materially  misleading.  The Act also  requires the  Securities  and
Exchange  Commission  to  prescribe  rules  requiring  inclusion of any internal
control   report  and   assessment   by  management  in  the  annual  report  to
stockholders.  The Act requires the company's  registered public accounting firm
that issues the audit report to attest to and report on management's  assessment
of the company's internal controls.

Item 2.   Properties
-------   ----------

Properties

     We conduct our business  through our  administrative  office and one branch
office. We own our administrative  office building,  and lease our branch office
facility. Our administrative offices are located at 500 10th Street, Alamogordo,
New Mexico. Our branch office is located at 233 New York Street, Alamogordo, New
Mexico.  Our premises and  equipment  had a net book value of $7.5 million as of
June 30, 2004. We believe that our current  facilities  are adequate to meet our
present needs.

Item 3.   Legal Proceedings
-------   -----------------

     We are not  involved in any pending  legal  proceedings  other than routine
legal proceedings  occurring in the ordinary course of business. We believe that
these  routine  legal  proceedings,  in the  aggregate,  are  immaterial  to our
financial condition and results of operations.


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

          Not applicable.

                                     PART II

Item 5.   Market for Common Equity, Related Shareholder Matters and Small
-------   ---------------------------------------------------------------
          Business Issuer Purchases of Equity Securities
          ----------------------------------------------

          (a)  Information included in the 2004 Annual Report to Shareholders is
               herein incorporated by reference.

                                       25

<PAGE>

          (b)  Not applicable.

          (c)  Issuer Purchases of Equity Securities.


<TABLE>
<CAPTION>
                                                                      Total number of shares   Maximum number of
                                                                        purchased under a      shares that may be
                            Total number of      Average Price paid    publicly announced       purchased under
                           shares purchased          per share           repurchase plan        repurchase plan
                         -------------------    -------------------    -------------------    -------------------

<S>                             <C>                     <C>                    <C>                   <C>
April 1 to April 30              53                    $26.10                  --                    N/A
May 1 to May 31                  --                      --                    --                    N/A
June 1 to June 30                --                      --                    --                    N/A

</TABLE>


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

     Information  included in the 2004 Annual Report to  Shareholders  is herein
incorporated by reference.

Item 7.   Financial Statements
-------   --------------------

               The following  documents  appear in sections of the  Registrant's
               2004 Annual Report to  Shareholders  under the same caption,  and
               are  incorporated  herein by reference.  No other sections of the
               2004 Annual Report to  Shareholders  are  incorporated  herein by
               this reference.

          (1)  Report to Shareholders
          (2)  Selected Financial and Other Data
          (3)  Managements  Discussion  and Analysis of Financial  Condition and
               Results of Operations
          (4)  Independent Auditors' Report
          (5)  Consolidated Financial Statements (i) Consolidated Balance Sheets
               (ii)  Consolidated   Statements  of  Income  (iii)   Consolidated
               Statements of Changes in Equity (iv)  Consolidated  Statements of
               Cash Flows (v) Notes to Consolidated Financial Statements

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

         Not applicable.

Item 8A. Controls and Procedures
-------- -----------------------

     Under  the  supervision  and  with  the  participation  of our  management,
including our Chief Executive Officer and Chief Financial Officer,  we evaluated
the  effectiveness  of the design and operation of our  disclosure  controls and
procedures (as defined in Rule  13a-15(e) and 15d-15(e)  under the Exchange Act)
as of the end of the  period  covered  by this  annual  report.  Based upon that
evaluation,  the Chief Executive  Officer and Chief Financial  Officer concluded
that, as of the end of the period covered by this annual report,  our disclosure
controls and procedures were effective to ensure that information required to be
disclosed  in the reports that the Company  files or submits  under the Exchange
Act is recorded,  processed,  summarized  and  reported  within the time periods
specified in the Securities and Exchange Commission's rules and forms.

     There were no significant  changes made in our internal controls during the
period covered by this report or, to our knowledge,  in other factors that could
significantly affect these controls subsequent to the date of their evaluation.

Item 8B. Other Information
-------- -----------------
         Not applicable.

                                       26

<PAGE>


                                    PART III

Item 9.  Directors,  Executive  Officers,  Promoters  and Control  Persons;
         ------------------------------------------------------------------
         Compliance  with Section 16(a) of the Exchange Act
         --------------------------------------------------

     Information  included in the Proxy Statement for the 2004 Annual Meeting of
Shareholders is incorporated herein by reference.

Item 10. Executive Compensation
-------- ----------------------

     Information  included in the Proxy Statement for the 2004 Annual Meeting of
Shareholders is incorporated herein by reference.

Item 11. Security Ownership of Certain Beneficial Owners and Management and
-------- ------------------------------------------------------------------
         Related Stockholder Matters
         ---------------------------

     Information  included in the Proxy Statement for the 2004 Annual Meeting of
Shareholders is incorporated herein by reference.

Item 12. Certain Relationships and Related Transactions
-------- ----------------------------------------------

     The  Company  does not have any equity  compensation  program  that was not
approved by stockholders, other than its employee stock ownership plan.

     Set forth below is certain information as of June 30, 2004 regarding equity
compensation  to directors and  executive  officers of the Company that has been
approved by stockholders.

<TABLE>
<CAPTION>

====================================================================================================================
                               Number of securities to be
                                issued upon exercise of                                    Number of securities
  Equity compensation plans     outstanding options and         Weighted average         remaining available for
  approved by stockholders               rights                  exercise price            issuance under plan
--------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                          <C>                         <C>
    Stock Option Plan.......             19,106                       18.50                       28,049
--------------------------------------------------------------------------------------------------------------------
    Recognition and                       5,890
      Retention Plan........              (1)                    Not Applicable                   14,024
--------------------------------------------------------------------------------------------------------------------
    Total...................             24,996                      $18.50                       42,073
====================================================================================================================
<FN>

(1) Represents shares that have been granted but have not yet vested.
</FN>
</TABLE>

         Information included in the Proxy Statement for the 2004 Annual Meeting
of Shareholders is incorporated herein by reference.

Item 13.   Exhibits
--------   --------

                The following exhibits are filed as part of this report.
        3.1     Federal Stock Charter of Alamogordo Financial Corp.*
        3.2     Bylaws of Alamogordo Financial Corp.*
        4.0     Stock Certificate of Alamogordo Financial Corp.*
       10.1     Alamogordo Financial Corp. Employee Stock Ownership Plan and
                Trust**
       10.2     Alamogordo Financial Corp. 2001 Stock Option Plan**
       10.3     Alamogordo Financial Corp. 2001 Recognition and Retention Plan**
       13       Alamogordo Financial Corp. 2003 Annual Report to Shareholders
       23       Consent of Auditors
       31.1     Certification of Chief Executive Officer Pursuant to Section 302
                of the Sarbanes-Oxley Act of 2002
       31.2     Certification of Chief Financial Officer Pursuant to Section 302
                of the Sarbanes-Oxley Act of 2002

                                       27

<PAGE>

       32       Certification of Chief Executive Officer and Chief Financial
                Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002

*        Incorporated herein by reference into this document from the Exhibits
         to Form SB-2 Registration Statement, initially filed on December 16,
         1999, Registration No. 333-92913.
**       Incorporated herein by reference into this document from the Exhibits
         to Proxy Statement for the June 25, 2001 Annual Meeting of
         Stockholders, filed with the Commission on May 29, 2001.

Item 14.   Principal Accountant Fees and Services
--------   --------------------------------------

     Information  included in the Proxy Statement for the 2004 Annual Meeting of
Shareholders is incorporated herein by reference.







                                       28
<PAGE>

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                                      ALAMOGORDO FINANCIAL CORP.


Date:      October 12, 2004         By:     /s/ R. Miles Ledgerwood
          ---------------------             ------------------------------------
                                            R. Miles Ledgerwood
                                            President


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



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


Date:  October 12, 2004                   Date:  October 12, 2004
       ------------------------------            -------------------------------



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


Date:  October 12, 2004                   Date:  October 12, 2004
       ------------------------------            -------------------------------



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


Date:  October 12, 2004                   Date:  October 12, 2004
       ------------------------------            -------------------------------