<PAGE>
                                                                      Exhibit 13
 
                                  [ L O G O ]



                          ROCKY FORD FINANCIAL, INC.


                               ANNUAL REPORT FOR

                                THE YEAR ENDED

                              SEPTEMBER 30, 1998
<PAGE>
 
                    [ROCKY FORD FINANCIAL, INC. LETTERHEAD]



To Our Stockholders:

     Rocky Ford Financial Inc. did some great things in 1998.  We are maturing
at a rapid pace as our net profit increased from $93,000.00 to $208,000.00 and
hope to do even better in 1999.  Our loan portfolio increased from $13.5 million
to $14.1 million, which shows we are getting a larger share of home loans in our
trade area.

     Being a young public traded company, we have many challenges and we are
maturing at a rapid pace determined to take our business to a higher level of
performance for our stockholders. The economy looks positive in our area, and we
are looking forward to a good year in 1999.

     We would not be successful if it were not for our hardworking employees and
we want to thank them for their efforts.  We are confident that they will
continue to meet any challenges.

     Thank you for your support and confidence and we hope to see you at our
annual meeting January 21, 1999.



                                       Sincerely,                         
                                                                          
                                       /s/ Keith E. Waggoner
                                                                          
                                       Keith E. Waggoner                  
                                       President & Chief Executive Officer 
<PAGE>
 
                              FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
                                                AT SEPTEMBER 30,       CHANGE     
                                           ---------------------- ---------------- 
                                             1998      1997       AMOUNT   PERCENT
                                             ----      ----       ------   ------- 
                                                   (DOLLARS IN THOUSANDS)
<S>                                        <C>       <C>         <C>     <C> 
FINANCIAL POSITION:
 Total assets............................  $ 23,013  $ 23,165     $(152)      (.66)% 
 Loans receivable, net...................    14,093    13,530       563       4.16   
 Mortgage-backed and related securities..     1,806     2,421      (615)    (25.40)  
 Investment securities...................     1,033     1,482      (449)    (30.30)  
 Deposits................................    15,598    16,139      (541)     (3.35)  
 Stockholders' equity....................     6,724     6,448       276       4.28   
                                                                                     
 Number of common shares outstanding.....   423,200   423,200        --         --    
 
</TABLE> 


<TABLE> 
<CAPTION> 
                                           FOR THE YEAR ENDED
                                              SEPTEMBER 30,         CHANGE     
                                           ------------------  ---------------- 
                                             1998       1997   AMOUNT   PERCENT
                                             ----      ----    ------   ------- 
                                                    (DOLLARS IN THOUSANDS)
<S>                                        <C>       <C>       <C>      <C>  
RESULTS OF OPERATIONS:
 Interest income.........................  $  1,700  $  1,662   $  38      2.29%
 Interest expense........................       768       827     (59)    (7.13)
 Net interest income.....................       932       835      97     11.62
 Provision for loan losses...............        --        --
 Net interest income after provision
  for loan losses........................       932       835      97     11.62
 Non-interest income.....................        14        16      (2)   (12.50)
 Non-interest expense....................       604       728    (124)   (17.03)
 Earnings before cumulative effect
  of accounting change...................       342       124     218    175.81
 Net earnings............................       208        93     115    123.66
</TABLE>

                                       1
<PAGE>
 
                        SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>

SUMMARY OF FINANCIAL CONDITION
                                                      AT SEPTEMBER 30,
                                         --------------------------------------------
                                         1998      1997     1996     1995       1994
                                         ----      ----     ----     ----       ----
                                                   (DOLLARS IN THOUSANDS)
<S>                                     <C>      <C>      <C>      <C>      <C>
Total amount of:
Total assets..........................  $23,013  $23,165  $20,388  $19,653    $19,621
Cash..................................      268      305      221      160        123
Interest-bearing deposits.............    3,700    2,900    2,000    1,100        600
Certificates of deposit...............    1,599    1,999    1,897    2,583      2,780
Securities available for sale                                               
  FHLB stock..........................      210      323      303      284        284
  FHLMC stock.........................      574      409      282      121         11
                                        -------  -------  -------  -------    -------
    Total.............................      784      732      585      405        295
                                        -------  -------  -------  -------    -------
Securities-held to maturity                                                 
  GNMA's..............................    1,806    2,421    2,617    1,373      1,568
  U.S. agencies.......................      249      749      500    2,700      3,573
                                        -------  -------  -------  -------    -------
    Total.............................    2,055    3,170    3,117    4,073      5,141
                                        -------  -------  -------  -------    -------
Loans receivable, net.................   14,093   13,530   12,287   10,984     10,361
Savings deposits......................   15,598   16,139   17,145   16,702     17,137
Equity substantially restricted.......    6,724    6,448    2,778    2,573      2,192
                                                                            
Number of:                                                                  
 Real estate loans outstanding........      415      408      403      401        401
 Savings accounts.....................    1,460    1,617    1,652    1,675      1,709
 Offices open.........................        1        1        1        1          1

<CAPTION> 
 
SUMMARY OF OPERATIONS
                                                  YEAR ENDED SEPTEMBER 30,    
                                        --------------------------------------------
                                          1998     1997     1996     1995      1994
                                          ----     ----     ----     ----      ----
                                                   (DOLLARS IN THOUSANDS)                                                      
<S>                                     <C>      <C>      <C>      <C>       <C> 
Interest  income......................  $ 1,700  $ 1,662  $ 1,525  $ 1,471   $ 1,479
Interest expense......................      768      827      820      734       684
                                        -------  -------  -------  -------   -------
   Net interest income................      932      835      705      737       795
Provision for loan losses (recovery)..       --       --       --       69       (18)
                                        -------  -------  -------  -------   -------
   Net interest income after                                                
   provision for loan losses..........      932      835      705      806       777
                                        -------  -------  -------  -------   -------
Noninterest income....................       14       16       21       26        18
                                        -------  -------  -------  -------   -------
   Subtotal...........................      946      851      726      832       795
                                        -------  -------  -------  -------   -------
                                                                            
Noninterest expense:                                                        
   Compensation and benefits..........      308      526      232      230       217
   Other (1)..........................      296      202      307      197       191
                                        -------  -------  -------  -------   -------
     Total noninterest expense........      604      728      539      427       408
                                        -------  -------  -------  -------   -------
     Income before taxes..............      342      123      187      405       387
Income tax expense....................      134       30       58      118       157
                                        -------  -------  -------  -------   -------
     Net income.......................  $   208  $    93  $   129  $   287   $   230
                                        =======  =======  =======  =======   =======
</TABLE>

                                       2
<PAGE>
 
<TABLE>
<CAPTION>
KEY OPERATING RATIOS
                                                                        YEAR ENDED SEPTEMBER 30,         
                                                             --------------------------------------------
                                                               1998     1997     1996     1995      1994 
                                                               ----     ----     ----     ----      ---- 
<S>                                                          <C>      <C>      <C>      <C>      <C>     
PERFORMANCE RATIOS:                                                                                      
   Return on assets (ratio of net earnings                                                               
      to average total assets)..............................    .90%    0.43%    0.64%    1.50%     1.14%
   Return on equity (ratio of net earnings                                                               
      to average equity)....................................   3.12     2.57     4.81    12.24     10.69 
   Ratio of average interest-earning assets                                                              
      to average interest-bearing liabilities............... 138.83   119.91   116.14   114.83    111.93 
   Ratio of net interest income, after provision                                                         
      for loan losses, to noninterest expense............... 154.42   112.75   130.85   188.60    190.25 
   Net interest rate spread.................................   2.90     3.13     2.90     3.33      3.60 
   Net yield on average interest-earning                                                                 
      assets................................................   4.26     3.92     3.57     3.91      4.02 
                                                                                                         
QUALITY RATIOS:                                                                                          
   Non-performing loans to total loans at                                                                
      end of period.........................................    .38     0.00     0.00     0.00      0.05 
   Non-performing loans to total assets.....................    .24     0.00     0.00     0.00      0.03 
   Non-performing assets to total assets                                                                 
      at end of period......................................    .24     0.00     0.00     0.00      0.15 
   Allowance for loan losses to non-                                                                     
      performing loans at end of period..................... 110.37     0.00     0.00     0.00   2560.00 
   Allowance for loan losses to total                                                                    
      loans, net............................................    .43     0.44     0.49     0.55      1.24 
                                                                                                         
CAPITAL RATIOS:                                                                                          
   Equity to total assets at end of period..................  29.22    27.83    13.63    13.09     11.17 
   Average equity to average assets.........................  28.97    16.82    13.27    12.24     10.70  
</TABLE>  
-------------------------
(a)  Annualized.

                                       3
<PAGE>
 
                  BUSINESS OF THE COMPANY AND THE ASSOCIATION

ROCKY FORD FINANCIAL, INC.

     Rocky Ford Financial, Inc. (the "Company") was incorporated under the laws
of the State of Delaware in March 1997 for the purpose of becoming a savings and
loan holding company for Rocky Ford Federal Savings and Loan Association ("Rocky
Ford" or the "Association").  On May 21, 1997, the Association consummated its
conversion from mutual to stock form (the "Conversion") and the Company
completed its offering of Common Stock through the sale and issuance of 423,400
shares of Common Stock at a price of $10.00 per share, realizing gross proceeds
of $4.23 million and net proceeds of $3.83 million.  The Company purchased all
of the stock of the Association with a portion of the offering proceeds.  Prior
to the Conversion, the Company did not engage in any material operations.
Currently, the Company's principal business is the business of the Association.
The Company has no significant assets other than the outstanding capital stock
of the Association, $1.6 million of cash and cash equivalents and a note
receivable from the Company's Employee Stock Ownership Plan ("ESOP"), therefore,
substantially all of the discussion in this Annual Report relates to the
operations of the Association.


ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION

     The Association is a federal mutual savings and loan association operating
through a single office located in Rocky Ford, Colorado and serving Otero
County, Colorado.  The Association was chartered as a federal mutual savings and
loan association and received federal insurance of its deposit accounts in 1934,
under its current name of Rocky Ford Federal Savings and Loan Association.
Effective May 21, 1997, the Association became a stock savings and loan
association.  At September 30, 1998, the Association had total assets of $23.0
million, total deposits of $15.6 million and equity of $6.7 million.

     The principal business of the Association consists of attracting deposits
from the general public and investing these deposits in loans secured by first
mortgages on single-family residences in the Association's market area.  The
Association derives its income principally from interest earned on loans and, to
a lesser extent, interest earned on mortgage-backed securities and investment
securities and noninterest income.  Funds for these activities are provided
principally by operating revenues, deposits and repayments of outstanding loans
and investment securities and mortgage-backed securities.

     The Association is subject to examination and comprehensive regulation by
the Office of Thrift Supervision ("OTS"), and the Association's savings deposits
are insured up to applicable limits by the Savings Association Insurance Fund
("SAIF"), which is administered by the Federal Deposit Insurance Corporation
("FDIC").  The Association is a member of, and owns capital stock in the FHLB of
Topeka, which is one of 12 regional banks in the FHLB System. The Association is
further subject to regulations of the Board of Governors of the Federal Reserve
System governing reserves to be maintained and certain other matters.

     The Association's executive offices are located at 801 Swink Avenue, Rocky
Ford, Colorado 81067-0032, and its main telephone number is (719) 254-7642.


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

GENERAL

     The principal business of the Association consists of accepting deposits
from the general public and investing these funds primarily in loans and in
investment securities and mortgage-backed securities.  The Association's loan
portfolio consists primarily of loans secured by residential real estate located
in its market area, with terms of 15 to 20 years.

                                       4
<PAGE>
 
     The Association's net income is dependent primarily on its net interest
income, which is the difference between interest income earned on its loan,
investment securities and mortgage-backed securities portfolio and interest paid
on interest-bearing liabilities.  Net interest income is determined by (i) the
difference between yields earned on interest-earning assets and rates paid on
interest-bearing liabilities ("interest rate spread") and (ii) the relative
amounts of interest-earning assets and interest-bearing liabilities.  The
Association's interest rate spread is affected by regulatory, economic and
competitive factors that influence interest rates, loan demand and deposit
flows.  To a lesser extent, the Association's net income also is affected by the
level of noninterest expenses such as compensation and employee benefits and
FDIC insurance premiums.

     The operations of the Association are significantly affected by prevailing
economic conditions, competition and the monetary, fiscal and regulatory
policies of governmental agencies.  Lending activities are influenced by the
demand for and supply of housing, competition among lenders, the level of
interest rates and the availability of funds. Deposit flows and costs of funds
are influenced by prevailing market rates of interest, primarily on competing
investments, account maturities and the levels of personal income and savings in
the Association's market area.


ASSET/LIABILITY MANAGEMENT

     The Association seeks to reduce its exposure to changes in interest rates
by originating fixed-rate loans with maturities of no more than 15 years and by
maintaining a relatively high level of liquid assets.  The matching of the
Association's assets and liabilities may be analyzed by examining the extent to
which its assets and liabilities are interest rate sensitive and by monitoring
the expected effects of interest rate changes on the Association's net interest
income.

     An asset or liability is interest rate sensitive within a specific time
period if it will mature or reprice within that time period.  If the
Association's assets mature or reprice more quickly or to a greater extent than
its liabilities, the Association's net portfolio value and net interest income
would tend to increase during periods of rising interest rates but decrease
during periods of falling interest rates.  If the Association's assets mature or
reprice more slowly or to a lesser extent than its liabilities, the
Association's net portfolio value and net interest income would tend to decrease
during periods of rising interest rates but increase during periods of falling
interest rates.  As a result of the interest rate risk inherent in the
historical savings institution business of originating long-term loans funded by
short-term deposits, the Association has pursued certain strategies designed to
decrease the vulnerability of its earnings to material and prolonged changes in
interest rates.

     In accordance with the Association's interest rate risk policy, the
Association emphasizes the origination of fixed rate loans with maturities of no
more than 15 years and maintains a relatively high level of liquid assets.
Maintaining a high level of liquid assets tends to reduce potential net income
because liquid assets usually provide a lower yield than longer term (less
liquid) assets.  At September 30, 1998, the average weighted term to maturity of
the Association's loan portfolio was 12 years.


YEAR 2000 COMPLIANCE

     At the turn of the century computer-based information systems will be faced
with problems potentially affecting hardware, software, networks, processing
platforms, as well as customer and vendor interdependencies.  The effects of the
Year 2000 Issue may be experienced before, on, or after January 1, 2000, and if
not addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect the Company's
ability to conduct normal business operations.  The Company has an ongoing
program of evaluating the effect of the Year 2000 on its information processing
systems and business operations.  The Company's core data processing is
performed by an outside vendor.  As of October 1998, the client testing of the
core system was complete, the vendor is currently analyzing the incident sheets
and writing up the results of the testing.  The Company is in the process of
updating computers and ancilliary systems.  It is management's position that the
cost of modifications will not have a material effect on the Company's
operations.  All costs associated with modifications will be expensed as
incurred.  It is not possible to be certain that all aspects of the Year 2000
Issue affecting the Company, including those related to the efforts of
customers, other financial institutions, or other third parties, such as utility
providers, will be fully resolved before the Year 2000.

                                       5
<PAGE>
 
     The Company has adopted a contingency and business resumption plan in case
critical systems are found not Year 2000 ready or fail.  The plan has identified
alternative means of operations that do not require computers due to the nature
of the company's business and number of total accounts, and can be carried out
in their current location.  The plan is reviewed on an ongoing basis.


INTEREST RATE SENSITIVITY ANALYSIS

     The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap."  An asset or
liability is said to be interest rate sensitive within a specific period if it
will mature or reprice within that period.  The interest rate sensitivity gap is
defined as the difference between the amount of interest-earning assets maturing
or repricing within a specific time period and the amount of interest-bearing
liabilities maturing or repricing within that time period.  A gap is considered
positive when the amount of interest rate sensitive assets exceeds the amount of
interest rate sensitive liabilities, and is considered negative when the amount
of interest rate sensitive liabilities exceeds the amount of interest rate
sensitive assets.  At September 30, 1998, the Association had an excess of
interest-bearing liabilities over interest-earning assets maturing or repricing
within one year of approximately $6 million, resulting in a negative one-year
interest rate sensitivity gap of 26.95%.  Generally, during a period of rising
interest rates, a negative gap would be expected to adversely affect net
interest income while a positive gap would be expected to result in an increase
in net interest income, while conversely during a period of declining interest
rates,  a negative gap would be expected to result in an increase in net
interest income and a positive gap would be expected to adversely affect net
interest income.  The Association's current one-year gap is within the
guidelines established by management and approved by the Board of Directors.
Management considers numerous factors when establishing these guidelines,
including current interest rate margins, capital levels, and any guidelines
provided by the OTS.

                                       6
<PAGE>
 
     The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at September 30, 1998 which are
expected to mature or reprice in each of the time periods shown.

<TABLE>
<CAPTION>
 
 
                                                             Three       Over One    Over Three    Over Five     Over
                                              Three Months  Months to     Through      Through      Through      Ten
                                                 or Less     One Year   Three Years   Five Years   Ten Years    Years    Total
                                               ----------   ---------  ------------  -----------  ----------  --------  -------
                                                                          (Dollars in thousands)  
<S>                                              <C>       <C>        <C>           <C>          <C>         <C>       <C>
Interest-earning assets:
------------------------
 
Mortgage loans.................................  $   182   $  1,238      $  2,525     $  2,498     $ 5,008   $ 2,565   $14,016
Share loans....................................      132         11            28           --          --        --       171
Interest-bearing deposits......................    4,299        700           300           --          --        --     5,299
U.S. government agency securities..............       --         --            --          249          --        --       249
Mortgage-backed securities.....................        7        111           220          203         442       823     1,806
Equity securities..............................       --         --            --           --          --       784       784
                                                 -------   --------      --------     --------     -------   -------   -------
Total interest-earning assets..................  $ 4,620   $  2,060      $  3,073     $  2,950     $ 5,450   $ 4,172   $22,325
                                                 =======   ========      ========     ========     =======   =======   =======
 
Interest-bearing liabilities
----------------------------
 
Certificate accounts...........................  $ 2,670   $  6,424      $  2,937     $     --     $    --   $    --   $12,031
Money market deposit accounts..................    2,502         --            --           --          --        --     2,502
Passbook accounts..............................    1,065         --            --           --          --        --     1,065
                                                 -------   --------      --------     --------     -------   -------   -------
Total interest-bearing liabilities.............  $ 6,237   $  6,424      $  2.937     $     --     $    --   $    --   $15,598
                                                 =======   ========      ========     ========     =======   =======   =======
 
Interest-earning assets less interest-bearing
 liabilities...................................  $(1,617)  $ (4,364)     $    136     $  2,950     $ 5,450   $ 4,172   $ 6,727
                                                 =======   ========      ========     ========     =======   =======   =======
 
Cumulative interest-rate sensitivity gap.......  $(1,617)  $ (5,981)     $ (5,845)    $ (2,895)    $ 2,555   $ 6,727
                                                 =======   ========      ========     ========     =======   ======= 
 
Cumulative ratio of interest-earning assets
 to interest-bearing liabilities...............    74.07%     52.76%        62.53%       81.44%     116.38%   143.13%
                                                 =======   ========      ========     ========     =======   =======
 
Cumulative interest-rate sensitivity gap as
 a percentage of interest earning assets.......   (7.24)%   (26.79)%      (26.18)%     (12.97)%      11.44%    30.13%
                                                 =======   ========      ========     ========     =======   ======= 
</TABLE>

     Share loans, interest-bearing deposits, and U.S. government agency
securities are included in the period in which they mature.  Equity securities,
which have no specified maturity, are included in the over ten years period.
Mortgage loans and mortgage-backed securities, all of which are fixed rate, are
based on normal amortization plus estimated annual prepayments of 5%.  Deposit
certificate accounts are scheduled according to contractual maturities. Money
market and passbook deposit accounts are included in the earliest period.

     Net Portfolio Value.  In recent years, the Association has measured its
interest rate sensitivity by computing the "gap" between the assets and
liabilities which were expected to mature or reprice within certain periods,
based on assumptions regarding loan prepayment and deposit decay rates formerly
provided by the OTS.  However, the OTS now requires the computation of amounts
by which the net present value of an institution's cash flows from assets,
liabilities and off balance sheet items (the institution's net portfolio value,
or "NPV") would change in the event of a range of assumed changes in market
interest rates.  These computations estimate the effect on an institution's NPV
from instantaneous and permanent 1% to 4% increases and decreases in market
interest rates.  In the Association's interest rate sensitive policy, the Board
of Directors has established a maximum decrease in net interest income and
maximum decreases in NPV given these instantaneous changes in interest rates.

                                       7
<PAGE>
 
     The following table sets forth the interest rate sensitivity of the
Association's net portfolio value as of September 30, 1998 in the event of 1%,
2%, 3% and 4% instantaneous and permanent increases and decreases in market
interest rates, respectively.  These changes are set forth below as basis
points, where 100 basis points equals one percentage point.

<TABLE>
<CAPTION>
                                Net Portfolio Value             NPV as % of Portfolio Value of Assets 
        Change            ------------------------------        -------------------------------------
       in Rates           $ Amount  $ Change   % Change            NPV Ratio    Basis Point Change               
       --------           --------  ---------  ---------           ----------   -------------------              
                              (Dollars in thousands)                                                            
<S>                       <C>       <C>           <C>                <C>            <C>         
      + 400 bp              $4,549   $(1,375)       (23)%              22.44%        (447)  bp           
      + 300 bp               4,989      (935)       (16)               23.98         (293)  bp       
      + 200 bp               5,411      (513)        (9)               25.38         (153)  bp       
      + 100 bp               5,745      (179)        (3)               26.43          (48)  bp       
          0 bp               5,924        --         --                26.91           --   bp       
      - 100 bp               6,022        98          2                27.12           21   bp       
      - 200 bp               6,147       224          4                27.41           50   bp       
      - 300 bp               6,300       376          6                27.78           87   bp       
      - 400 bp               6,460       536          9                28.16          125   bp 
</TABLE>

     The following table sets forth the interest rate risk capital component for
the Association at September 30, 1998 given a hypothetical 200 basis point rate
change in market interest rates.

<TABLE> 
<CAPTION> 
                                                                         September 30, 1998
                                                                         ------------------
<S>                                                                    <C> 
Pre-shock NPV Ratio: NPV as % of Portfolio Value of Assets...........         29.61%
Exposure Measure: Post-Shock NPV Ratio...............................         25.38%
Sensitivity Measure: Change in NPV Ratio.............................           153 bp
Interest Rate Risk Capital Component ($000)..........................               (1)
</TABLE> 
--------------------
(1)  Although this calculation is not applicable to the Association, the
     Association has a negative interest rate sensitivity gap which would
     adversely affect net interest income during a period of rising interest
     rates.  The Association believes its high level of liquid assets would,
     however, allow the Association to address this negative impact.

     Computations of prospective effects of hypothetical interest rate changes
are based on numerous assumptions, including relative levels of market interest
rates and loan prepayments, and should not be relied upon as indicative of
actual results.  Further, the computations do not contemplate any actions the
Association may undertake in response to changes in interest rates.

     Certain shortcomings are inherent in the method of analysis presented in
both the computation of NPV and in the analysis presented in prior tables
setting forth the maturing and repricing of interest-earning assets and
interest-bearing liabilities.  For example, although certain assets and
liabilities may have similar maturities or periods to repricing, they may react
in differing degrees to changes in market interest rates.  The interest rates on
certain of assets and liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other assets and liabilities may lag
behind changes in market rates.  Based on the above, net interest income should
decline with instantaneous increases in interest rates while net interest income
should increase with instantaneous declines in interest rates.  Further, in the
event of a change in interest rates, prepayment and early withdrawal levels
would likely deviate significantly from those assumed in the tables.

     Rocky Ford Federal originates only fixed-rate real estate loans and holds
them in portfolio until maturity. Because Rocky Ford Federal's interest-bearing
liabilities which mature or reprice within short periods substantially 

                                       8
<PAGE>
 
exceed its earning assets with similar characteristics, material and prolonged
increases in interest rates generally would adversely affect net interest
income, while material and prolonged decreases in interest rates generally, but
to a lesser extent because of their historically low levels, would have the
opposite effect. The Association's high level of liquid assets and investments
"available for sale" provides management with the flexibility to address this
interest rate sensitivity gap position.


AVERAGE BALANCE, INTEREST AND AVERAGE YIELDS AND RATES

     The following table sets forth certain information relating to the
Association's average interest-earning assets and interest-bearing liabilities
and reflects the average yield on assets and average cost of liabilities for the
periods and at the date indicated.  Such yields and costs are derived by
dividing income or expense by the average monthly balance of assets or
liabilities, respectively, for the periods presented.  Management does not
believe that the use of month-end balances instead of daily balances has caused
any material difference in the information presented.

     The table also presents information for the periods and at the date
indicated with respect to the difference between the average yield earned on
interest-earning assets and average rate paid on interest-bearing liabilities,
or "interest rate spread," which savings institutions have traditionally used as
an indicator of profitability.  Another indicator of an institution's net
interest income is its "net yield on interest-earning assets," which is its net
interest income divided by the average balance of interest-earning assets.  Net
interest income is affected by the interest rate spread and by the relative
amounts of interest-earning assets and interest-bearing liabilities.  When
interest-earning assets approximate or exceed interest-bearing liabilities, any
positive interest rate spread will generate net interest income.


                                       9


<PAGE>
<TABLE>
<CAPTION>
 
 
                                                                       
                                                                                        Year Ended September 30,                 
                                                                       -------------------------------------------------------
                                                    At September 30,              1998                         1997           
                                                         1998          --------------------------   --------------------------
                                                ----------------------                     Average                      Average
                                                               Yield/   Average             Yield/   Average             Yield/
                                                   Balance      Cost    Balance   Interest   Cost    Balance   Interest   Cost
                                                   -------     ------   -------   --------  ------   -------   --------  ------
                                                                                  (Dollars in thousands)
<S>                                              <C>           <C>      <C>       <C>       <C>     <C>       <C>       <C>    
INTEREST/DIVIDEND-EARNING ASSETS:                                                                                              
 Interest-bearing deposits................        $ 5,299       5.19%  $ 4,901     $  275    5.61%  $ 4,251     $  262    6.16%
  Investments.............................          2,839       8.56     3,266        243    7.44     3,846        271    7.05 
  Loans...................................         14,093       8.39    13,718      1,182    8.62    12,847      1,129    8.79 
                                                  -------       ----   -------     ------    ----   -------     ------    ---- 
Total interest-earning assets.............         22,231       7.65    21,885      1,700    7.77    20,944      1,662    7.94 
                                                                                   ======    ====               ======    ==== 
Non-interest-earning assets...............            782                1,114                          635                    
                                                  -------              -------                      -------                    
Total assets..............................        $23,013              $22,999                      $21,579                    
                                                  =======              =======                      =======                    
                                                                                                                               
INTEREST-BEARING LIABILITIES:                                                                                                  
  Passbook - money market accounts........        $ 3,567       3.70   $ 3,729        132    3.54   $ 4,932        150    3.04 
  Certificates of deposit.................         12,031       5.29    12,035        636    5.28    12,535        677    5.40 
                                                  -------       ----   -------     ------    ----   -------     ------    ---- 
Total interest-bearing liabilities........         15,598       4.92    15,764        768    4.87    17,467        827    4.73 
                                                                                   ======    ====               ======    ==== 
Non-interest-bearing liabilities..........            691                  572                          483                    
                                                  -------              -------                      -------                    
Total liabilities.........................         16,289               16,336                       17,950                    
                                                                       -------                      -------                    
Equity....................................          6,724                6,663                        3,629                    
                                                  -------              -------                      -------                    
Total liabilities and equity..............        $23,013              $22,999                      $21,579                    
                                                  =======              =======                      =======                     
                                                
Net interest/dividend income..............                                         $  932                       $  835         
                                                                                   ======                       ======         
Interest/dividend rate spread (1).........                      2.73%                        2.90%                        3.21%
                                                             =======                       ======                       ====== 
Net interest/dividend-earning assets......        $ 6,633              $ 6,121                      $ 3,477                    
                                                  =======              =======                      =======                    
Net interest/dividend margin (2)..........                      4.19%                        4.26%                        3.99%
                                                             =======                       ======                       ====== 
Average interest/dividend-earning assets                                                                                       
 to average interest-bearing liabilities..                              138.83%                      119.91%                   
                                                                       =======                      =======                     
</TABLE> 
--------------------
(1)  Includes nonaccrual loans.


                                      10 
<PAGE>
 
RATE/VOLUME ANALYSIS

     The following table sets forth certain information regarding changes in
interest income and interest expense of the Association for the periods
indicated.  For each category of interest-earning asset and interest-bearing
liability, information is provided on changes attributable to: (i) changes in
volume (changes in volume multiplied by old rate); (ii) changes in rate (changes
in rate multiplied by old volume); and (iii) changes in rate/volume (changes in
rate multiplied by changes in volume).

<TABLE>
<CAPTION>
 
                                                       Year Ended June 30,
                                                 -------------------------------
                                                   1998         vs.        1997
                                                 -------------------------------
                                                    Increase (Decrease) Due to
                                                 -------------------------------
                                                                  Rate/
                                                 Volume   Rate   Volume   Total
                                                 ------   ----   ------   -----
                                                          (In thousands)
<S>                                              <C>      <C>    <C>      <C>
Interest income:
  Interest-bearing deposits....................   $  40   $(23)   $  (4)   $ 13
  Investments..................................     (41)    15       (2)    (28)
  Loans........................................      76    (22)      (1)     53
                                                  -----   ----    -----    ----
    Total interest-earning assets..............      75    (30)      (7)     38
                                                  -----   ----    -----    ----
 
Interest-bearing liabilities:
  Deposits.....................................     (81)    24       (2)    (59)
                                                  -----   ----    -----    ----
 
  Increase (decrease) in net interest income...   $ 156   $(54)   $  (5)   $ 97
                                                  =====   ====    =====    ====
</TABLE>

COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1998 AND 1997

     The Company's total assets decreased by $152,000 from $23.2 million at
September 30, 1997 to $23.0 million at September 30, 1998.  The decrease is
attributed to assets used to fund the reduction in deposits.

     The Company's loan portfolio had a net increase of approximately $563,000
during the year ended September 30, 1998.  Net loans totaled $14.1 million at
September 30, 1998 and $13.5 million at September 30, 1997.  During the year
ended September 30, 1998, the Company wrote loans in the amount of $3.5 million
and received payments in the amount of $3.0 million.  The loan activity was
attributed to new loans and refinancing due to lower interest rates.  As of
September 30, 1998, the outstanding loan commitments for real estate loans was
$201,000.

     The allowance for loan losses totaled $60,000 at September 30, 1998 and
September 30, 1997.  As of those dates the Company had $54,000 and $0 non-
performing loans in its portfolio.  There were no loans charged off or
recoveries of previous loan losses during the year ended September 30, 1998.
The determination of the allowance for loan losses is based on management's
analysis, performed on a quarterly basis, of various factors, including the
market value of the underlying collateral, growth and composition of the loan
portfolio, the relationship of the allowance for loan losses to outstanding
loans, historical loss experience, delinquency trends and prevailing economic
conditions. Although management believes its allowance for loan losses is
adequate, there can be no assurance that additional allowances will not be
required or that losses on loans will not be incurred.  The Company has had
minimal losses on loans in prior years.  At September 30, 1998, the ratio of the
allowance for loan losses to net loans was .43% as compared to .44% at September
30, 1997.

     The Company's interest earning assets, excluding loans, decreased $600,000
from $8.8 million at September 30, 1997 to $8.2 million at September 30, 1998.
The Company's investment portfolio, at September 30, 1998, included 

                                       11
<PAGE>
 
mortgage-backed and related securities classified as "held to maturity" carried
at amortized cost of $2.1 million and an estimated fair value of $2.2 million,
equity securities classified as "available for sale" with an estimated fair
value of $574,000 and interest bearing deposits with various financial
institutions totaling $5.3 million. The decrease was used to fund new loans and
the reduction in deposits.

     At September 30, 1998 deposits decreased to $15.6 million from $16.1
million at September 30, 1997 or a net decrease of 3.35%.  The decrease is
attributed to normal seasonal withdrawals.  Management is continually evaluating
the investment alternatives available to the Company's customers, and adjusts
the pricing on its savings products to maintain its existing deposits.

     The Company's equity at September 30, 1998 increased to $6.7 million from
$6.4 million at September 30, 1997.  The increase is attributed to net income
for the year of $208,000, an increase in the net unrealized gain on securities
available for sale of $104,000, less dividends paid of $118,000.


COMPARISON OF OPERATING RESULTS FOR THE YEAR ENDED SEPTEMBER 30, 1998 AND 1997

     Net Income.  The Company's net income for the year ended September 30, 1998
was $208,000 compared to net income of $93,000 for the year ended September 30,
1997.  The increase in net earnings resulted primarily from the recognition, in
1997, of a past service retirement expense of approximately $142,000, net of
deferred income tax effect, in accordance with the retirement plan adopted by
the board of directors effective March 31, 1997.

     Net Interest Income.  Net interest income for the year ended September 30,
1998 was $932,000 compared to $836,000 for the year ended September 30, 1997.
The increase was due to an increase in the interest earnings on loans, and a
decrease in deposits of $541,000, with a corresponding decrease in interest
expense from $827,000 for the year ended September 30, 1997 to $768,000 for the
year ended September 30, 1998.

     Interest Income.  Interest income increased by $38,000, or by 2.29%, during
1998 compared to 1997.  This increase resulted from an increase of average
interest-earning assets from $20.9 million as of September 30, 1997 to $21.9
million as of September 30, 1998.  The Company experienced a decrease in the
average yield on the interest-earning assets from 7.94% in 1997 to 7.77% in
1998.

     Interest Expense.  Interest expense decreased $59,000 to $768,000 for the
year ended September 30, 1998 from $827,000 for the year ended September 30,
1997.  The decrease in expense for the period was caused by the increase of the
average rate paid from 4.73% in 1997 to 4.87% in 1998 with a corresponding
decrease in deposits from $16.1 million in 1997 to $15.6 million in 1998.

     Provision for Loan Losses.  The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the risk
inherent in its loan portfolio and the general economy.  Such evaluation
considers numerous factors, including general economic conditions, loan
portfolio composition, prior loss experience, the estimated fair value of the
underlying collateral and other factors that warrant recognition in providing
for an adequate loan loss allowance.

     The Company determined a provision for loan loss was not required for the
years ended September 30, 1998 and 1997.

     Non-Interest Expense.  The decrease in the non-interest expense section of
$124,000 is attributed to a $214,000 retirement expense recognized in September
30, 1997, offset by increased professional fees and employee benefit plans
incurred in the current period of $94,000.

     Income Tax Expense.  The expense recognized as of September 30, 1998
represents the estimated tax due on taxable income at the effective tax rate of
39%.  The rate exceeds the statutory rate due to nondeductible ESOP expenses
recognized and the effect of state taxes.

                                       12
<PAGE>
 
LIQUIDITY AND CAPITAL RESOURCES

     The Company initially has no business other than that of the Association
and investing the proceeds retained by it.  The Association is subject to
certain regulatory limitations with respect to the payment of dividends to the
Company.

     The Company's primary source of funds consists of deposits, repayment of
loans and mortgage-backed securities, maturities of investments and interest-
bearing deposits, and funds provided from operations.  While scheduled
repayments of loans and mortgage-backed securities and maturities of investment
securities are predicable sources of funds, deposit flows and loan prepayments
are greatly influenced by the general level of interest rates, economic
conditions and competition.  The Company uses its liquidity resources
principally to fund existing and future loan commitments, to fund maturing
certificates of deposit and demand deposit withdrawals, to invest in other
interest-earning assets, to maintain liquidity, and to meet operating expenses.
Management believes that proceeds from the stock sale, loan repayments and other
sources of funds will be adequate to meet the Company's liquidity needs for the
immediate future.

     The Company is required to maintain minimum levels of liquid assets as
defined by OTS regulations.  This requirement, which may be varied at the
direction of the OTS depending upon economic conditions and deposit flows, is
based upon a percentage of deposits and short-term borrowings.  The required
minimum ratio was 5% until November 24, 1997, when it was changed to 4%.  The
Company has historically maintained a level of liquid assets in excess of
regulatory requirements.  The Company's liquidity ratios at September 30, 1998
and 1997 were 27% and 20%, respectively.  The Association's relatively high
liquidity ratios at September 30, 1998 and 1997 were reflective of accelerated
loan payments, and management's determination to refrain from investing excess
liquidity with longer terms.

     Liquidity management is both a daily and long-term function of business
management.  If the Association requires funds beyond its ability to generate
them internally, the Association believes that it could borrow funds from the
FHLB.  At September 30, 1998, the Association had no outstanding advances from
the FHLB.


IMPACT OF INFLATION AND CHANGING PRICES

     The financial statements and related data presented herein have been
prepared in accordance with generally accepted accounting principles, which
require the measurement of financial position and results of operations in terms
of historical dollars without considering changes in the relative purchasing
power of money over time because of inflation.  Unlike most industrial
companies, virtually all of the assets and liabilities of the Company are
monetary in nature.  As a result, interest rates have a more significant impact
on the Company's performance that the effects of general levels of inflation.
Interest rates do not necessarily move in same direction or in the same
magnitude as the prices of goods and services.


FUTURE IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

     Employers' Disclosure About Pensions and Other Postretirement Benefits.  In
February 1998, the Financial Accounting Standards Board issued SFAS No.  132,
"Employers' Disclosure About Pensions and Other Postretirement Benefits."  This
Statement revises employers' disclosures about pension and other postretirement
benefit plans.  It does not change the measurement or recognition of those
plans.  It standardizes the disclosure requirements for pensions and other
postretirement benefits to the extent practicable, requires additional
information on changes in the benefit obligations and fair values of plan assets
that will facilitate financial analysis, and eliminates certain disclosures that
are no longer useful.  The Statement is effective for fiscal years beginning
after December 15, 1997.  Currently, the Company does not have any pension or
postretirement plans that would come under the statement.  Accordingly, the
statement will not have any impact on the financial statements.

     Accounting for Derivative Instruments and Hedging Activities.  In June
1998, the Financial Accounting Standards Board issued SFAS No.  133, "Accounting
for Derivative Instruments and Hedging Activities."  This 

                                       13
<PAGE>
 
Statement establishes accounting and reporting standards for derivative
instruments, including derivative instruments embedded in other contracts, and
for hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. The statement is effective for fiscal years
beginning after June 15, 1999. Management, at this time, has not determined the
impact of adopting this statement.

                                       14
<PAGE>

 
                       CONSOLIDATED FINANCIAL STATEMENTS
                  ROCKY FORD FINANCIAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
 
                                                                           PAGE
<S>                                                                        <C>
 
Independent Auditors' Report                                                16
 
Statements of Financial Condition September 30, 1998 and 1997               17
 
Statements of Income for the Years Ended September 30, 1998 and 1997        18
 
Statements of Equity for the Years Ended September 30, 1998 and 1997        19
 
Statements of Cash Flows for the Years Ended September 30, 1998 and 1997    20
 
Notes to Consolidated Financial Statements                                  21
</TABLE>

                                       15
<PAGE>
 
            [LETTERHEAD OF GRIMSLEY, WHITE & COMPANY APPEARS HERE]


                          INDEPENDENT AUDITORS' REPORT


Board of Directors
Rocky Ford Financial, Inc.
Rocky Ford, Colorado

We have audited the accompanying consolidated statements of financial condition
of Rocky Ford Financial, Inc. And Subsidiary as of September 30, 1998 and 1997,
and the related consolidated statements of income, equity, and cash flows for
the years then ended.  These consolidated financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Rocky Ford
Financial, Inc. And Subsidiary  as of September 30, 1998 and 1997, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.



                                 /s/ Grimsley, White & Company
                                 GRIMSLEY, WHITE & COMPANY



November 20, 1998



                                                                         Page 16
<PAGE>
 
                   ROCKY FORD FINANCIAL, INC. AND SUBSIDIARY
 
                 CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
 
                          SEPTEMBER 30, 1998 AND 1997
 
<TABLE> 
<CAPTION> 
                            ASSETS                                                          1998                  1997             
                                                                                        -----------           ----------- 
<S>                                                                                     <C>                    <C> 
Cash and cash equivalents                                                                                                           
   Interest - bearing                                                                   $ 3,700,000           $ 2,900,000   
   Non - interest bearing                                                                   267,576               305,382           
Certificates of deposit                                                                   1,599,000             1,999,312           
Securities available for sale                                                                                                       
     Equity securities ( cost of $11,327)                                                   574,062               409,218           
Securities held to maturity                                                                                                         
     Mortgage-backed securities (estimated market value of $1,906,500                                                               
         and $2,537,400 )                                                                 1,806,286             2,421,308           
     U.S. agencies (estimated market value of $264,700 and $748,000)                        249,199               748,965           
Loans receivable - net                                                                   14,092,549            13,529,566           
Federal Home Loan Bank stock, at cost                                                       209,900               323,500           
Retirement trust assets                                                                     295,311               251,687           
Accrued interest receivable                                                                 121,660               146,769           
Premises and equipment                                                                       76,688                83,270           
Prepaids                                                                                     20,526                45,910           
                                                                                        -----------           -----------           

            TOTAL ASSETS                                                                $23,012,757           $23,164,887           
                                                                                        ===========           ===========           

                  LIABILITIES AND EQUITY                                                                                  
Deposits                                                                                $15,597,944           $16,139,404           
Advances from borrowers for taxes and insurance                                              33,050                35,562           
Accounts payable and accrued expenses                                                       452,376               372,700           
Deferred income taxes                                                                       205,539               169,400           
                                                                                        -----------           ----------- 

            TOTAL LIABILITIES                                                            16,288,909            16,717,066           
                                                                                        ===========           =========== 

Commitments and contingencies                                                                                                       

Preferred stock- $.01 par value; authorized 1,000,000                                                                               
   shares; no shares issued or outstanding                                                        -                     -           
Common stock-$.01 par value; authorized 3,000,000 shares;                                                                           
   issued and outstanding 423,200 shares                                                      4,232                 4,232           
Paid-in capital                                                                           3,844,821             3,830,582           
Retained earnings - substantially restricted                                              2,791,147             2,700,923           
Net unrealized gain on securities available for sale,                                                                               
    net of tax of  $208,200 and $147,250                                                    354,496               250,644           
Note receivable from ESOP Trust                                                            (270,848)             (338,560)          
                                                                                        -----------           ----------- 

            TOTAL EQUITY                                                                  6,723,848             6,447,821           
                                                                                        -----------           ----------- 
            TOTAL LIABILITIES AND EQUITY                                                $23,012,757           $23,164,887           
                                                                                        ===========           =========== 
</TABLE> 
 
                SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                         Page 17
<PAGE>
 
                   ROCKY FORD FINANCIAL, INC. AND SUBSIDIARY
 
                       CONSOLIDATED STATEMENTS OF INCOME
 
                    YEARS ENDED SEPTEMBER 30, 1998 AND 1997

<TABLE> 
<CAPTION> 
                                                                        1998               1997
                                                                   ----------------   ----------------
<S>                                                                <C>                <C>                                 
INTEREST INCOME                                                                                                                    
      Loans receivable                                                 $1,181,752         $1,128,952                                
      Securities available for sale                                        30,036             25,679                                
      Securities held to maturity                                         212,804            246,067                                
      Other interest-bearing assets                                       275,659            261,524                                
                                                                   ----------------   ----------------            

                  TOTAL INTEREST INCOME                                 1,700,251          1,662,222                                

INTEREST ON DEPOSITS                                                      767,991            826,587                                
                                                                   ----------------   ----------------     

                  NET INTEREST INCOME                                     932,260            835,635                                

PROVISION FOR  LOAN LOSSES                                                      -                  -                                
                                                                   ----------------   ---------------- 
                  NET INTEREST INCOME AFTER                                                                                         
                        PROVISION FOR LOAN LOSSES                         932,260            835,635                                
                                                                   ----------------   ---------------- 
NON-INTEREST INCOME                                                                                                                 
      Other charges                                                        13,334             16,002                                
                                                                   ----------------   ----------------    
NON-INTEREST EXPENSE                                                                                                                
      GENERAL AND ADMINISTRATIVE                                                                                                    
            Compensation and benefits                                     308,213            525,646                                
            Occupancy and equipment                                        30,610             35,905    
            Computer services                                              44,563             33,510                                
            SAIF deposit insurance                                         17,390             23,132                                
            Other                                                         202,954            109,533                                
                                                                   ----------------   ---------------- 

                  TOTAL NON-INTEREST EXPENSE                              603,730            727,726                                
                                                                   ----------------   ----------------  

                  INCOME BEFORE TAXES                                     341,864            123,911                                
                                                                                                                                    
PROVISION FOR INCOME TAXES                                                133,821             30,566                                
                                                                   ----------------   ----------------   

                  NET INCOME                                           $  208,043         $   93,345                                
                                                                   ================   ================

BASIC EARNINGS PER COMMON SHARE                                        $     0.52         $     0.26                                
                                                                   ================   ================
DILUTED EARNINGS PER COMMON SHARE                                      $     0.52         $     0.26                                
                                                                   ================   ================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                                                                                          
      BASIC                                                               396,988            392,730                                
      DILUTED                                                             396,988            392,730                                
DIVIDENDS PER SHARE                                                    $     0.30                                                   
                                                                   ================   ================                    
</TABLE> 

                SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                         Page 18
<PAGE>
 
                   ROCKY FORD FINANCIAL, INC AND SUBSIDIARY
 
                       CONSOLIDATED STATEMENTS OF EQUITY
 
                    YEARS ENDED SEPTEMBER 30, 1998 AND 1997

<TABLE> 
<CAPTION>  
                                                                                                                      NET    
                                                                                                                   UNREALIZED
                                                                                                                      GAIN
                                                                                                                       ON
                                                                                       NOTE                        SECURITIES
                                                  COMMON           PAID-IN          RECEIVABLE      RETAINED       AVAILABLE-
                                                  STOCK            CAPITAL             ESOP         EARNINGS        FOR-SALE
                                                  ------          ----------        ----------      ----------     ----------  
<S>                                               <C>             <C>               <C>             <C>            <C>
BALANCES, OCTOBER 1, 1996                         $    -          $        -        $        -      $2,607,578     $  170,682
 
      Net income for the year                                                                           93,345
 
     Change in net unrealized gain on
         securities available-for-sale, net
         of taxes of $47,000                                                                 -               -         79,962
 
     Proceeds from issuance of stock,
         net of conversion costs
         of $410,186                               4,232           3,479,022
 
     Purchase of common stock by ESOP                                338,560          (338,560)
 
     ESOP contribution                                                13,000
                                                  ------          ----------        ----------      ----------     ----------
 
BALANCES, SEPTEMBER 30, 1997                       4,232           3,830,582          (338,560)      2,700,923        250,644
 
      Net income for the year                                                                          208,043
 
     Change in net unrealized gain on
         securities available-for-sale, net
         of taxes of $60,992                                                                                          103,852
 
      Dividends paid - $.30 per share                                                                 (117,819)
 
     Payment on ESOP note receivable                                                    67,712
 
     ESOP contribution                                                14,239
                                                  ------          ----------        ----------      ----------     ----------
 BALANCES, SEPTEMBER 30, 1998                     $4,232          $3,844,821        $ (270,848)     $2,791,147     $  354,496
                                                  ======          ==========        ==========      ==========     ========== 
</TABLE> 
 
                SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                                         Page 19
<PAGE>
 
                   ROCKY FORD FINANCIAL, INC AND SUBSIDIARY
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                    YEARS ENDED SEPTEMBER 30, 1998 AND 1997

<TABLE> 
<CAPTION> 
                                                                                                       1998                1997
                                                                                                ----------------    ----------------
<S>                                                                                             <C>                 <C>     
CASH FLOWS FROM OPERATING ACTIVITIES: 
      Net income                                                                                 $       208,043     $       93,345
                                                                                                ----------------    ----------------
      Adjustments to reconcile net income to net cash provided
            by operating activities:
      Amortization of:
            Deferred loan origination fees                                                               (11,599)           (15,149)
            Discounts on investments                                                                        (234)            (2,221)
      Stock dividend received from FHLB                                                                  (24,500)           (21,100)
      Earned ESOP shares priced above original cost                                                       14,239             13,000
      Decrease in unearned ESOP shares                                                                    33,856                  -
      Depreciation                                                                                        16,291             20,032
      Change in assets and liabilities:
            Accrued interest receivable                                                                   25,109            (21,751)
            Prepaids                                                                                      25,384             11,701
            Accounts payable and accrued expenses                                                        113,532             99,483
            Deferred income taxes                                                                        (24,853)           (27,756)
                                                                                                ----------------    ----------------
 
            TOTAL ADJUSTMENTS                                                                            167,225             56,239
                                                                                                ----------------    ----------------

            NET CASH PROVIDED BY OPERATING ACTIVITIES                                                    375,268            149,584
                                                                                                ----------------    ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Net change in certificates of deposit                                                              400,312           (102,312)
      Loan originations and principal payments on loans                                                 (551,384)        (1,227,508)
      Purchase of investment securities held to maturity                                                       -           (248,828)
      Proceeds from maturities of investment securities held to maturity                                 500,000                  -
      Principal payments on mortgage-backed securities                                                   615,022            197,543
      Redemption of Federal Home Loan Bank Stock                                                         138,100                  -
      Capital purchases                                                                                   (9,709)            (4,630)
      Retirement plan trust deposits                                                                     (43,624)          (251,687)
                                                                                                ----------------    ----------------

            NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES                                           1,048,717         (1,637,422)
                                                                                                ----------------    ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Issuance of common stock                                                                                 -          3,483,254
      Dividends paid                                                                                    (117,819)                 -
      Net change in deposits                                                                            (541,460)        (1,005,234)
      Net change in mortgage escrow funds                                                                 (2,512)            (6,216)
                                                                                                ----------------    ----------------

            NET CASH PROVIDED (USED)  BY FINANCING ACTIVITIES                                           (661,791)         2,471,804
                                                                                                ----------------    ----------------

            NET INCREASE IN CASH AND CASH EQUIVALENTS                                                    762,194            983,966
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                                         3,205,382          2,221,416
                                                                                                ----------------    ----------------

CASH AND CASH EQUIVALENTS AT END OF YEAR                                                         $     3,967,576     $    3,205,382
                                                                                                ================    ================

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
Cash paid for:
     Taxes                                                                                       $        42,371     $       41,472
     Interest                                                                                            770,158            829,384
</TABLE> 
 
                SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                                         Page 20
<PAGE>
 
                   ROCKY FORD FINANCIAL, INC. AND SUBSIDIARY


                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE -1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
         The following is a description of the more significant accounting
         policies which Rocky Ford Financial, Inc. (the Company and its wholly
         owned subsidiary, Rocky Ford Federal Savings and Loan Association (the
         Association) follow in preparing and presenting the consolidated
         financial statements.

         Basis of Presentation
    
         The consolidated financial statements include the accounts of the
         Company and its wholly owned subsidiary Rocky Ford Federal Savings and
         Loan Association. All significant intercompany accounts and
         transactions have been eliminated.

         Organization

         Rocky Ford Federal Savings and Loan Association (the Association) is a
         federally chartered association which conducts its operations in
         Southeastern Colorado. The Association provides a variety of financial
         services to the area it serves. Its primary deposit products are
         certificates of deposit and its primary lending products are real
         estate mortgages.

         The Company's purpose is to act as a holding company with the
         Association as its sole subsidiary. The Company's principal business is
         the business of the Association and holding investments.

         Savings deposits of the Association are insured by the Federal Deposit
         Insurance Corporation ("FDIC") up to certain limitations. The
         Association pays a premium to the FDIC for the insurance of such
         savings.

         Use of Estimates

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

         Cash Equivalents
   
         Cash equivalents consist of overnight deposits and funds due from
         banks. For purposes of the statements of cash flows, the Association
         considers all highly liquid debt instruments with original maturities,
         when purchased, of three months or less to be cash equivalents.

         Certificates of Deposit

         The Association maintains certificates of deposit with financial
         institutions across the United States. It is the policy of the
         Association to limit deposits to insurable accounts.

                                                                         Page 21
<PAGE>
 
                   ROCKY FORD FINANCIAL, INC. AND SUBSIDIARY


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  -1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

          Securities Held-to-Maturity

          Mortgage-backed securities and related debt investments for which the
          Association has the positive intent and ability to hold to maturity
          are reported at cost, adjusted for amortization of premiums and
          accretion of discounts which are recognized in interest income using
          the interest method over the period to maturity.

          Securities Available-for-Sale
   
          Securities available-for-sale consist of equity securities, not
          classified as trading securities, which are carried at fair value.

          Unrealized holding gains and losses, net of tax, on securities
          available-for-sale are reported as a net amount in a separate
          component of equity until realized.

          Gains and losses on the sale of securities available-for-sale are
          determined using the specific-identification method.

          Declines in the fair value of individual held-to-maturity and
          available-for-sale securities below their cost, that are other than
          temporary, would result in write-downs of the individual securities to
          their fair value. Should the Association incur write-downs, they will
          be included in earnings as realized losses.

          Premiums and discounts are recognized in interest income using the
          interest method over the period to maturity.

          Loans Receivable

          Loans receivable are stated at unpaid principal balances, less the
          allowance for loan losses, and net of deferred loan-origination fees
          and discounts.

          Loan origination and commitment fees, as well as certain direct
          origination costs, are deferred and amortized as a yield adjustment
          over the lives of the related loans using the interest method.
          Amortization of deferred loan fees is discontinued when a loan is
          placed on nonaccrual status.

          Loans are placed on nonaccrual status when the principal and interest
          is delinquent for 90 days or more. Uncollectible interest on these
          loans is charged off, or an allowance is established, based on
          management's periodic evaluation, by a charge to interest income equal
          to all interest previously accrued. Income is subsequently recognized
          only to the extent that cash payments are received.

          Federal Home Loan Bank Stock

          Federal Home Loan Bank (FHLB) stock is an equity interest in the FHLB
          of Topeka. The Association, as a member of the FHLB, is required to
          maintain an investment in the capital stock of the FHLB. The stock is
          carried at cost, as its cost is assumed to equal its market value,
          since if the Association withdraws membership in the FHLB, the stock
          must be redeemed for face value. The FHLB declares cash and stock
          dividends. The stock dividends are recognized as income due to the
          fact they are redeemable at par value ($100 per share).

                                                                         Page 22
<PAGE>
 
                   ROCKY FORD FINANCIAL, INC. AND SUBSIDIARY


                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  -1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

          Allowance for Loan Losses
   
          The allowance for loan losses is maintained at a level which, in
          management's judgment, is adequate to absorb potential losses inherent
          in the loan portfolio. The amount of the allowance is based on
          management's evaluation of the collectibility of the loan portfolio,
          including the nature of the portfolio, credit concentrations, specific
          impaired loans, and economic conditions. The allowance is increased by
          a provision for loan losses, which is charged to expense, and reduced
          by charge-offs, net of recoveries. Such provisions are based on
          management's estimate of net realizable value or fair value of the
          collateral, as applicable. These estimates are susceptible to economic
          changes that could result in a material adjustment to results of
          operations in the near term. Recovery of the carrying value of such
          loans is dependent, to a great extent, on the economic, operational,
          and other conditions that may be beyond the Association's control.

          Real Estate Held for Investment and Foreclosed Real Estate
 
          Direct investments in real estate properties held for investment are
          carried at lower of cost, including cost of improvements and amenities
          subsequent to acquisition, or net realizable value.

          Foreclosed real estate held for sale is carried at the lower of fair
          value minus estimated costs to sell or cost (the fair value of the
          foreclosed asset at the time of foreclosure). Costs of holding
          foreclosed property are charged to expense in the current period,
          except for significant property improvements, which are capitalized to
          the extent that carrying value does not exceed estimated fair market
          value.

          Income Taxes
 
          Income taxes are recognized under SFAS No. 109 Accounting for Income
          Taxes. Under the provisions of SFAS No. 109, deferred tax assets and
          liabilities are recorded based on the differences between the
          financial statement and the tax basis of assets and liabilities and
          the tax rates which will be in effect when these differences are
          expected to reverse. If appropriate, deferred tax assets are reduced
          by a valuation allowance which reflects the extent to which such
          assets will be realized.

          Premises and Equipment

          Land is carried at cost. Building, furniture, fixtures, and equipment
          are carried at cost, less accumulated depreciation. Building,
          furniture, fixtures, and equipment are depreciated using the straight-
          line method over the estimated useful lives of the assets. Estimated
          life of the building is 30 years and 5 to 15 years for furniture and
          equipment and 5 years on the automobile.

          Fair Values of Financial Instruments

          The following methods and assumptions were used in estimating fair
          values of financial instruments as disclosed herein:

          Cash and short-term instruments. The carrying amounts of cash and
          short-term instruments approximate fair values.

                                                                         Page 23
 
<PAGE>
 
                   ROCKY FORD FINANCIAL, INC. AND SUBSIDIARY


                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE - 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

          Fair Values of Financial Instruments (Continued)

          Available-for-sale and held-to-maturity securities. Fair values for
          securities, excluding restricted equity securities, are based on
          quoted market prices. The carrying values of restricted equity
          securities approximate fair values.

          Loans receivable. Fair values for mortgage loans is estimated using
          discounted cash flow analysis, using interest rates currently being
          offered for loans with similar terms to borrowers of similar credit
          quality. Fair values for impaired loans are estimated using discounted
          cash flow analysis or underlying collateral values, where applicable.

          Deposit liabilities. The carrying amounts of passbook savings and
          money-market accounts approximate their fair values at the reporting
          date. Fair values for fixed-rate CDs are estimated using a discounted
          cash flow calculation that applies interest rates currently being
          offered on certificates to a schedule of aggregated expected monthly
          maturities on time deposits.

          Advertising. Advertising is expensed as incurred.

NOTE  -2  INVESTMENT SECURITIES

          Investment securities are summarized as follows:

          Held-to-Maturity Securities

          The amortized cost and estimated fair value of held-to-maturity
          securities at September 30, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
                                                        Gross        Gross              
                                          Amortized   Unrealized  Unrealized    Fair    
           1998                             Cost        Gains       Losses      Value   
          --------                        ---------   ----------  ----------  ---------- 
          <S>                             <C>         <C>         <C>         <C>    
          Mortgage-backed securities                                                    
           GNMA certificates              $1,806,286   $100,214     $   0     $1,906,500
                                                                                        
          U.S. Government Agencies           249,199     15,501         0        264,700
                                          ----------   --------     -----     ----------
                                                                                        
                                          $2,055,485   $115,715     $   0     $2,171,200
                                          ==========   ========     =====     ==========
                                                                                        
                                                                                        
           1997                                                                         
          --------                                                                      
          Mortgage-backed securities                                                    
           GNMA certificates              $2,421,308   $116,059     $   0     $2,537,367
          U.S. Government Agencies           748,965          0      (997)       747,968
                                          ----------   --------     -----     ----------
                                                                                        
                                          $3,170,273   $116,059     $(997)    $3,285,335
                                          ==========   ========     =====     ========== 
</TABLE>

                                                                         Page 24
<PAGE>
 
                   ROCKY FORD FINANCIAL, INC. AND SUBSIDIARY


                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  -2  INVESTMENT SECURITIES (Continued)

          Available-for-Sale Securities

          The amortized cost and estimated fair value of available-for-sale
          securities at September 30, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>
                                                     Gross           Gross              
                                      Amortized    Unrealized     Unrealized     Fair   
           1998                         Cost         Gains          Losses       Value  
          ---------                   ---------    ----------     ----------  ----------
          <S>                        <C>           <C>            <C>         <C>       
          Equity securities                                                             
                                                                                        
           FHLMC stock               $   11,327    $  562,735     $       0   $  574,062
                                     ==========    ==========     =========   ========== 
                                                                                        
           1997                                                                         
          ---------                                                                     
          Equity securities                                                             
                                                                                        
           FHLMC stock               $   11,327    $  397,891     $       0   $  409,218
                                     ==========    ==========     =========   ========== 
</TABLE> 

          The amortized cost of debt securities at September 30, 1998, by
          contractual maturity, are shown below. The Association's debt
          securities held-to-maturity are mortgage-backed securities whose
          expected maturities will differ from contractual maturities because
          borrowers may have the right to call or prepay obligations with or
          without call or prepayment penalties.
<TABLE> 
<CAPTION>                                                 

          Held-to-Maturity Debt Securities                   Cost             
          ---------------------------------                ---------          
          <S>                                             <C>                 
          Due in one year or less                         $   25,855          
          Due after one year through five years              377,446          
          Due from five to ten years                         235,281          
          Due after ten years                              1,416,903          
                                                          ----------          
                                                                              
            Total Held-to-Maturity Securities             $2,055,485          
                                                          ==========           
</TABLE>

          GNMA Certificates with a carrying amount of $602,853 and $232,638 at
          September 30, 1998 and 1997, respectively, were pledged to secure
          public deposits.

                                                                         Page 25
<PAGE>
 
                   ROCKY FORD FINANCIAL, INC. AND SUBSIDIARY


                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE  -3    LOANS RECEIVABLE

            Loans receivable at September 30 are summarized as follows:

<TABLE>
<CAPTION>
                                                                1998          1997
                                                            ------------  ------------                                             
       <S>                                                  <C>           <C>                                                      
       First mortgage loans                                                                                                        
         (principally conventional):                                                                                               
         Principal balances:                                                                                                       
            Secured by one-to-four-family                                                                                          
              residences                                    $13,852,628   $13,320,764                                              
            Secured by other properties                         101,807       138,567                                              
                                                            -----------   -----------                                              
                                                                                                                                   
                                                             13,954,435    13,459,331                                              
       Less:                                                                                                                       
         Net deferred loan origination fees                     (34,494)      (46,093)                                             
                                                            -----------   -----------                                              
                                                                                                                                   
            Total first mortgage loans                       13,919,941    13,413,238                                              
                                                            -----------   -----------                                              
                                                                                                                                   
       Second mortgage and share loans                                                                                             
         Principal balances:                                                                                                       
            Second mortgage                                      61,169        70,207                                              
            Share                                               171,439       106,121                                              
                                                            -----------   -----------                                              
                                                                                                                                   
              Total second mortgages and share loans            232,608       176,328                                              
                                                            -----------   -----------                                              
                                                                                                                                   
       Less:                                                                                                                       
         Allowance for loan losses                              (60,000)      (60,000)                                             
                                                            -----------   -----------                                              
                                                                                                                                   
                                                            $14,092,549   $13,529,566                                              
                                                            ===========   ===========                                               
</TABLE> 
 
       Activity in the allowance for loan losses is summarized as follows for
       the years ended September 30:

<TABLE> 
<CAPTION> 
                                                           1998          1997                                                       
                                                       -----------   -----------                                                    
       <S>                                             <C>           <C> 
       Balance at beginning of year                    $    60,000   $    60,000                                                    
       Provision (recovery) charged to income                    0             0                                                    
       Charge-offs and recoveries, net                           0             0                                                    
                                                       -----------   -----------                                                    

            Balance at end of year                     $    60,000   $    60,000                                                    
                                                       ===========   ===========      
</TABLE>

       Nonaccrual loans for which interest has been reserved totaled $54,363 and
       $0 at September 30, 1998 and 1997, respectively. Interest income in the
       amount of $1,869 and $0 has been reserved at September 30, 1998 and 1997.

       As of September 30, 1998 the Association had outstanding firm commitments
       to originate loans of approximately $201,000.

                                                                         Page 26
<PAGE>
 
                   ROCKY FORD FINANCIAL, INC. AND SUBSIDIARY


                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  -4   ACCRUED INTEREST RECEIVABLE

           Accrued interest receivable at September 30 is summarized as follows:


<TABLE>
<CAPTION>
                                                   1998        1997             
                                                ----------  ----------     
            <S>                                 <C>         <C>            
            Certificates of deposit             $   9,860   $  22,508      
            Investment securities                   1,302      13,177      
            Mortgaged-backed securities            12,513      16,779      
            Loans receivable                       97,985      94,305      
                                                ---------   ---------      
                                                                           
                                                $ 121,660   $ 146,769      
                                                =========   =========      
</TABLE> 

NOTE  -5   PREMISES AND EQUIPMENT

           Premises and equipment at September 30 are summarized as follows:
 

<TABLE> 
<CAPTION>           
                                                      1998        1997              
                                                    ---------   ---------           
           <S>                                      <C>         <C>                 
           Land                                     $  10,000   $  10,000           
           Buildings                                  119,666     119,666           
           Furniture and fixtures                     109,652     102,071           
           Automobile                                  34,963      34,963           
                                                    ---------   ---------           
                                                                                    
                                                      274,281     266,700           
           Less accumulated depreciation             (197,593)   (183,430)          
                                                    ---------   ---------           
                                                                                    
                                                    $  76,688   $  83,270           
                                                    =========   =========            
</TABLE>                                        

           Depreciation expense charged to operations amounted to $16,291 and
           $20,032 for the years ended September 30, 1998 and 1997.
           
NOTE  -6   DEPOSITS

           Deposits at September 30 are summarized as follows:

<TABLE>
<CAPTION>
 
                                  RATE AT               1998                   1997       
                               SEPTEMBER 30,     AMOUNT     PERCENT     AMOUNT     PERCENT
                               --------------  ----------  ---------  -----------  -------
           <S>                 <C>             <C>         <C>        <C>          <C>    
           Money market           3.75%        $2,501,771      16.04  $ 2,800,821    17.36
           Passbook savings       3.00%         1,065,672       6.83    1,031,781     6.39
                                               ----------  ---------  -----------  -------
                                                                                          
                                                3,567,443      22.87    3,832,602    23.75
                                               ----------  ---------  -----------  -------
                                                                                          
           Certificates of                                                                
             deposit            3% - 4%                 0          0      224,449     1.39
                                4% - 5%           210,223       1.35    4,614,701    28.59
                                5% - 6%        11,787,309      75.57    6,738,968    41.75
                                6% - 7%                 0          0      696,266     4.31
                                7% - 8%            32,969        .21       32,418      .21
                                               ----------  ---------  -----------  -------
                                                                                          
                                               12,030,501      77.13   12,306,802    76.25
                                               ----------  ---------  -----------  -------
                                                                                          
                                              $15,597,944     100.00  $16,139,404   100.00
                                              ===========  =========  ===========  ======= 
</TABLE>

                                                                         Page 27
<PAGE>
 
                   ROCKY FORD FINANCIAL, INC. AND SUBSIDIARY


                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  -6  DEPOSITS (Continued)

          The aggregate amount of jumbo certificates of deposit with a minimum
          denomination of $100,000 was approximately $1,695,000 and $2,068,000
          at September 30, 1998 and 1997.

          At September 30, 1998, scheduled maturities of certificates of
          deposits are as follows:


<TABLE> 
<CAPTION>  
             Rate                         1999         2000         2001     
          -----------                 ------------  ----------   ----------
          <S>                         <C>           <C>          <C>      
            4% - 5%                   $  210,223    $       0    $       0 
            5% - 6%                    8,850,754    1,828,307    1,108,248 
            7% - 8%                       32,969            0            0 
                                      ----------   ----------    --------- 
                                                                           
                                      $9,093,946   $1,828,307   $1,108,248 
                                      ==========   ==========   ========== 
</TABLE> 
 
          Interest expense on deposits for years ended September 30 is
          summarized as follows:

<TABLE> 
<CAPTION> 
                                               1998         1997            
                                            -----------  -----------   
           <S>                              <C>          <C>       
           Money market                     $  100,176   $  121,332    
           Passbook savings                     31,358       28,160    
           Certificates of deposit             636,457      677,095    
                                            ----------   ----------    
                                                                       
                                            $  767,991   $  826,587    
                                            ==========   ==========    
</TABLE> 
 
NOTE  -7  INCOME TAXES
  
          Income tax expense for the years ended September 30 is summarized as
          follows:
  

<TABLE> 
<CAPTION> 
                                              1998        1997            
                                          -----------  -----------        
          <S>                             <C>          <C> 
          Current                         $  158,721   $   58,266         
          Deferred                           (24,900)     (27,700)        
                                          ----------   ----------         
                                                                          
                                          $  133,821   $   30,566         
                                          ==========   ==========         
                                 
          Effective tax rates                     39%          25%
</TABLE>

          Retained earnings at September 30, 1998 include earnings of
          approximately $452,000, representing bad debt deductions for which no
          provision for federal income taxes has been made. If, in the future,
          this portion of retained earnings is used for any purpose other than
          to absorb bad debt losses, federal income taxes will be imposed at the
          then applicable rates.

                                                                         Page 28
<PAGE>
 
                   ROCKY FORD FINANCIAL, INC. AND SUBSIDIARY


                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE -7   INCOME TAXES (Continued)    
                                      
          The provisions for federal income taxes for the years ended September
          30, 1998 and 1997 differ from that computed at the statutory corporate
          tax rate of 34 percent as follows:
          
<TABLE>                               
<CAPTION>                             
                                           1998          1997     
                                         --------      --------   
          <S>                            <C>           <C>        
          Tax at statutory rate          $116,234      $42,130    
          Change Resulting From:                                  
            State tax and credits           6,128       (5,000)   
          Non deductible ESOP expense       9,483            0    
          Other                             1,976       (6,564)   
                                         --------      -------    
                                         $133,821      $30,566    
                                         ========      =======    
</TABLE>                                                          
                                                                  
          Temporary differences between the financial statement carrying amounts
          and tax basis of assets and liabilities that gave rise to significant
          portions of the deferred tax liability at September 30 relates to the
          following:

<TABLE>
<CAPTION>
                                                                   1998         1997            
                                                                 --------     --------          
          <S>                                                    <C>          <C>               
          Deferred Tax Assets                                                                   
          Deferred compensation                                  $107,200     $ 96,000          
          Deferred loan fees                                       12,800       17,000          
          State tax credits carryover                                   0        5,000          
                                                                 --------     --------          
                                                                                                
              Total                                               120,000      118,000          
                                                                 --------     --------          
                                                                                                
          Deferred Tax Liabilities                                                              
          Accrued interest on loans                                36,900       34,900          
          FHLB stock dividend                                      34,200       47,500          
          Bad debt deduction                                       46,200       57,800          
          Unrealized gain on securities available-for-sale        208,239      147,200          
                                                                 --------     --------          
              Total                                               325,539      287,400          
                                                                 --------     --------          
              Net Deferred Tax Liability                         $205,539     $169,400          
                                                                 ========     ========           
</TABLE>

          Deferred tax expense results from timing differences in the
          recognition of income and expense for tax and financial purposes. The
          sources and tax effects of these temporary and timing differences are
          as follows:

<TABLE>
<CAPTION>
                                                     1998       1997       
                                                  ---------  ---------     
                 <S>                              <C>        <C>           
                 Accrued interest on loans        $  2,000   $  1,700      
                 Deferred Directors retirement     (11,200)   (65,600)     
                 Deferred loan fees recognized       4,200      5,700      
                 FHLB stock dividend               (13,300)     7,800      
                 Bad debt deduction                (11,600)   (11,500)     
                 State tax credits                   5,000     (5,000)     
                 SAIF special assessment                 0     39,200      
                                                  --------   --------      
                                                  $(24,900)  $(27,700)     
                                                  ========   ========       
</TABLE>

                                                                         Page 29
<PAGE>
 
                   ROCKY FORD FINANCIAL, INC. AND SUBSIDIARY



                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE -8  CAPITAL REQUIREMENTS

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

         Quantitative measures established by regulation to ensure capital
         adequacy require the Association to maintain minimum amounts and ratios
         as outlined below. Management believes, as of September 30, 1998, the
         Association met all capital adequacy requirements to which it is
         subject.

         As of August 12, 1998, the most recent notification from Office of
         Thrift Supervision categorized the Association as well capitalized
         under the regulatory framework for prompt corrective action. To be well
         capitalized the Association must maintain minimum total risk-based,
         Tier I risk-based, and Tier I leverage ratios. There are no conditions
         or events since that notification that management believes have changed
         the institution's category.

         The following is a reconciliation of the Association's capital computed
         under generally accepted accounting principles (GAAP) to regulatory
         capital. OTS regulations specify minimum capital requirements for the
         Association. The following reconciliation also compares the capital
         requirements as computed to the minimum capital requirements for the
         Association.

<TABLE>
      <S>                                         <C> 
       Equity Per GAAP                            $ 5,079,928               
          Unrealized Gain on Securities              (354,496)               
                                                   ----------               
            Tier I Capital                          4,725,432               

          Valuation Allowance                          60,000               
                                                   ----------               

            Regulatory Capital                     $4,785,432               
                                                   ==========                
</TABLE> 

<TABLE> 
<CAPTION> 
                                         Actual            Adequacy Purposes    Action Regulations
                                  Amount        Ratio       Amount     Ratio     Amount     Ratio
                                ----------   ------------ ----------   -----   ----------   -----
       <S>                      <C>          <C>          <C>          <C>     <C>          <C>        
       Total Capital
         (to Risk Weighted
         Assets)                $4,785,432      54.29%     $705,120    8.00%   $ 881,400    10.00%
       Tier I Capital
         (to Risk Weighted
         Assets)                 4,725,432      53.61       352,560    4.00      528,840     6.00
       Tier I Capital
      (to Average Assets)        4,725,432      22.14       853,800    4.00    1,067,200     5.00
 </TABLE>

                                                                         Page 30
<PAGE>
 
                   ROCKY FORD FINANCIAL, INC. AND SUBSIDIARY


                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE -8  CAPITAL REQUIREMENTS (Continued)

         The Association's management believes that, under the current
         regulations, the Association will continue to meet its minimum capital
         requirements in the coming year. However, events beyond the control of
         the Association, such as increased interest rates or a downturn in the
         economy in the Association's operating area, could adversely affect
         future minimum capital requirements.


NOTE -9  OTHER NON-INTEREST EXPENSE

<TABLE> 
<CAPTION>          
                                                                    1998          1997            
                                                                 ---------     --------          
          <S>                                                    <C>           <C>               
          Communication, postage and office supplies             $ 19,009      $ 21,258          
          Insurance                                                 6,393         6,109          
          Professional services                                   109,012        20,109          
          Travel and entertainment                                 26,238        26,340          
          Dues and subscriptions                                    6,614         5,381          
          Other                                                    28,209        23,522          
          Advertising                                               7,479         6,814          
                                                                 --------      --------          
                                                                 $202,954      $109,533          
                                                                 ========      ========           
</TABLE>

NOTE -10  SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK


          Most of the Association's business activity is with customers located
          within the state, principally southeastern Colorado. The Association
          does not have a high concentration of deposits or loans with one
          individual or entity.


NOTE -11  RELATED PARTY TRANSACTIONS

          Loans to related parties include loans made to directors, executive
          officers, and their associates as defined. The loans are made on
          substantially the same terms as other loan customers.

          The aggregate dollar amount of loans was $302,813 and $81,700 at
          September 30, 1998 and 1997, respectively. During 1998, new loans were
          $309,500 and repayments totaled $88,387. Purchases from directors for
          the years ended September 30, 1998 and 1997 amounted to $7,800 and
          $20,300, respectively. As of September 30, 1998, approximately
          $683,000 of directors and employees accounts were included in
          deposits.


NOTE-12   FAIR VALUES OF FINANCIAL INSTRUMENTS

          The estimated fair values of the Association's financial instruments
          as of September 30, are as follows:

<TABLE>
<CAPTION>
                                                      1998                      1997                       
                                            CARRYING        FAIR      CARRYING        FAIR                 
          Financial Assets:                  AMOUNT        VALUE       AMOUNT        VALUE                 
                                           -----------  -----------  -----------  -----------              
          <S>                              <C>          <C>          <C>          <C>                      
          Cash and cash equivalents        $ 3,967,576  $ 3,967,576  $ 3,205,382  $ 3,205,382              
          Certificates of deposit            1,599,000    1,599,000    1,999,312    1,999,312              
          Securities available-for-sale        574,062      574,062      409,218      409,218              
          Securities held-to-maturity        2,055,485    2,171,200    3,170,273    3,285,335              
          Loans receivable - net            14,092,549   14,598,000   13,529,566   14,053,000              
          Financial liabilities:                                                                           
          Deposits                          15,597,944   15,670,000   16,139,404   16,118,000               
</TABLE>

                                                                         Page 31
<PAGE>
 
                   ROCKY FORD FINANCIAL, INC. AND SUBSIDIARY



                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE -13  RETIREMENT PLAN

          During the year ended September 30, 1997, the Association adopted a
          non-qualified retirement plan for its senior officer and directors in
          recognition of their years of service to the Association. Funds are
          set aside annually in a grantor trust. Distributions are scheduled to
          be paid at the time the officer or directors leave the Association. No
          tax deduction for the Plan is claimed until funds are paid to the
          beneficiaries.

          For the years ended September 30, 1998 and 1997, the contributions to
          the plan were $34,432 and $251,687.


NOTE -14  EMPLOYEE STOCK OWNERSHIP PLAN

          As a part of conversion to stock, the Association established an ESOP
          to benefit substantially all employees. The ESOP purchased 33,856
          shares of common stock in the conversion with proceeds received from a
          loan from the Company. The note is to be repaid in ten annual
          principal installments of $33,856, starting October 1, 1997. Interest
          is based on the Wall Street Journal Prime plus one point, and is
          adjusted annually on October 1. The unallocated shares of stock held
          by the ESOP are pledged as collateral on the debt. The ESOP is funded
          by contributions made by the Association in amounts sufficient to
          retire the debt. At September 30, 1998, the outstanding balance of the
          note receivable is $270,848 and is presented as a reduction of
          stockholders' equity. ESOP compensation expense was $77,042 and
          $49,856 for the years ended September 30, 1998 and 1997.

          In November 1993, the AICPA issued Statement of Position 93-6
          "Employers' Accounting for Employee Stock Ownership Plans." The
          statement was adopted May 21, 1997, the effective date of the
          Association's conversion to a stock company. The Statement requires,
          among other things, that: (1) for ESOP shares committed to be released
          in a period to compensate employees directly, employers should
          recognize compensation cost equal to the average fair value (as
          determined on a monthly basis) of the shares committed to be released,
          (2) dividends on unallocated shares used to repay ESOP loans are not
          considered dividends for financial reporting purposes, dividends on
          allocated or committed shares are credited to the accounts of the
          participants and reported as dividends in the financial statements,
          (3) for an internally leveraged ESOP, the Company's loan receivable
          and the ESOP note payable as well as the interest income/expense is
          not reflected in the consolidated financial statements and (4) for
          earnings per share computations, ESOP shares that have been committed
          to be released should be considered outstanding. ESOP shares that have
          not been committed to be released should not be considered
          outstanding.


          The ESOP shares as of September 30, 1998 are as follows:

<TABLE>
           <S>                                             <C>
           Allocated shares                                   3,386
           Shares committed to be released for allocation     4,258
           Unreleased shares                                 26,212
                                                           --------
 
                    Total ESOP shares                        33,856
                                                           ========
 

           Fair value of unreleased shares                 $288,332
                                                           ========
</TABLE> 

                                                                         Page 32
<PAGE>
 
                   ROCKY FORD FINANCIAL, INC. AND SUBSIDIARY



                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE-15  IMPACT OF NEW ACCOUNTING STANDARDS


         Disclosure of Information about Capital Structure. In February 1997,
         the Financial Accounting Standards Board issued Statement No. 129. The
         Statement incorporates the disclosure requirements of APB Opinion No.
         15, Earnings Per Share and makes them applicable to all public and
         nonpublic entities that have issued securities addressed by the
         Statement. APB Opinion No. 15 requires disclosure of descriptive
         information about securities that is not necessarily related to the
         computation of earnings per share.

         This statement continues the previous requirements to disclose certain
         information about an entity's capital structure found in APB Opinions
         No. 10, Omnibus Opinion - 1966, and No. 15, Earnings Per Share, and
         FASB Statement No. 47, Disclosure of Long-Term Obligations, for
         entities that were subject to the requirements of those standards. This
         Statement eliminates the exemption of nonpublic entities from certain
         disclosure requirements of Opinion No. 15 as provided by FASB Statement
         No. 21, Suspension of the Reporting of Earnings per Share and Segment
         Information by Nonpublic Enterprises. It supersedes specific disclosure
         requirements of Opinions 10 and 15 and Statement 47 and consolidates
         them in this statement for ease of retrieval and for greater visibility
         to nonpublic entities. The Statement is effective for financial
         statements for periods ending after December 15, 1997. The impact of
         adopting the Statement was not material to the financial statements.

         Reporting Comprehensive Income. In June 1997, the Financial Accounting
         Standards board issued Statement No. 130. The Statement establishes
         standards for reporting and display of comprehensive income and its
         components (revenues, expenses, gains, and losses) in a full set of
         general-purpose financial statements. This Statement requires that all
         items that are required to be recognized under accounting standards as
         components of comprehensive income to be reported in a financial
         statement that is displayed with the same prominence as other financial
         statements. This Statement does not require a specific format for that
         financial statement but requires that an enterprise display an amount
         representing total comprehensive income for the period in that
         financial statement.

         This Statement requires that an enterprise (a) classify items of other
         comprehensive income by their nature in a financial statement and (b)
         display the accumulated balance of other comprehensive income
         separately from retained earnings and additional paid-in capital in the
         equity section of a statement of financial position.

         This Statement is effective for fiscal years beginning after December
         15, 1997. FASB Statement No. 130 will be adopted by the Association
         after September 30, 1998, the impact of adopting the Statement will not
         be material to the financial statements.

         Disclosures about Segments of an Enterprise and Related Information. In
         June 1997 the Financial Accounting Standards Board issued Statement No.
         131. The Statement establishes standards for the way that public
         business enterprises report information about operating segments in
         annual financial statements and requires that those enterprises report
         selected information about operating segments in interim financial
         reports issued to shareholders. It also establishes standards for
         related disclosures

                                                                         Page 33
<PAGE>
 
                   ROCKY FORD FINANCIAL, INC. AND SUBSIDIARY



                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE-15  IMPACT OF NEW ACCOUNTING STANDARDS (Continued)

         about products and services, geographic areas, and major customers.
         This Statement supersedes FASB Statement No. 14, Financial reporting
         for segments of Business Enterprise, but retains the requirement to
         report information about major customers. It amends FASB Statement No.
         94, Consolidation of all Majority-owned Subsidiaries, to remove the
         special disclosure requirements for previously unconsolidated
         subsidiaries.

         The Statement requires that a public business enterprise report
         financial and descriptive information about its reportable operating
         segments. Operating segments are components of an enterprise about
         which separate financial information is available that is evaluated
         regularly by the chief operating decision maker in deciding how to
         allocate resources and in assessing performance.

         Generally, financial information is required to be reported on the
         basis that is used internally for evaluating segment performance and
         deciding how to allocate resources to segments.

         The Statement requires that a public business enterprise report a
         measure of segment profit or loss, certain specific revenue and expense
         items, and segment assets. It requires reconciliations of total segment
         revenues, total segment profit or loss, total segment assets and other
         amounts disclosed for segments to corresponding amounts in the
         enterprise's general-purpose financial statements. It requires that all
         public business enterprises report information about the revenues
         derived from the enterprise's products or services (or groups of
         similar products and services), about the countries in which the
         enterprise earns revenues and holds assets, and about major customers
         regardless of whether that information is used in making operating
         decisions.

         The Statement also requires that a public business enterprise report
         descriptive information about the way that the operating segments were
         determined, the products and services provided by the operating
         segments, differences between the measurements used in reporting
         segment information and those used in the enterprise's general-purpose
         financial statements, and changes in the measurement of segment amounts
         from period to period.

         This Statement is effective for fiscal years beginning after December
         15, 1997. FASB Statement No. 131 will be adopted by the Association
         after September 30, 1998, the impact of adopting the Statement is not
         expected to have a significant effect on the Company as it only
         operates within one segment under the new standard.

         Employers' Disclosures About Pensions and Other Postretirement
         Benefits. In February, 1998, the Financial Accounting Standards Board
         issued SFAS No. 132, "Employers' Disclosure About Pensions and Other
         Postretirement Benefits." This Statement revises employers' disclosures
         about pension and other postretirement benefit plans. It does not
         change the measurement or recognition of those plans. It standardizes
         the disclosure requirements for pensions and other postretirement
         benefits to the extent practicable, requires additional information on
         changes in the benefit obligations and fair values of plan assets that
         will facilitate financial analysis, and eliminates certain disclosures
         that are no longer useful. The Statement is effective for fiscal years
         beginning after December 15, 1997. Currently the Company does not have

                                                                         Page 34
<PAGE>
 
                   ROCKY FORD FINANCIAL, INC. AND SUBSIDIARY



                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE-15  IMPACT OF NEW ACCOUNTING STANDARDS (Continued)

         any pension or postretirement plans that would come under the
         statement. Accordingly, the statement will not have any impact on the
         financial statements.

         Accounting for Derivative Instruments and Hedging Activities. In June,
         1998, the Financial Accounting Standards Board issued SFAS No. 133,
         "Accounting for Derivative Instruments and Hedging Activities." This
         Statement establishes accounting and reporting standards for derivative
         instruments, including derivative instruments embedded in other
         contracts, and for hedging activities. It requires that an entity
         recognize all derivatives as either assets or liabilities in the
         statement of financial position and measure those instruments at fair
         value. The statement is effective for fiscal years beginning after June
         15, 1999. Management, at this time, has not determined the impact of
         adopting this statement.


NOTE 16  EARNINGS PER SHARE

         The Company adopted Financial Accounting Standards Board Statement No.
         128 relating to earnings per share, effective for the quarter ended
         December 31, 1997. The statement requires dual presentations of basic
         and diluted earning per share on the face of the income statement.
         Basic ESP excludes dilution and is computed by dividing income
         available to common shareholders by the weighted-average number of
         common shares outstanding for the period. Diluted EPS reflects the
         potential dilution that could occur if securities or other contracts to
         issue common stock were exercised or converted into common stock or
         resulted in the issuance of common stock that then shares in the
         earnings of the entity. Employee Stock Ownership Plan shares not
         committed to be released to participants are not considered outstanding
         for the purposes of computing earnings per share.

         The conversion from a mutual savings association to a stock institution
         was completed May 21, 1997. The computation of earnings per share, for
         the year ended September 30, 1997 is based on the net income earned
         from the date of conversion to the end of the fiscal year divided by
         the weighted-average number of shares issued from the date of
         conversion until the end of the fiscal year.


NOTE-17  UNCERTAINTY DUE TO THE YEAR 2000 ISSUE

         The Year 2000 Issue arises because many computerized systems use two
         digits rather than four to identify a year. Date-sensitive systems may
         recognize the year 2000 as 1900 or some other date, resulting in errors
         when information using 2000 dates is processed. In addition, similar
         problems may arise in some systems which use certain dates in 1999 to
         represent something other than a date. The effects of the Year 2000
         Issue may be experienced before, on, or after January 1, 2000, and, if
         not addressed, the impact on operations and financial reporting may
         range from minor errors to significant systems failure which could
         affect the Company's ability to conduct normal business operations. It
         is not possible to be certain that all aspects of the Year 2000 Issue
         affecting the Company, including those related to the efforts of
         customers, other financial institutions, suppliers, or other third
         parties, will be fully resolved.

                                                                         Page 35
<PAGE>
 
                   ROCKY FORD FINANCIAL, INC. AND SUBSIDIARY



                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE-17  CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)

         The following condensed statements summarize the financial position,
         operating results and cash flows of Rocky Ford Financial, Inc. as of
         September 30 1998 and 1997 and for the year and four months then ended.

<TABLE>
<CAPTION>
                                                           1998          1997   
                                                        -----------  ------------
          <S>                                           <C>          <C>         
          ASSETS                                                                
          Cash and equivalents                          $1,637,827   $ 1,577,324
          Investment in subsidiary                       2,122,125     1,992,663
          ESOP note receivable                             270,848       338,560
          Other                                              4,522        19,612
                                                        ----------   -----------
                                                        $4,035,322   $ 3,928,159
                                                        ==========   ===========
          LIABILITIES AND STOCKHOLDERS' EQUITY                                  
          Accounts payable                              $    2,700   $         0
          Stockholders' equity                           4,032,622     3,928,159
                                                        ----------   -----------
          Total liabilities and stockholders' equity    $4,035,322   $ 3,928,159
                                                        ==========   ===========
                                                                                
          CONDENSED STATEMENT OF INCOME                                         
          Equity in undistributed net income                                    
            of subsidiary                               $  214,102   $    81,756
          Other net                                         (6,059)       11,589
                                                        ----------   -----------
                                                        $  208,043   $    93,345
                                                        ==========   ===========
                                                                                
          CONDENSED STATEMENT OF CASH FLOWS                                     
          Operating activities:                                                 
          Net income                                    $  208,043   $    93,345
          Adjustment to reconcile net income to                                 
            cash provided by operating activities:                              
          Equity in undistributed net income of                                 
            subsidiary                                    (214,102)      (81,756)
          Other                                             32,029        (6,612)
                                                        ----------   -----------
          Net cash provided by operations                   25,970         4,977
                                                        ----------   -----------
                                                                                
          Investing activities:                                                 
          ESOP note payments                                67,712             0
          Investment in subsidiary                               0    (1,910,907)
          Dividends received from subsidiary                84,640             0
          Dividends paid                                  (117,819)            0
                                                        ----------   -----------
                                                            34,533    (1,910,907)
                                                        ----------   -----------
                                                                                
          Financing activities:                                                 
          Proceeds from stock conversion net                                    
            of expenses                                          0     3,483,254
                                                        ----------   -----------
                                                                                
          Net increase in cash                              60,503     1,577,324
                                                                                
              Cash beginning                             1,577,324             0
                                                        ----------   -----------
                                                                                
              Cash ending                               $1,637,827   $ 1,577,324
                                                        ==========   =========== 
</TABLE>

                                                                         Page 36
<PAGE>

 
                   ROCKY FORD FINANCIAL, INC. AND SUBSIDIARY



                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE -18  MUTUAL TO STOCK CONVERSION
  
          On January 14, 1997, the Board of Directors of Rocky Ford Federal
          Savings and Loan Association adopted a Plan of Conversion under which
          the Association would convert from a federally chartered mutual
          savings institution to a federally chartered stock savings and loan
          pursuant to the Rules and Regulations of the OTS. The Plan included,
          as part of the conversion, the concurrent formation of a holding
          company. The Plan was approved by the Office of Thrift Supervision
          (OTS) and included the filling of a registration statement with the
          Securities and Exchange Commission. The Plan was approved by the
          members of the Association at a special meeting held May 6, 1997. In
          accordance with the Plan, the Company issued common stock which was
          sold in the conversion. The closing of the offering occurred on May
          21, 1997 and resulted in a stock offering of $4,232,000 (including
          $338,560 in shares subscribed by the ESOP). The Company transferred
          fifty percent of the net proceeds for the purchase of all of the
          capital stock of the Association.

          No change was made in the Board of Directors or management as a result
          of the Conversion.

          The costs of issuing the common stock was deferred and deducted from
          the proceeds of the stock sale and amounted to $410,186.

          For the purpose of granting eligible members of the Association a
          priority in the event of future liquidation, the Association at the
          time of conversion, established a liquidation account equal to its
          regulatory capital as of the date of the latest balance sheet used in
          the final conversion offering circular. In the event (and only in such
          event) of future liquidation of the converted Association, an eligible
          savings account holder who continues to maintain a savings account
          shall be entitled to receive a distribution from the liquidation
          account, in the proportionate amount of the then-current adjusted
          balance of the savings deposits then held, before any distributions
          may be made with respect to capital stock.

          Present regulations provide that the Association may not declare or
          pay a cash dividend on or repurchase any of its capital stock if the
          result thereof would be to reduce the regulatory capital of the
          Association below the amount required for the liquidation account or
          the regulatory capital requirement. Further, any dividend declared or
          paid on or repurchase of, the Association's capital stock shall be in
          compliance with the rules and regulations of the Office of Thrift
          Supervision, or other applicable regulations.

          The ESOP stock purchases were financed by issuing a note to the
          Company for the entire purchase.

                                                                         Page 37
<PAGE>
 
                        MARKET AND DIVIDEND INFORMATION

TRADING IN THE COMMON STOCK

     The Company's Common Stock is traded on the over-the-counter market through
the OTC "Electronic Bulletin Board", administered by Nasdaq.  There are
currently 423,400 shares of the Common Stock outstanding and approximately 70
holders of record of the Common Stock (not including shares held in "street
name") as of December 1, 1997.

     The following table sets forth certain information as to the range of the
high and low bid prices for the Company's common stock for the calendar quarters
since the Common Stock's issuance on May 21, 1997.

<TABLE>
<CAPTION>
 
                              HIGH BID (1)  LOW BID (1)  DIVIDENDS PAID
                              ------------  -----------  --------------
<S>                           <C>           <C>          <C>
      FISCAL 1997:
         Third Quarter           14.25         12.75          none
         Fourth Quarter          14.25         13.25          none
                                                   
      FISCAL 1998:                                 
         First Quarter           14.12         14.00          none
         Second Quarter          15.00         14.12          $.15
         Third Quarter           14.75         14.00          none
         Fourth Quarter          14.75         11.00          $.15
</TABLE>

_______________
(1)  Quotations reflect inter-dealer price, without retail mark-up, mark-down or
     commissions, and may not represent actual transactions.


DIVIDEND RESTRICTIONS

     Under OTS regulations, the Association may not pay dividends on its capital
stock if its regulatory capital would thereby be reduced below the amount then
required for the liquidation account established for the benefit of certain
depositors of the Association at the time of the Conversion.  In addition,
savings institution subsidiaries of savings and loan holding companies are
required to give the OTS 30 days' prior notice of any proposed declaration of
dividends to the holding company.

     OTS regulations impose additional limitations on the payment of dividends
and other capital distributions (including stock repurchases and cash mergers)
by the Association.  Under these regulations, a savings institution that,
immediately prior to, and on a pro forma basis after giving effect to, a
proposed capital distribution, has total capital (as defined by OTS regulation)
that is equal to or greater than the amount of its  capital requirements (a
"Tier 1 Association") is generally permitted, without OTS approval, to make
capital distributions during a calendar year in the amount equal to the greater
of: (i) 75% of its net income for the previous four quarters; or (ii) up to 100%
of its net income to date during the calendar year plus an amount that would
reduce by one-half the amount by which its capital-to-assets ratio exceeded
regulatory requirements at the beginning of the calendar year.  A savings
institution with total capital in excess of current minimum capital ratio
requirements (a "Tier 2 Association") is permitted to make capital distributions
without OTS approval of up to 75% of its net income for the previous four
quarters, less dividends already paid for such period.  A savings institution
that fails to meet current minimum capital requirements (a "Tier 3 Association")
is prohibited from making any capital distributions without the prior approval
of the OTS.  A Tier 1 Association that has been notified by the OTS that it is
in need of more than normal supervision will be treated as either a Tier 2 or
Tier 3 Association.  The Association is a Tier 1 Association.  Under the OTS'
prompt corrective action regulations, the Association would also be prohibited
from making any capital distribution if after making the 

                                      38
<PAGE>
 
distribution, the Association would have: (i) a total risk-based capital ratio
of less than 8.0%; (ii) a Tier 1 risk-based capital ratio of less than 4.0%; or
(iii) a leverage ratio of less than 4.0%. The OTS, after consultation with the
FDIC, however, may permit an otherwise prohibited stock repurchase by a savings
institution if made in connection with the issuance of additional shares in an
equivalent amount and the repurchase would reduce the institution's financial
obligations or otherwise improve the institution's financial condition.

     Furthermore, earnings of the Association appropriated to bad debt reserves
for federal income tax purposes are not available for payment of cash dividends
or other distributions to the Company without payment of taxes at the then
current tax rate by First Federal on the amount of earnings removed from the
reserves for such distributions.  The Company intends to make full use of this
favorable tax treatment afforded to the Association and the Company and does not
contemplate use of any post-Conversion earnings of the Association in a manner
which would limit either the Association's bad debt deduction or create federal
tax liabilities.

                                      39
<PAGE>

 
<TABLE>
<CAPTION>

                                                 BOARD OF DIRECTORS
<S>                                    <C>                                    <C>
DONALD F. GAUSE                        KEITH E. WAGGONER                      WAYNE W. WHITTAKER
Chairman of the Board of the           President and Chief Executive          Vice President of the Company and
 Company and the Association           Officer of the Company                 Association
                                       and the Association
 
FRANCIS E. CLUTE                       NORMAN L. BAILEY                       WILLIAM E. BURRELL
Secretary and Treasurer of the         President, La Junta Golf Club          Advisor, Burrell Seeds, Inc. and
 Company and the Association           La Junta, Colorado                     D.V. Burrell Seed Growers Company
                                                                              Rocky Ford, Colorado

BRIAN H. HANCOCK                       R. DEAN JONES
Self-employed Real Estate and          Owner, Jones Motors, Inc.
Insurance Broker                       La Junta, Colorado
Rocky Ford, Colorado
<CAPTION> 
                                                 EXECUTIVE OFFICERS
<S>                                    <C>                                    <C>
DONALD F. GAUSE                        KEITH E. WAGGONER                      WAYNE W. WHITTAKER
Chairman of the Board of the           President and Chief Executive          Vice President of the Company and
Company and the Association            Officer of the Company                 the Association
                                       and the Association
 
FRANCIS E. CLUTE
Secretary and Treasurer of the
Company and the Association

<CAPTION> 
                                                 OFFICE LOCATIONS                                                      
<S>                                    <C> 
                                       MAIN OFFICE:                                                                          
                                       801 Swink Avenue                                                                      
                                       Rocky Ford, Colorado  81067-0032                                                  
 
<CAPTION> 
                                                 GENERAL INFORMATION
<S>                                    <C>                                    <C>
INDEPENDENT PUBLIC ACCOUNTANTS         ANNUAL MEETING                         ANNUAL REPORT ON FORM 10-KSB
Grimsley, White & Company              The 1999 Annual Meeting of             A copy of the Company's Annual
Certified Public Accountants           Stockholders will be held on January   Report on Form 10-KSB for the fiscal
Rocky Ford, Colorado                   21, 1999 at 2:00 p.m. at  Rocky Ford   year ended September 30, 1998 as
                                       Federal Savings and Loan Association   filed with the Securities and
GENERAL COUNSEL                        801 Swink Avenue, Rocky Ford,          Exchange Commission will be
H. Barton Mendenhall                   Colorado                               furnished without charge to
Mendenhall & Malouff                                                          stockholders as of the record date for
Rocky Ford, Colorado                   TRANSFER AGENT AND REGISTRAR           the 1998 Annual Meeting upon
                                       Illinois Stock Transfer Company        written request to Francis E. Clute,
SPECIAL COUNSEL                        Chicago, Illinois                      Rocky Ford Financial, Inc., 801
Housley Kantarian & Bronstein, P.C.                                           Swink Avenue, Rocky Ford,
1220 19th Street, N.W., Suite 700                                             Colorado  81067-0032.
Washington, D.C.  20036
</TABLE>

                                      40