UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB/A
                                 AMENDMENT NO. 1


[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                                     OF 1934
                  For the Fiscal Year Ended September 30, 2006
                                       OR
 [ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934
              For the transition period from      to
                                            ------  -----

                        Commission File Number: 000-51385

                    First Federal Banc of the Southwest, Inc.
                    -----------------------------------------
                 (Name of Small Business Issuer in its Charter)

                 Delaware                                       85-0453611
-------------------------------------------------        ----------------------
(State or Other Jurisdiction of Incorporation               (I.R.S. Employer
              or Organization)                            Identification Number)


300 North Pennsylvania Avenue, Roswell, New Mexico                    88201
--------------------------------------------------               --------------
    (Address of Principal Executive Office)                        (Zip Code)

                               (505) 622-6201
                               --------------
                 (Issuer's Telephone Number including area code)

           Securities Registered Pursuant to Section 12(b) of the Act:

                                                    Name of Each Exchange
          Title of Class                             On Which Registered
          --------------                            ---------------------
Common Stock, par value $0.01 per share            The NASDAQ Stock Market, LLC

           Securities Registered Pursuant to Section 12(g) of the Act:

                                      None
                                      ----
                                (Title of Class)


Check whether the issuer is not required to file reports pursuant to Section 13
                       or 15(d) of the Exchange Act. [ ]

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

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

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained,  to the  best of  Registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendments to this Form 10-KSB. [ ]

     Indicate  by check mark  whether  the  Registrant  is a shell  company  (as
defined in Rule 12b-2 of the Exchange Act).
[  ] YES [X] NO

     The Registrant's revenues for the fiscal year ended September 30, 2006 were
$39 million.

     As of December 15, 2006, there were 4,007,053 shares issued and outstanding
of the  Registrant's  Common Stock. The aggregate value of the voting stock held
by non-affiliates of the Registrant,  computed by reference to the closing price
of the Common Stock as of December 15, 2006 was $50.2 million.

                       DOCUMENTS INCORPORATED BY REFERENCE

         None
<PAGE>
                                    PART III

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

     First Federal has adopted a Code of Ethics that applies to First  Federal's
principal executive officer, and principal financial officer. The Code of Ethics
is filed as Exhibit 14 to this Form 10-KSB.

     The table  below sets forth  certain  information  as of January  22,  2007
regarding the  composition  of the Company's  Board of Directors,  including the
terms of  office of Board  members.  Except as  indicated  herein,  there are no
arrangements  or  understandings  between  any  director  and any  other  person
pursuant to which such director was selected.

<TABLE>
<CAPTION>
                                                     Amount of Shares                   Percent of Shares
     Name and Address of                             Owned and Nature                     of Common Stock
      Beneficial Owner                            of Beneficial Ownership                Outstanding (1)
 -----------------------------------------      ----------------------------            ------------------

   <S>                                                <C>                                    <C>
   Edward K. David                                       310,752(2)                           7.7%
   Aubrey L. Dunn, Jr.                                   121,976(3)                            3.0
   Kay R. McMillan (4)                                   944,296(5)                           23.5
   Michael P. Mataya                                      20,435(6)                              *
   James E. Paul, Jr.                                     16,600(7)                              *
   Russell P. Weems                                       27,960                                 *
   Richard C. Kauzlaric                                  113,881(8)                            2.8
   Marc Reischman                                        219,984(9)                            5.5
   Michael A. McMillan(4)                                42,968(10)                            1.1
   Arturo Jurado                                         79,660(11)                            2.0
   Catherine Gutierrez                                    3,122(12)                              *
   George A. Rosenbaum, Jr.                              14,800(13)                              *
   All directors  and  executive  officers            1,916,434(14)                          46.7%
   as a group (12 persons)
</TABLE>
-----------------------------
(1)  Calculated as a  percentage of common shares outstanding plus stock options
     that are exercisable within 60 days of January 22, 2007.
(2)  Includes  75,240 shares of  common stock owned indirectly through a pension
     plan  of  which Mr.  David  is  a  trustee and  11,400 options  that can be
     exercised within 60 days of the Record Date.
(3)  Includes  9,400  shares  of  common   stock  owned  through  an  individual
     retirement  account and 10,256 options that can be exercised within 60 days
     of the Record Date.
(4)  Kay  R.  McMillan  and  Michael A. McMillan  are  related to one another as
     mother and son, respectively.
(5)  Includes 48,072  shares of common stock  owned by a  pension plan, of which
     Mrs. McMillan is a trustee,  and 6,200 options that can be exercised within
     60 days of the Record Date.
(6)  Includes 757 shares held by an individual retirement account, 14,974 shares
     held in trust and 3,000 options that can be exercised within 60 days of the
     Record Date.
(7)  Includes  11,000  options  that  can be  exercised within  60  days  of the
     Record Date.
(8)  Includes  110,881 shares  of  common  stock held in trust and 3,000 options
     that can be exercised within 60 days of the Record Date.
(9)  Includes  164,296  shares of  common stock  held by a corporation and 9,000
     shares  of common stock  owned through an individual retirement account and
     2,000 options that can be exercised within 60 days of the Record Date.
(10) Includes 9,000 options that can be exercised within  60 days of  the Record
     Date.
(11) Includes  32,000 shares owned  by a corporation  and 6,200 options that can
     be exercised within 60 days of the Record Date.
(12) Includes 3,000 options that  can be exercised  within 60 days of the Record
     Date.
(13) Includes 14,800 options that can be exercised  within 60 days of the Record
     Date.
(14) Includes 79,856 options that can be exercised within 60 days  of the Record
     Date.

                                       2
<PAGE>
     The  principal  occupation  during  the past five  years of each  director,
nominee for  director and  executive  officer of the Company is set forth below.
All such  persons  have held  their  present  positions  for five  years  unless
otherwise stated.

     Edward K. David has  served as a  Director  of the Bank since 1981 and as a
Director of the Company since its  formation in 1998. He became  Chairman of the
Board of  Directors  in 2003.  Mr.  David is the  President  of David  Petroleum
Corporation, an oil and gas exploration company.

     Marc  Reischman  has served as a  Director  of the Bank since 1998 and as a
Director of the Company  since its formation in 1998. He became Vice Chairman of
the Board of Directors in 2003.  Mr.  Reischman  is Chief  Executive  Officer of
Holsum Inc., a New Mexico company.

     Aubrey L. Dunn, Jr. has served as President,  Chief Executive Officer and a
Director of the Bank since 1996 and as the President,  Chief  Executive  Officer
and a Director of the Company since its formation in 1998.

     Kay R. McMillan first served as an Advisory Director of the Company and the
Bank in 2003.  In 2004,  she became a full Director of the Company and the Bank.
Ms.  McMillan is the largest  stockholder  in the Company and is the Chairman of
the Board of Permian Exploration  Corporation,  an oil and gas company. For over
30 years, Ms. McMillan has been a private investor in numerous  businesses.  Ms.
McMillan is the mother of Michael A. McMillan.

     Michael A. McMillan first served as an Advisory Director of the Company and
the Bank in 2002.  In 2003,  he became a full  Director  of the  Company and the
Bank. From 1992 through 2005, Mr.  McMillan was employed by Permian  Exploration
Corporation,  an oil and gas company. Since 2005, Mr. McMillan has served as the
managing  partner  for Mike  McMillan  LLC.  Mr.  McMillan  is the son of Kay R.
McMillan.

     Arturo  Jurado  has  served as a  Director  of the Bank since 1994 and as a
Director of the Company since its formation in 1998. Mr. Jurado is the President
of Jurado Farms.

     Russell P.  Weems has served as a Director  of the Bank since 1991 and as a
Director of the  Company  since its  formation  in 1998.  He is a  self-employed
architect.

     James E. Paul,  Jr. has served as a Director  of the  Company  and the Bank
since 2000.  Since 1991,  he has been the  President of the Jim Paul Company and
JP&A Concerts.

     Catherine   Gutierrez  has  been  associated  with  the  certified   public
accounting firm now named Tooley & Gutierrez CPA's since 1996. Ms.  Gutierrez is
a certified public accountant and currently is a principal of Tooley & Gutierrez
CPA's as well as a fifty percent stockholder.  Ms. Gutierrez joined the Board of
Directors  in July 2005 and serves as the  Chairperson  of the  Company's  Audit
Committee.

     Michael P. Mataya is the  President and Chief  Executive  Officer of Indian
Capital Distributing Co., a wholesale gasoline marketer.  Mr. Mataya is Director
of the New Mexico Petroleum  Marketers  Association,  Director of the New Mexico
Baptist Children's Home and is a former member of the Board of Directors for Los
Angeles  Crippled  Children's  Hospital.  Mr.  Mataya  became a director  of the
Company upon the  completion of the merger GFSB Bancorp,  Inc. with and into the
Company on May 31, 2005.

     Richard C. Kauzlaric is President of Four Corners Title Company,  President
of Western  New Mexico  Gallup  Foundation,  past  Regent of Western  New Mexico
University  and past  President of New Mexico  Amigos.  Mr.  Kauzlaric  has been
instrumental in the  redevelopment  of downtown  Gallup.  Mr.  Kauzlaric was the
President  of GFSB  Bancorp,  Inc. and became a director of the Company upon the
completion of the merger GFSB Bancorp, Inc. with and into the Company on May 31,
2005.

                                       3
<PAGE>

     Executive Officer of the Company who is not a Director

     George A.  Rosenbaum,  Jr. has been  employed  by the  Company and the Bank
since  2003.  From 2002 to 2003,  he served as the Chief  Financial  Officer  of
Illini Bancorp, Inc., a publicly traded bank holding company. From 2000 to 2002,
Mr. Rosenbaum was a Senior Manager with McGladrey & Pullen LLP. Mr. Rosenbaum is
a certified public  accountant with over 25 years of experience in the financial
services industry.

Ownership Reports by Officers and Directors

     The officers and directors of the Company and beneficial  owners of greater
than 10% of the Company's common stock are required to file reports with the SEC
disclosing  beneficial  ownership  and changes in  beneficial  ownership  of the
common stock.  SEC rules require  disclosure in the Company's Proxy Statement or
Annual  Report on Form  10-KSB of the  failure of an  officer,  director  or 10%
beneficial  owner of the  Company's  common  stock to file a these  reports on a
timely  basis.  Based on our review of ownership  reports,  President  and Chief
Executive  Officer  Aubrey L.  Dunn,  Jr.  filed  one late Form 4 to report  the
exercise of stock options and Director Kay R. McMillan  filed one late Form 4 to
report the  exercise of stock  options.  Based on the  Company's  review of such
ownership reports, the Company believes that no other officer or director of the
Company failed to timely file such  ownership  reports for the fiscal year ended
September 30, 2006.

Board Independence

     The Board of Directors  has  determined  that,  except for Mr.  Dunn,  each
member of the Board is an  "independent  director"  within  the  meaning  of the
NASDAQ  corporate  governance  listing  standards.  Mr.  Dunn is not  considered
independent because he is an executive officer of the Company.

Audit Committee

     The Audit Committee consists of Director Gutierrez, who serves as Chairman,
Director Weems, Director Jurado and Director Reischman. Each member of the Audit
Committee  is  considered  "independent"  as  defined  in the  NASDAQ  corporate
governance  listing  standards and under SEC Rule 10A-3.  The Board of Directors
has  determined  that  Director  Gutierrez  qualifies  as  an  "audit  committee
financial  expert" as that term is defined by the rules and  regulations  of the
SEC.

ITEM 10.          Executive Compensation
----------------------------------------

Directors' Compensation

     Directors  of the  Company do not receive a fee for serving on the Board of
Directors  of the  Company.  The Chairman of the Board and Chairman of the Audit
Committee  receive a fee of $1,700 per  regular  Bank board  meeting.  All other
Directors  of the Bank  receive  a fee of $1,200  per Bank  board  meeting.  The
Chairman of the  Nominating  Committee  receives $500 per  Nominating  Committee
meeting  attended,  and all other  committee  members  receive a fee of $250 per
committee meeting attended.  Additionally,  the Bank pays any gross receipts tax
due on directors' fees.

                                       4
<PAGE>

Executive Compensation

     Summary  Compensation  Table.  The following table sets forth for the three
years ended September 30, 2006, certain information as to the total remuneration
paid  by the  Company  to its  Chief  Executive  Officer  and the  Bank's  other
executive  officer who received total annual  compensation in excess of $100,000
(together, "Named Executive Officers").

<TABLE>
<CAPTION>
                                                                               Long Term Compensation
                                                          -----------------------------------------------------------------
                                 Annual Compensation                 Awards                           Payouts
                           -----------------------------  -----------------------------  ----------------------------------
                                                                             Restricted   Options/
Name and Principal         Fiscal                          Other Annual       Stock        SARS      LTIP      All Other
Position                    Year     Salary      Bonus    Compensation(1)      Awards       (#)    Payouts  Compensation(2)
-------------------------- -------  ---------  ---------  ---------------   -----------  --------  -------  ---------------

<S>                         <C>     <C>        <C>        <C>                <C>                    <C>      <C>
Aubrey   L.   Dunn ,  Jr.,  2006    $ 238,403  $  24,431  $     --            $   --         --     $   --   $   9,000
President, Chief Executive  2005      227,308     60,000        --                --         --         --       9,000
Officer    and    Director  2004      217,308         --        --                --         --         --       9,000

George   A.    Rosenbaum,   2006    $ 159,708  $  20,552  $     --            $   --        6,000   $   --   $   8,574
Jr.,    Executive    Vice   2005      130,085     50,000        --                --         --         --       8,180
President    and    Chief   2004      116,711         --        --                --        8,800       --       5,630
Financial Officer
---------------------------
</TABLE>
(1)  The  Bank provides certain members  of senior management with certain other
     personal benefits,  the aggregate  value of which did not exceed the lesser
     of $50,000 or 10%  of the total annual  salary and  bonus reported for each
     officer. The value of such personal benefits is not included in this table.
(2)  Includes employer contributions to a 401(k) plan.

Employment Agreements

     The Company has entered  into  employment  agreements  with Aubrey L. Dunn,
Jr.,  President  and Chief  Executive  Officer  and  George A.  Rosenbaum,  Jr.,
Executive  Vice President and Chief  Financial  Officer.  Mr. Dunn's  employment
agreement  was amended  effective  October 10,  2006,  to provide a gross-up for
taxes under  Section  280G of the  Internal  Revenue  Code,  and to increase Mr.
Dunn's  post-employment  medical,  dental and life  insurance  coverage  from 20
months to 36 months.  Washington  Federal,  Inc.  (who has agreed to acquire the
Company and the Bank) has agreed to honor the  employment  agreements  with each
executive.  Neither  Messrs.  Dunn nor Rosenbaum  will be employed by Washington
Federal following the transaction.

     In accordance  with the terms of the employment  agreements,  in connection
with the merger with Washington Federal, the Company will pay $947,000 to Aubrey
L. Dunn, Jr. (which amount  includes a gross-up  payment for taxes of $447,000),
and  $944,000  to George A.  Rosenbaum  Jr.  (which  amount  includes a gross-up
payment for taxes of  $287,000),  subject to applicable  withholding  and excise
taxes, in complete  settlement and satisfaction of each executive's rights under
his employment agreement.  In addition,  each of Messrs. Dunn and Rosenbaum will
receive continued health care coverage  substantially  identical to the coverage
provided to each executive  prior to the  acquisition for a period of thirty-six
months  following  their  termination  of  employment.  The value of Mr.  Dunn's
additional  16 months of  post-employment  medical,  dental  and life  insurance
coverage is approximately $11,000.

Non-Compete and Non-Solicitation Agreement

     In connection  with the execution of the merger  agreement with  Washington
Federal, Mr. Dunn also entered into a non-compete and non-solicitation agreement
with  Washington  Federal  pursuant  to which Mr. Dunn has agreed not to compete
with Washington  Federal for a period of six months  commencing at the effective
time of the  acquisition in any city, town or county in which the Company has an
office.  Mr. Dunn has also agreed that  commencing at the effective  time of the
acquisition and for a period of two consecutive  years  thereafter,  he will not
hire,  attempt to hire,  contact or solicit with regard to hiring any individual
who immediately prior to the effective time of the acquisition (i) was a current
employee  of the  Company  or any  affiliate,  or (ii)  became  an  employee  of
Washington  Federal in connection with the  acquisition,  or otherwise induce or
knowingly  encourage  any person to leave the employ of Washington  Federal.  In
consideration for Mr. Dunn's entering into the non-compete and  non-solicitation
agreement, the Company will pay Mr. Dunn immediately prior to the effective time
of the acquisition $650,000, less applicable withholding taxes.


                                       5
<PAGE>
Benefit Plans

     Stock Option Plans.  The  Company's  stock benefit plans are the 1995 Stock
Option Plan and the First Federal Banc of the Southwest,  Inc. 2002 Stock Option
and Incentive Plan.

     The following table sets forth  information with respect to grants of stock
options to the Named Executive Officers during 2006.

<TABLE>
<CAPTION>
                                                 OPTION GRANTS IN 2006 FISCAL YEAR
---------------------------------------------------------------------------------------------------------------------
                                                          Individual Grants
---------------------------------------------------------------------------------------------------------------------
                                               Percent of Total
                                                Options Granted    Exercise
                                                to Employees in     or Base    Expiration
        Name                Options Granted      Fiscal 2006       Price (1)     Date        Grant Date Present Value
------------------------    ---------------    ----------------    --------    ----------    ------------------------
<S>                              <C>                 <C>            <C>        <C>                  <C>
George A. Rosenbaum, Jr.         6,000               8.6%           $15.05     10/19/2010           $26,900(2)
</TABLE>
-------------------------------
(1) The  exercise price of  the options is equal to the fair market value of the
    underlying  shares  on  the date of  the  award.
(2) Based on a grant date present value  of  $4.49 per  share  derived using the
    Black-Scholes   option   pricing  model   with  the  following  assumptions:
    volatility  of 34.0%;  risk-free rate of return of 4.32%;  dividend yield of
    1.9%; and a four-year option life.

     Set forth below is certain  information  concerning options  outstanding to
the Named Executive Officers at September 30, 2006, and the options exercised by
the Named Executive Officers during 2006.

<TABLE>
<CAPTION>
                                 AGGREGATE OPTION EXERCISES IN 2006 FISCAL YEAR AND
                                           FISCAL YEAR-END OPTION VALUES
----------------------------------------------------------------------------------------------------------------------
                                                                 Number of Unexercised        Value of Unexercised
                                                                      Options at             In-The-Money Options at
                                                                       Year-End                    Year-End (1)
                                                              --------------------------    --------------------------
                                                   Value
                               Shares Acquired    Realized     Exercisable/Unexercisable    Exercisable/Unexercisable
        Name                   Upon Exercise        ($)                  (#)                           ($)
---------------------------    ---------------    --------    --------------------------    --------------------------

<S>                                 <C>             <C>            <C>                           <C>
Aubrey L. Dunn, Jr.                 --              --             10,256 / 69,744               60,000 / 408,000

George A. Rosenbaum, Jr.            --              --             14,800 / --                   49,600 / --
</TABLE>
------------------
(1) Equals  the difference  between the aggregate exercise price of such options
    and the aggregate fair market value of the shares of common stock that would
    be   received   upon   exercise,   assuming   such   exercise   occurred  on
    September 30, 2006,  at which date  the last trade price of the common stock
    as quoted on the Nasdaq Capital Market was $15.60.

     Set forth below is certain  information  as of September 30, 2006 regarding
the 1995 Stock  Option Plan and the First  Federal Banc of the  Southwest,  Inc.
2002 Stock Option and Incentive Plan.

<TABLE>
<CAPTION>
====================================================================================================================

                               Number of securities to be
                                issued upon exercise of                                    Number of securities
                                outstanding options and         Weighted average         remaining available for
                                         rights                  exercise price            issuance under plan
--------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                          <C>                          <C>
1995 Stock Option Plan
                                         14,600                      $13.13                         --
--------------------------------------------------------------------------------------------------------------------
2002  Stock  Option and
Incentive Plan                          175,850                      $11.57                       36,950
====================================================================================================================

         Total                          190,450                      $11.69                       36,950
====================================================================================================================
</TABLE>

                                       6
<PAGE>

     401(k)  Plan.  The Bank  provides its  employees a tax-exempt  benefit plan
qualifying  under  Section  401(k)  of the  Internal  Revenue  Code.  Generally,
employees  who have  attained  age 21 and who have  completed  three  months  of
employment are eligible to participate in the 401(k) plan as of the first day of
the month  following  their  eligibility.  Eligible  employees  are permitted to
contribute  to the  401(k)  plan on a  pre-tax  basis up to the  maximum  limits
permitted by law. The plan has a mandatory match of 4% (assuming  certain levels
of  contributions  by the  participant)  and also allows the  employer to make a
discretionary match above the mandatory levels.

     Participation  contributions to the 401(k) plan are vested at a rate of 20%
per year beginning  with the  participant's  second year of employment  with the
Bank.  Withdrawals  are not permitted  before age 59 1/2. Except in the event of
death,  disability,  termination  of employment  or reasons of proven  financial
hardship. With certain limitations, participants may make withdrawals from their
accounts  while  actively   employed.   Upon  termination  of  employment,   the
participant's account will be distributed,  unless he or she elects to defer the
payment.

     The 401(k)  plan may be amended by the Board of  Directors,  except that no
amendment may be made which would reduce the interest of any  participant in the
401(k) plan trust fund or divert any of the assets of the 401(k) plan trust fund
to purposes other than the benefit of participants or their beneficiaries.

     For the fiscal year ended  September 30, 2006, the Bank made  approximately
$235,000 in contributions to the 401(k) plan.

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

     Persons and groups who beneficially own in excess of 5% of the common stock
are required to file certain reports with the Securities and Exchange Commission
(the "SEC") regarding such ownership.  The following table sets forth, as of the
Record Date,  the shares of common stock  beneficially  owned by each person who
was the beneficial owner of more than 5% of the Company's  outstanding shares of
common  stock.  Information  with respect to all of our  directors and executive
officers is set forth in ITEM 9, Directors,  Executive  Officers,  Promoters and
Control Persons; Compliance with Section 16(a) of the Exchange Act, above.

<TABLE>
<CAPTION>
                                                     Amount of Shares
                                                     Owned and Nature                 Percent of Shares
         Name and Address of                           of Beneficial                   of Common Stock
          Beneficial Owners                            Ownership (1)                      Outstanding
         -------------------                         ----------------                 -----------------
<S>                                                         <C>                             <C>
Kay R. McMillian                                            944,296                         23.5%
300 North Pennsylvania Avenue
Roswell, New Mexico 88201

Edward K. David                                             310,752                          7.7%
300 North Pennsylvania Avenue
Roswell, New Mexico 88201

Marc Reischman                                              219,984                          5.5%
300 North Pennsylvania Avenue
Roswell, New Mexico 88201
</TABLE>
----------------------------------------
(1) For purposes of this table, a person is deemed to be the beneficial owner of
   shares  of common  stock if he has  shared  voting  or  investment power with
   respect  to such security,  or has a right to acquire beneficial ownership at
   any time within 60 days from January 22, 2007. As used herein, "voting power"
   is the power  to vote or  direct the voting of shares, and "investment power"
   is the  power to dispose  of or direct the  disposition of shares.  The table
   includes  all shares held directly  as well as by spouses and minor children,
   in  trust  and  other  indirect  ownership,  over  which  shares  the  named
   individuals effectively exercise sole or shared voting and investment  power.

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

         No directors, executive officers or immediate family members of such
individuals were engaged in transactions with the Company or any subsidiary
involving more than $60,000 (other than through a loan) during the fiscal year
ended September 30, 2006. In addition, during the fiscal year ended September
30, 2006, no directors, executive officers or immediate family members of such
individuals were involved in loans from the Company or the Bank involving more
than $60,000 which had not been made in the ordinary course of business and on
substantially the same terms and conditions, including interest rate and
collateral, as those of comparable transactions prevailing at the time with
other persons, and do not include more than the normal risk of collectibility or
present other unfavorable features.

                                       7
<PAGE>
ITEM 13.          Exhibits
--------------------------

     3.1  Certificate of  Incorporation  of First Federal Banc of the Southwest,
          Inc.*
     3.2  Bylaws of First Federal Banc of the Southwest, Inc.*
     4.1  Form  of  Common  Stock  Certificate  of  First  Federal  Banc  of the
          Southwest, Inc.*
     10.1 Form of Employment Agreement with Jerry R. Spurlin *
     10.2 Form of Employment Agreement with William W. Head, Jr.*
     10.3 Form of Employment Agreement with Leonard C. Scalzi*
     10.4 Release on Non-Compete Agreement with Richard P. Gallegos*
     10.5 Purchase  Agreement,  dated as of May 9, 2003,  by and  between  First
          Federal Bank and Aubrey L. Dunn, Jr.*
     10.6 Form of Change in Control Agreement with Debra S. Fischer*
     1.7  Form of Change in Control Agreement with Ginger R. Palmer*
     1.8  First Federal Bank 1995 Stock Option Plan**
     1.9  First  Federal  Banc of the  Southwest,  Inc.  2002  Stock  Option and
          Incentive Plan**
     1.10 Employment Agreement with George A. Rosenbaum, Jr.***
     1.11 Employment Agreement of Aubrey L. Dunn, Jr.****
     1.12 First  Amendment  to the  Employment  Agreement  of  Aubrey  L.  Dunn,
          Jr.*****
     1.13 First Federal Banc of the Southwest, Inc. 2006 Retention Pay Plan*****
     1.14 First Federal Banc of the Southwest, Inc. Severance Plan*****
     14   Code of Ethics******
     21   Subsidiaries of Registrant*
     31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of
          the Securities  Exchange Act of 1934, as amended,  as adopted pursuant
          to Section 302 of the Sarbanes-Oxley Act of 2002
     31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of
          the Securities  Exchange Act of 1934, as amended,  as adopted pursuant
          to Section 302 of the Sarbanes-Oxley Act of 2002
     32   Certification of Chief Executive  Officer and Chief Financial  Officer
          pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
          of the Sarbanes-Oxley Act of 2002
------------------------------
*        Incorporated by reference to the Registration Statement on Form S-4 of
         First Federal (file no. 333-120729), originally filed with the
         Securities and Exchange Commission on November 24, 2004.
**       Incorporated by reference to the Registration Statement on Form S-8 of
         First Federal (file no. 333-128308), originally filed with the
         Securities and Exchange Commission on September 14, 2005.
***      Incorporated by reference to the Quarterly Report on Form 10-QSB for
         the quarterly period ended June 30, 2005 (file no. 000-51243), filed
         with the Securities and Exchange Commission on August 15, 2005.
****     Incorporated  by reference to the Current  Report on Form 8-K for the
         event of May 18, 2006 (file no.  000-51243),  filed with
         the Securities and Exchange Commission on May 19, 2006.
*****    Incorporated by reference to the Current Report on Form 8-K for the
         event of October 10, 2006 (file no. 000-51243), filed with the
         Securities and Exchange Commission on October 16, 2006.
******   Incorporated by reference to the Annual Report on Form 10-KSB for the
         year ended September 30, 2005 (File No. 000-51243), filed with the
         Securities and Exchange Commission on January 13, 2006.

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

     The Company's  independent  registered  public accounting firm for the year
ended  September  30,  2004 was Neff + Ricci LLP.  On June 15,  2005,  the audit
committee  of the  Company  met and  decided to dismiss  Neff + Ricci LLP as the
Company's independent registered public accounting firm. The Company's financial
statements  in recent years,  including  the years ended  September 30, 2004 and
2003,  were audited by Neff + Ricci LLP. On June 15, 2005,  the audit  committee
also approved the  engagement  of Eide Bailly LLP as the  Company's  independent
registered public accounting firm for the fiscal year ending September 30, 2005.

                                       8
<PAGE>

     The reports of Neff + Ricci LLP on the financial  statements of the Company
for the fiscal  years ended  September  30, 2004 and 2003  contained  no adverse
opinion or  disclaimer  of opinion  and were not  qualified  or  modified  as to
uncertainty, audit scope or accounting principles. In connection with its audits
for the fiscal  years ended  September  30,  2004 and 2003 and through  June 15,
2005,  there  were no  disagreements  with  Neff + Ricci  LLP on any  matter  of
accounting principles or practices,  financial statement disclosure, or auditing
scope or procedure, which disagreements,  if not resolved to the satisfaction of
Neff + Ricci LLP would have caused Neff + Ricci LLP to make reference thereto in
its report on the Company's financial statements.  During the fiscal years ended
September 30, 2003 and 2004 and through June 15, 2005,  there were no reportable
events (as set forth in Regulation S-K Item 304(a)(1)(v)) with Neff + Ricci LLP.

     During the fiscal years ended  September 30, 2003 and 2004 and through June
15,  2005,  neither  the Company  nor anyone on its behalf  consulted  with Eide
Bailly LLP regarding  either (i) the  application of accounting  principles to a
specific  completed or proposed  transaction,  or the type of audit opinion that
might be rendered on the Company's financial statements; or (ii) any matter that
was the subject matter of a disagreement  or reportable  event with Neff + Ricci
LLP (as set forth in Regulation S-K Item 304(a)(1)(iv) or (v)).

     Set forth below is certain information concerning aggregate fees billed for
professional  services  rendered by Eide Bailly LLP and Neff + Ricci LLP, during
the fiscal years ended September 30, 2006 and September 30, 2005, respectfully.

     Audit  Fees.  During  the  past  two  fiscal  years  the  fees  billed  for
professional  services  rendered for the audit of the Company's annual financial
statements and for the review of the consolidated  financial statements included
in the  Company's  quarterly  reports on Forms 10-QSB were $130,000 for 2006 and
$99,000 for 2005.

     Audit-Related  Fees.  The  aggregate  fees billed to us for  assurance  and
related services rendered that are reasonably  related to the performance of the
audit of and  review  of the  financial  statements  and  that  are not  already
reported in "--Audit  Fees," above,  were $0 and $41,000 during the fiscal years
ended  September 30, 2006 and 2005,  respectively.  The 2005 fees related to the
filing of a registration statement,  and amendments thereto, with the Securities
and Exchange Commission.

     Tax Fees. During the past two fiscal years the fees billed for professional
services for tax services such as tax advice,  tax planning,  tax compliance and
the review of tax returns were $21,000 for 2006 and $11,000 for 2005.

     All Other Fees. There were no aggregate fees billed to the Company that are
not described above during the past two fiscal years.

     The Audit Committee  considered whether the provision of non-audit services
was compatible with maintaining the  independence of its independent  registered
public  accounting  firm. The Audit  Committee  concluded that  performing  such
services  in fiscal  2006 and 2005 did not  affect  the  independent  registered
public accounting  firm's  independence in performing its function as auditor of
the Company. The Audit Committee pre-approved 100% of the audit-related fees and
tax fees  described  above during the fiscal years ended  September 30, 2006 and
2005.

                                        9
<PAGE>
Policy on Audit  Committee  Pre-Approval  of Audit  and  Non-Audit  Services  of
Independent Registered Public Accounting Firm

     The Audit  Committee's  policy is to  pre-approve  all audit and  non-audit
services  provided by the independent  registered  public accounting firm. These
services may include audit services,  audit-related  services,  tax services and
other services.  Pre-approval  is generally  provided for up to one year and any
pre-approval is detailed as to particular service or category of services and is
generally  subject to a  specific  budget.  The Audit  Committee  has  delegated
pre-approval authority to its Chairman when expedition of services is necessary.
The independent registered public accounting firm and management are required to
periodically report to the full Audit Committee regarding the extent of services
provided by the independent registered public accounting firm in accordance with
this pre-approval, and the fees for the services performed to date.


<PAGE>
                                   SIGNATURES

     Pursuant to the  requirements of Section 13 of the Securities  Exchange Act
of 1934,  the  Company has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

                                       FIRST FEDERAL BANC OF THE SOUTHWEST, INC.


Date: January 26, 2007              By: \s\ Aubrey L. Dunn, Jr.
                                        ----------------------------------------
                                        Aubrey L. Dunn, Jr.
                                        President and Chief Executive Officer
                                        (Duly Authorized Representative)

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

<TABLE>
<CAPTION>
            Signatures                                Title                                      Date
            ----------                                -----                                      ----

<S>                                      <C>                                              <C>
\s\ Aubrey L. Dunn, Jr.                  President,     Chief    Executive                January 26, 2007
--------------------------------         Officer and  Director  (Principal
Aubrey L. Dunn, Jr.                      Executive Officer)


\s\ George A. Rosenbaum, Jr.             Executive   Vice   President  and                January 26, 2007
--------------------------------         Chief      Financial      Officer
George A. Rosenbaum, Jr.                 (Principal      Financial     and
                                         Accounting Officer)


\s\ Edward K. David                      Chairman of the Board                            January 26, 2007
--------------------------------
Edward K. David


\s\ Marc Reischman                       Vice Chairman of the Board                       January 26, 2007
--------------------------------
Marc Reischman


\s\ Kay R. McMillan                      Director                                         January 26, 2007
--------------------------------
Kay R. McMillan


\s\ Michael A. McMillan                  Director                                         January 26, 2007
--------------------------------
Michael A. McMillan


\s\ Arturo Jurado                        Director                                         January 26, 2007
--------------------------------
Arturo Jurado


<PAGE>
\s\ Russell P. Weems                     Director                                         January 26, 2007
--------------------------------
Russell P. Weems


\s\ James E. Paul, Jr.                   Director                                         January 26, 2007
--------------------------------
James E. Paul, Jr.


\s\ Catherine Gutierrez                  Director                                         January 26, 2007
--------------------------------
Catherine Gutierrez


\s\ Michael P. Mataya                    Director                                         January 26, 2007
--------------------------------
Michael P. Mataya


\s\ Richard C. Kauzlaric                 Director                                         January 26, 2007
--------------------------------
Richard C. Kauzlaric
</TABLE>