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                                  EXHIBIT 10.7

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                      FIRST FEDERAL BANK ROSWELL NEW MEXICO
                           CHANGE IN CONTROL AGREEMENT
                                       FOR
                                GINGER R. PALMER

        This AGREEMENT ("Agreement") is made effective as of ____________, 2004
(the "Effective Date") by and between First Federal Bank, Roswell, New Mexico, a
federally chartered stock savings bank (the "Bank"), and Ginger R. Palmer
("Employee"). Any reference to "Company" herein shall mean First Federal Banc of
the Southwest, Inc., the parent holding company of the Bank, or any successor
thereto.

        WHEREAS, the Company has entered into an Agreement and Plan of Merger
Dated as of ___________, 2004, by and between the Company and GFSB Bancorp, Inc.
("GFSB"), pursuant to which GFSB will merge with and into the Company (the
"Merger"), and the separate existence of GFSB shall cease; and

        WHEREAS, prior to the Merger, Employee was employed by GFSB as Vice
President, and is experienced in certain phases of the business of GFSB; and

        WHEREAS, the Bank recognizes the substantial contribution Employee has
made to GFSB, and in order to induce Employee to enter into the employ of the
Bank for the period provided in this Agreement.

        NOW, THEREFORE, in consideration of the foregoing premises, and upon the
other terms and conditions hereinafter provided, the parties hereto agree as
follows:

1.      TERM OF AGREEMENT

        The term of this Agreement shall commence as of the Effective Date and
shall continue for a period of twenty-four (24) full calendar months thereafter.

2.      PAYMENTS TO EMPLOYEE UPON CHANGE IN CONTROL

        (a)     In the event of the voluntary or involuntary termination of
Employee's employment under this Agreement, other than for Cause as defined in
Section 2(c) hereof, in connection with a Change in Control of the Bank or the
Company (as herein defined), or within twenty-four (24) months after such Change
in Control, the provisions of Section 3 shall apply. Upon the occurrence of a
Change in Control, the Employee shall have the right to elect to voluntarily
terminate her employment at any time during the term of this Agreement following
any demotion, loss of title, office or significant authority, material reduction
in her annual compensation or benefits, or relocation of her principal place of
employment by more than 35 miles from its location immediately prior to the
Change in Control.

        (b)     A "Change in Control" of the Bank or the Company shall mean a
change in control of a nature that: (i) would be required to be reported in
response to Item 1(a) of the

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current report on Form 8-K, as in effect on the date hereof, pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"); or (ii)
results in a Change in Control of the Bank or the Company within the meaning of
the Home Owners' Loan Act, as amended, and applicable rules and regulations
promulgated thereunder (collectively, the "HOLA") as in effect at the time of
the Change in Control; or (iii) without limitation such a Change in Control
shall be deemed to have occurred at such time as (a) any "person" (as the term
is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 35% or more of the
combined voting power of Company's outstanding securities, except for any
securities purchased by any employee benefit plan or trust maintained by the
Bank or the Company; or (b) individuals who constitute the Board on the date
hereof (the "Incumbent Board") cease for any reason to constitute at least a
majority thereof, PROVIDED that any person becoming a director subsequent to the
date hereof whose election was approved by a vote of at least three-quarters of
the directors comprising the Incumbent Board, or whose nomination for election
by the Company's stockholders was approved by the same Nominating Committee
serving under an Incumbent Board, shall be, for purposes of this clause (b),
considered as though she were a member of the Incumbent Board; or (c) a plan of
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Bank or the Company or similar transaction in which the Bank or
Company is not the surviving institution occurs; or (d) a proxy statement
soliciting proxies from stockholders of the Company, by someone other than the
current Board of Directors of the Company, seeking stockholder approval of a
plan of reorganization, merger or consolidation of the Company or similar
transaction with one or more corporations as a result of which the outstanding
shares of the class of securities then subject to the plan are exchanged for or
converted into cash or property or securities not issued by the Company; or (e)
a tender offer is made for 35% or more of the voting securities of the Company
and the shareholders owning beneficially or of record 35% or more of the
outstanding securities of the Company have tendered or offered to sell their
shares pursuant to such tender offer and such tendered shares have been accepted
by the tender offeror.

        (c)     The Employee shall not have the right to receive termination
benefits pursuant to Section 3 hereof upon Termination for Cause. The term
"Termination for Cause" shall mean termination because of the Employee's
intentional failure to perform stated duties, personal dishonesty, incompetence,
willful misconduct, any breach of fiduciary duty involving personal profit,
willful violation of any law, rule, regulation (other than traffic violations or
similar offenses) or final cease and desist order, or any material breach of any
material provision of this Agreement. In determining incompetence, the acts or
omissions shall be measured against standards generally prevailing in the
savings institution industry. For purposes of this paragraph, no act or failure
to act on the part of the Employee shall be considered "willful" unless done, or
omitted to be done, by the Employee not in good faith and without reasonable
belief that the Employee's action or omission was in the best interest of the
Bank. Notwithstanding the foregoing, the Employee shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
her a copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths of the members of the Board at a meeting of the Board called and
held for that purpose (after reasonable notice to the Employee and an
opportunity for her, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the

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Board, the Employee was guilty of conduct justifying Termination for Cause and
specifying the particulars thereof in detail. The Employee shall not have the
right to receive compensation or other benefits for any period after Termination
for Cause.

        3.      TERMINATION AND RELEASE

        Upon the occurrence of a Change in Control, followed by the involuntary
termination of Employee's employment (other than for Termination for Cause) or
Employee's voluntary termination for one or more of the reasons set forth in
Section 2(a) hereof, within twenty-four (24) months after such Change in
Control, the Bank shall be obligated to pay the Employee, or in the event of her
subsequent death, her beneficiary or beneficiaries, or her estate, as the case
may be, the following:

        (a)     her earned but unpaid salary as of the date of termination of
employment with the Bank and the benefits to which she would be entitled as of
the date of termination as a former employee under the Bank's employee benefit
plans and programs and compensation plans and programs;

        (b)     as severance pay, an amount equal to the sum of 200% times
Employee's base annual salary in effect as of the end of the calendar year prior
to the date of termination of employment;

        (c)     notwithstanding the preceding paragraphs of this Section 3, in
no event shall the aggregate payments or benefits to be made or afforded to the
Employee under said paragraphs (the "Termination Benefits") constitute an
"excess parachute payment" under Section 280G of the Code or any successor
thereto, and in order to avoid such a result, Termination Benefits will be
reduced, if necessary, to an amount (the "Non-Triggering Amount"), the value of
which is one dollar ($1.00) less than an amount equal to three (3) times the
Employee's "base amount", as determined in accordance with said Section 280G.
The allocation of the reduction required hereby among Termination Benefits
provided by the preceding paragraphs of this Section 3 shall be determined by
the Employee; and

        (d)     notwithstanding any provision in this Agreement contrary to this
Section 3(d), in consideration of the severance benefits to which Employee may
be entitled to receive pursuant to Section 3(b) hereof, Employee shall first
execute a release acceptable in form and substance to the Bank and the Company,
that unconditionally and irrevocably forever releases and discharges the
Company, the Bank, their respective shareholders, agents, servants, employees,
directors, affiliates and/or subsidiaries, and any shareholders, agents,
servants, employees, directors, and officers of the affiliates and/or
subsidiaries of the Company and the Bank, and their respective heirs, successors
or assigns (the "Releasees") from any and all charges, complaints, claims,
liabilities, obligations, promises, agreements, controversies, actions, demands,
debts, costs, expenses, damages, injuries or causes of action ("Claims") which
Employee now has, or ever may have had, arising out of Employee's employment by,
or termination of employment by, the Bank or the Company, including by way of
example, and not by way of limitation, any claims that Employee (or any person
or persons claiming or deriving a right from Employee) may have

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based on discrimination due to age, race, sex, religion or national origin, or
any other claims pursuant to the Worker Adjustment and Retraining Notification
Act, the National Labor Relations Act, Title VII of the Civil Rights Act of
1964, the Americans with Disabilities Act, the Equal Pay Act, the Fair Labor
Standards Act, the Employee Retirement Income Security Act of 1974, as amended,
the Internal Revenue Code of 1986, as amended, and any other federal, state or
local statute, rule, constitutional provision, regulation, ordinance or common
law, including, but not limited to, those for wrongful discharge, fraud,
intentional or negligent infliction of emotional distress and breach of any
expressed or implied covenant of good faith and fair dealing, and including but
not limited to, any Claims for recovery of attorney's fees.

4.      NON-COMPETITION AND NON-SOLICITATION

        (a)     During the term of this Agreement, and for a period of two (2)
years following any termination of Employee's employment hereunder, Employee
agrees not to compete with the Bank and/or the Company following such
termination in any city, town or county in which the Bank and/or the Company has
an office or has filed an application for regulatory approval to establish an
office, determined as of the effective date of such termination, except as
agreed to pursuant to a resolution duly adopted by the Board. Employee agrees
that during such period and within said area, cities, towns and counties,
Employee shall not work for or advise, consult or otherwise serve with, directly
or indirectly, any entity whose business materially competes with the
depository, lending or other business activities of the Bank and/or the Company.
The parties hereto, recognizing that irreparable injury would result to the Bank
and/or the Company, its business and property in the event of Employee's breach
of this Subsection 4(a), agree that in the event of any such breach by Employee,
the Bank and/or the Company would be entitled, in addition to any other remedies
and damages available, to an injunction to restrain the violation hereof by
Employee, Employee's partners, agents, employers, employees and all persons
acting for or with Employee. Nothing herein shall be construed as prohibiting
the Bank and/or the Company from pursuing any other remedies available to the
Bank and/or the Company for such breach or threatened breach, including the
recovery of damages from Employee.

        (b)     Employee recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Bank and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the Bank. Employee will not, during or after the term
of her employment, disclose any knowledge of the past, present, planned or
considered business activities of the Bank or affiliates thereof to any person,
firm, corporation, or other entity for any reason or purpose whatsoever (except
for such disclosure as may be required to be provided to any federal banking
agency with jurisdiction over the Bank or Employee). Notwithstanding the
foregoing, Employee may disclose any knowledge of banking, financial and/or
economic principles, concepts or ideas which are not solely and exclusively
derived from the business plans and activities of the Bank, and Employee may
disclose any information regarding the Bank or the Company which is otherwise
publicly available. In the event of a breach or threatened breach by Employee of
the provisions of this Section, the Bank will be entitled to an injunction
restraining Employee from disclosing, in whole or in part, the knowledge of the
past, present, planned or considered business activities of the Bank or
affiliates thereof, or from rendering any services to any person, firm,
corporation or other entity to whom

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such knowledge, in whole or in part, has been disclosed or is threatened to be
disclosed. Nothing herein will be construed as prohibiting the Bank from
pursuing any other remedies available to the Bank for such breach or threatened
breach, including the recovery of damages from Employee.

        (c)     Employee agrees that during the term of this Agreement, and for
a period of two (2) years after termination of such employment for any reason,
she shall not, except in the course of her duties for the Bank or the Company,
directly or indirectly, induce or attempt to induce or otherwise counsel,
advise, ask or encourage any person who at the time is a current employee of the
Bank, the Company or any affiliate of the Bank or the Company, or who left such
employ within the preceding six (6) months, to leave the employ of the Bank or
the Company or to accept employment with another employer besides the Bank or
the Company, or as an independent contractor, or offer employment to or hire
such person, or work for any person or entity that offers employment to or hires
such person. Employee covenants and agrees that during the term of this
Agreement, and for a period of two (2) years after termination of such
employment for any reason, she shall not directly or indirectly in any capacity
whatsoever (whether as a proprietor, partner, investor, shareholder, director,
officer, employer, employee, agent, representative or otherwise), solicit
business from or perform services for any customer or prospective customer of
the Bank or the Company.

        (d)     In the event that the provisions of this Section 4 are deemed to
exceed the time, geographic or scope limitations permitted by applicable law,
then such provisions shall be reformed to the maximum time, geographic or scope
limitations, as the case may be, as permitted by applicable law.

5.      EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS

        This Agreement contains the entire understanding between the parties
hereto and supersedes any prior agreement between the Bank and the Employee,
except that this Agreement shall not affect or operate to reduce any benefit or
compensation inuring to the Employee of a kind elsewhere provided. No provision
of this Agreement shall be interpreted to mean that the Employee is subject to
receiving fewer benefits than those available to her without reference to this
Agreement.

6.      NO ATTACHMENT

        (a)     Except as required by law, no right to receive payments under
this Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.

        (b)     This Agreement shall be binding upon, and inure to the benefit
of, the Employee, the Bank and their respective successors and assigns.

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7.      MODIFICATION AND WAIVER

        (a)     This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.

        (b)     No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.

8.      REQUIRED REGULATORY PROVISIONS

        (a)     The Bank may terminate the Employee's employment at any time.
The Employee shall not have the right to receive compensation or other benefits
for any period after Termination for Cause as defined in Section 2(c)
hereinabove.

        (b)     If Employee is suspended from office and/or temporarily
prohibited from participating in the conduct of the Bank's affairs by a notice
served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act (12
USC ss.1818(e)(3) and ss.1818(g)(1)), the Bank's obligations under this contract
shall be suspended as of the date of service unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Bank may in its
discretion (i) pay Employee all or part of the compensation withheld while its
contract obligations were suspended and (ii) reinstate (in whole or in part) any
of the obligations which were suspended.

        (c)     If Employee is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or 8g(1) of the Federal Deposit Insurance Act (12 USC ss.1818(e)
and ss.1818(g)(1)), all obligations of the Bank under this contract shall
terminate as of the effective date of the order, but vested rights of the
contracting parties shall not be affected.

        (d)     If the Bank is in default as defined in Section 3(x)(1) of the
Federal Deposit Insurance Act (12 USC ss.1813(x)(1)), all obligations of the
Bank under this contract shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.

        (e)     All obligations of the Bank under this contract shall be
terminated, except to the extent determined that continuation of the contract is
necessary for the continued operation of the Bank by the Director of the Office
of Thrift Supervision ("OTS") or her designee at the time (i) the Federal
Deposit Insurance Corporation ("FDIC") enters into an agreement to provide
assistance to or on behalf of the Bank under the authority contained in Section
13(c) of the Federal Deposit Insurance Act (12 USC ss.1823(c)); or (ii) the
Director of the OTS or her designee approves a supervisory merger to resolve
problems related to the operation of the Bank

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or when the Bank is determined by the Director of the OTS to be in an unsafe or
unsound condition. Any rights of the parties that have already vested, however,
shall not be affected by such action.

        (f)     Notwithstanding anything herein contained to the contrary, any
payments to Employee by the Bank pursuant to this Agreement are subject to and
conditioned upon their compliance with Section 18(k) of the Federal Deposit
Insurance Act, 12 U.S.C. ss.1828(k), and the regulations promulgated thereunder
in 12 C.F.R. Part 359.

9.      SEVERABILITY

        If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.

10.     HEADINGS FOR REFERENCE ONLY

        The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.

11.     GOVERNING LAW

        The validity, interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of New Mexico, unless
preempted by Federal law as now or hereafter in effect.

        Except as otherwise expressly provided elsewhere in this Agreement, in
the event that any dispute should arise between the parties as to the meaning,
effect, performance, enforcement, or other issue in connection with this
Agreement, which dispute cannot be resolved by the parties, the dispute shall be
decided by final and binding arbitration of a panel of three arbitrators.
Proceedings in arbitration and its conduct shall be governed by the rules of the
American Arbitration Association ("AAA") applicable to commercial arbitrations
(the "Rules") except as modified by this Section. The Employee shall appoint one
arbitrator, the Company shall appoint one arbitrator, and the third shall be
appointed by the two arbitrators appointed by the parties. The third arbitrator
shall be impartial and shall serve as chairman of the panel. The parties shall
appoint their arbitrators within thirty (30) days after the demand for
arbitration is served, failing which the AAA promptly shall appoint a defaulting
party's arbitrator, and the two arbitrators shall select the third arbitrator
within fifteen (15) days after their appointment, or if they cannot agree or
fail to so appoint, then the AAA promptly shall appoint the third arbitrator.
The arbitrators shall render their decision in writing within thirty (30) days
after the close of evidence or other termination of the proceedings by the
panel, and the decision of a majority of the arbitrators shall be final and
binding upon the parties, and shall be nonappealable. Each party shall bear the
fees and expenses of its arbitrator, counsel, and witnesses, and the fees and

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expenses of the third arbitrator shall be shared equally by the parties. The
costs of the arbitration, including the fees of AAA, shall be borne as directed
in the decision of the panel.

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12.     SIGNATURES

        IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed by
its duly authorized officer, and the Employee has signed this Agreement, on the
day and date first above written.

ATTEST                                      FIRST FEDERAL BANK,
                                            ROSWELL, NEW MEXICO



__________________________                  By: ______________________________
                                                Aubrey L. Dunn, Jr.
                                                President and Chief Executive
                                                Officer


WITNESS                                              EMPLOYEE



__________________________                  By: ______________________________
                                                Ginger R. Palmer





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