<PAGE>
 
                                                                    EXHIBIT 10.6

                             EMPLOYMENT AGREEMENT
                             --------------------

     THIS AGREEMENT is entered into this 15th day of October 1997 (the
"Effective Date"),  by and between First Federal Savings and Loan Association of
Gadsden (the "Association") and Gates B. Little (the "Employee").

     WHEREAS, the Employee has heretofore been employed by the Association as
Vice President and is experienced in all phases of the business of the
Association; and

     WHEREAS, the Board of Directors of the Association believes it is in the
best interests of the Association to enter into this Agreement with the Employee
in order to assure continuity of management of the Association and to reinforce
and encourage the continued attention and dedication of the Employee to his
assigned duties; and

     WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship of the Association and the Employee.

     NOW, THEREFORE, it is AGREED as follows:

     1.    Employment.  The Employee is employed as Vice President of the
           ----------                                                    
Association.  The Employee shall render such administrative  and management
services for the Association as are currently rendered and as are customarily
performed by persons situated in a similar executive capacity.  The Employee
shall also promote, by entertainment or otherwise, as and to the extent
permitted by law, the business of the Association.  The Employee's other duties
shall be such as the Board of Directors (the "Board") of the Association may
from time to time reasonably direct, including normal duties as an officer of
the Association.

     2.    Base Compensation.  The Association agrees to pay the Employee during
           -----------------                                                    
the term of this Agreement a salary at the rate of $37,060 per annum, payable in
cash not less frequently than monthly.  The Board shall review, not less often
than annually, the rate of the Employee's salary, and in its sole discretion may
decide to increase his salary.

     3.    Discretionary Bonuses.  The Employee shall participate in an
           ---------------------                                       
equitable manner with all other senior management employees of the Association
in discretionary bonuses that the Board may award from time to time to the
Association's senior management employees.  No other compensation provided for
in this Agreement shall be deemed a substitute for the Employee's right to
participate in such discretionary bonuses.

     4.    (a)  Participation in Retirement, Medical and Other Plans.  During
                ----------------------------------------------------         
the term of this Agreement, the Employee shall be eligible to participate in the
following benefit plans:  group hospitalization, disability, health, dental,
sick leave, life insurance, travel and/or accident insurance, auto
allowance/auto lease, retirement, pension, and/or other present or future
qualified plans provided by the Association, generally which benefits, taken as
a whole, must be at least as favorable as those in effect on the Effective Date.
The Employee shall also be entitled at no expense to himself, to family medical
insurance provided by the Association throughout the term of this Agreement and
for a 3-year period beginning upon the termination of this Agreement, regardless
of his employment status.  This 3-year coverage period may be reconsidered and
extended by the Board, in its sole discretion.

           (b)  Employee Benefits; Expenses.  The Employee shall be eligible to
                ---------------------------                                    
participate in any fringe benefits which are or may become available to the
Association's senior management employees, including for example: any stock
option or incentive compensation plans, and any other benefits which are
commensurate with the responsibilities and functions to be performed by the
Employee under this Agreement.  The Employee shall be reimbursed for all
reasonable out-of-pocket business expenses which he shall incur in connection
with his services under this Agreement upon substantiation of such expenses in
accordance with the policies of the Association.

                                      -1-
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     5.    Term. The Association hereby employs the Employee, and the Employee
           ----                                                                
hereby accepts such employment under this Agreement, for the period commencing
on the Effective Date and ending thirty-six months thereafter (or such earlier
date as is determined in accordance with Section 9).  Additionally, this
Agreement shall be automatically extended to a date thirty-six months after any
"Change in Control" (as defined in Section 11 hereof), and on each annual
anniversary date from the Effective Date, the Board shall duly consider and
determine whether to extend the Employee's term of employment under this
Agreement, and the Employee's term of employment under this Agreement may be
extended to a date up to thirty-six months thereafter provided the Board
determines in a duly adopted resolution that the performance of the Employee has
met the Board's requirements and standards and that this Agreement shall be
extended.

     6.    Loyalty; Noncompetition.
           ----------------------- 

           (a)   During the period of his employment hereunder and except for
illnesses, reasonable vacation periods, and reasonable leaves of absence, the
Employee shall devote all his full business time, attention, skill, and efforts
to the faithful performance of his duties hereunder; provided, however, from
time to time, Employee may serve on the boards of directors of, and hold any
other offices or positions in, companies or organizations, which will not
present any conflict of interest with the Association or any of its subsidiaries
or affiliates, or unfavorably affect the performance of Employee's duties
pursuant to this Agreement, or will not violate any applicable statute or
regulation.  "Full business time" is hereby defined as that amount of time
usually devoted to like companies by similarly situated executive officers.
During the term of his or her employment under this Agreement, the Employee
shall not engage in any business or activity contrary to the business affairs or
interests of the Association.

           (b)   Nothing contained in this Paragraph 6 shall be deemed to
prevent or limit the Employee's right to invest in the capital stock or other
securities of any business dissimilar from that of the Association, or, solely
as a passive or minority investor, in any business.

     7.    Standards.  The Employee shall perform his duties under this
           ---------                                                   
Agreement in accordance with such reasonable standards as the Board may
establish from time to time.  The Association will provide Employee with the
working facilities and staff customary for similar executives and necessary for
him to perform his duties.

     8.    Vacation and Sick Leave.  At such reasonable times as the Board shall
           -----------------------                                              
in its discretion permit, the Employee shall be entitled, without loss of pay,
to absent himself voluntarily from the performance of his employment under this
Agreement, all such voluntary absences to count as vacation time; provided that:

           (a)   The Employee shall be entitled to an annual vacation in
accordance with the policies that the Board periodically establishes for senior
management employees of the Association.

           (b)   The Employee shall not receive any additional compensation from
the Association on account of his failure to take a vacation or sick leave, and
the Employee shall not accumulate unused vacation or sick leave from one fiscal
year to the next, except in either case to the extent authorized by the Board.

           (c)   In addition to the aforesaid paid vacations, the Employee shall
be entitled without loss of pay, to absent himself voluntarily from the
performance of his employment with the Association for such additional periods
of time and for such valid and legitimate reasons as the Board may in its
discretion determine. Further, the Board may grant to the Employee a leave or
leaves of absence, with or without pay, at such time or times and upon such
terms and conditions as such Board in its discretion may determine.

           (d)   In addition, the Employee shall be entitled to an annual sick
leave benefit as established by the Board.

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     9.    Termination and Termination Pay.  Subject to Section 11 hereof, the
           -------------------------------                                    
Employee's employment hereunder may be terminated under the following
circumstances:

           (a)   Death.  The Employee's employment under this Agreement shall
                 -----                                                       
terminate upon his death during the term of this Agreement, in which event the
Employee's designated beneficiary, or if none, the Employee's estate, shall be
entitled to receive the compensation due the Employee through the last day of
the calendar month in which his death occurred.

           (b)   Disability.
                 ---------- 

                 (1)  The Association may terminate the Employee's employment
after having established the Employee's Disability. For purposes of this
Agreement, "Disability" means a physical or mental infirmity which impairs the
Employee's ability to substantially perform his duties under this Agreement and
which results in the Employee becoming eligible for long-term disability
benefits under the Association's long-term disability plan (or, if the
Association has no such plan in effect, which impairs the Employee's ability to
substantially perform his duties under this Agreement for a period of one
hundred eighty (180) consecutive days). The Employee shall be entitled to the
compensation and benefits provided for under this Agreement for (i) any period
during the term of this Agreement and prior to the establishment of the
Employee's Disability during which the Employee is unable to work due to the
physical or mental infirmity, or (ii) any period of Disability which is prior to
the Executive's termination of employment pursuant to this Section 9(b);
provided that any benefits paid pursuant to the Association's long term
disability plan will continue as provided in such plan.

                 (2)  During any period that the Employee shall receive
disability benefits and to the extent that the Employee shall be physically and
mentally able to do so, he shall furnish such information, assistance and
documents so as to assist in the continued ongoing business of the Association
and, if able, shall make himself available to the Association to undertake
reasonable assignments consistent with his prior position and his physical and
mental health. The Association shall pay all reasonable expenses incident to the
performance of any assignment given to the Employee during the disability
period.

           (c)   Just Cause.  The Board may, by written notice to the Employee,
                 ----------                                                    
immediately terminate his employment at any time, for Just Cause.  The Employee
shall have no right to receive compensation or other benefits for any period
after termination for Just Cause.  Termination for "Just Cause" shall mean
termination because of, in the good faith determination of the Board, the
Employee's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement.  No act, or failure to act, on the
Employee's part shall be considered "willful" unless he has acted, or failed to
act, with an absence of good faith and without a reasonable belief that his
action or failure to act was in the best interest of the Association.
Notwithstanding the foregoing, the Employee shall not be deemed to have been
terminated for Just Cause unless there shall have been delivered to the Employee
a copy of a resolution duly adopted by the affirmative vote of not less than a
majority of the entire membership 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 the Employee, together with the Employee's counsel, to be heard
before the Board), finding that in the good faith opinion of the Board, the
Employee was guilty of conduct set forth above in the second sentence of this
subsection (c) and specifying the particulars thereof in detail.

           (d)   Without Just Cause; Constructive Discharge.
                 ------------------------------------------ 

                 (1)  The Board may, by written notice to the Employee,
immediately terminate his employment at any time for a reason other than Just
Cause, in which event the Employee shall be entitled to receive the following
compensation and benefits (unless such termination occurs within the time period
that begins on the date six months before a "Change in Control" (as defined in
Section 11 hereof) and ends on the later of the second annual

                                      -3-
<PAGE>
 
anniversary of the Change in Control or the expiration date of this Agreement
(the "Protected Period"), in which event the benefits and compensation provided
for in Section 11 shall apply): (i) the salary provided pursuant to Section 2
hereof, up to the date of termination of the term as provided in Section 5
hereof (including any renewal term) of this Agreement (the "Expiration Date"),
plus said salary for an additional 12-month period, and (ii) at the Employee's
election either (A) cash in an amount equal to the cost to the Employee of
obtaining all health, life, disability and other benefits which the Employee
would have been eligible to participate in through the Expiration Date based
upon the benefit levels substantially equal to those that the Association
provided for the Employee at the date of termination of employment or (B)
continued participation under such Association benefit plans through the
Expiration Date, but only to the extent the Employee continues to qualify for
participation therein. All amounts payable to the Employee shall be paid, at the
option of the Employee, either (I) in periodic payments through the Expiration
Date, or (II) in one lump sum within ten (10) days of such termination.

                 (2)  The Employee may voluntarily terminate his employment
under this Agreement, and the Employee shall thereupon be entitled to receive
the compensation and benefits payable under Section 9(d)(1) hereof, within
ninety (90) days following the occurrence of any of the following events, which
has not been consented to in advance by the Employee in writing (unless such
voluntary termination occurs during the Protected Period, in which event the
benefits and compensation provided for in Section 11 shall apply): (i) a
material reduction in the Employee's base compensation; (ii) the failure by the
Association to continue to provide the Employee with compensation and benefits
provided for under this Agreement, as the same may be increased from time to
time, or with benefits substantially similar to those provided to him under any
of the employee benefit plans in which the Employee now or hereafter becomes a
participant, or the taking of any action by the Association which would directly
or indirectly reduce any of such benefits or deprive the Employee of any
material fringe benefit enjoyed by him; (iii) the assignment to the Employee of
duties and responsibilities materially different from those normally associated
with his position as referenced at Section 1; or (iv) a material diminution or
reduction in the Employee's responsibilities or authority (including reporting
responsibilities) in connection with his employment with the Association. Said
sum shall be paid in lieu of the payment of any benefits under Section 9 hereof.

                 (3)  Notwithstanding the foregoing, but only to the extent
required under federal banking law, the amount payable under clause (d)(1)(i)
hereof shall be reduced to the extent that on the date of the Employee's
termination of employment, the present value of the benefits payable under
clauses (d)(1)(i) and (ii) hereof exceeds the limitation on severance benefits
that is set forth in Regulatory Bulletin 27a of the Office of Thrift
Supervision, as in effect on the Effective Date. In the event that Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code") becomes applicable
to payments made under this Section 9(d), and the payments exceed the "Maximum
Amount" as defined in Section 11(a)(1) hereof, the payments shall be reduced as
provided by Section 11(a)(2) of this Agreement.

           (e)   Termination or Suspension Under Federal Law.
                 ------------------------------------------- 

                 (1)  If the Employee is removed and/or permanently prohibited
from participating in the conduct of the Association's affairs by an order
issued under Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act
("FDIA") (12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Association
under this Agreement shall terminate, as of the effective date of the order, but
vested rights of the parties shall not be affected.

                 (2)  If the Association is in default (as defined in Section
3(x)(1) of FDIA), all obligations under this Agreement shall terminate as of the
date of default; however, this Paragraph shall not affect the vested rights of
the parties.

                 (3)  All obligations under this Agreement shall terminate,
except to the extent that continuation of this Agreement is necessary for the
continued operation of the Association: (i) by the Director of the Office of
Thrift Supervision ("Director of the OTS"), or his or her designee, at the time
that the Federal Deposit Insurance Corporation ("FDIC") or the Resolution Trust
Corporation enters into an agreement to provide assistance

                                      -4-
<PAGE>
 
to or on behalf of the Association under the authority contained in Section
13(c) of FDIA; or (ii) by the Director of the OTS, or his or her designee, at
the time that the Director of the OTS, or his or her designee approves a
supervisory merger to resolve problems related to operation of the Association
or when the Association is determined by the Director of the OTS to be in an
unsafe or unsound condition. Such action shall not affect any vested rights of
the parties.

                 (4)  If a notice served under Section 8(e)(3) or (g)(1) of the
FDIA (12 U.S.C. 1818(e)(3) or (g)(1)) suspends and/or temporarily prohibits the
Employee from participating in the conduct of the Association's affairs, the
Association's obligations under this Agreement shall be suspended as of the date
of such service, unless stayed by appropriate proceedings. If the charges in the
notice are dismissed, the Association may in its discretion (i) pay the Employee
all or part of the compensation withheld while its contract obligations were
suspended, and (ii) reinstate (in whole or in part) any of its obligations which
were suspended.

          (f)    Voluntary Termination by Employee.  Subject to Section 11
                 ---------------------------------
hereof, the Employee may voluntarily terminate employment with the Association
during the term of this Agreement, upon at least ninety (90) days' prior written
notice to the Board of Directors, in which case the Employee shall receive only
his compensation, vested rights and employee benefits up to the date of his
termination (unless such termination occurs pursuant to Section 9(d)(2) hereof
or within the Protected Period, in which event the benefits and compensation
provided for in Sections 9(d) or 11, as applicable, shall apply).

     10.   No Mitigation.  The Employee shall not be required to mitigate the
           -------------                                                     
amount of any payment provided for in this Agreement by seeking other employment
or otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Employee in any subsequent employment.

     11.   Change in Control.
           ----------------- 

           (a)   Change in Control; Involuntary Termination.
                 ------------------------------------------ 

                 (1)  Notwithstanding any provision herein to the contrary, if
the Employee's employment under this Agreement is terminated by the Association,
without the Employee's prior written consent and for a reason other than Just
Cause during the Protected Period, the Employee shall, subject to paragraph (2)
of this Section 11(a), be paid an amount equal to the difference between (i) the
product of 2.99 times his "base amount" as defined in Section 280G(b)(3) of the
Code and regulations promulgated thereunder (the "Maximum Amount"), and (ii) the
sum of any other parachute payments (as defined under Section 280G(b)(2) of the
Code) that the Employee receives on account of the Change in Control.

                 The amount payable under this Section 11(a)(2) shall be paid
either (i) in one lump sum within ten days of the later of the date of the
Change in Control and the Employee's last day of employment, or (ii) if prior to
the date which is 90 days before the date on which a Change in Control occurs,
the Employee filed a duly executed irrevocable written election in the form
attached hereto as Exhibit "A", payment of such amount shall be made according
to the elected schedule. Deferred amounts shall bear interest from the date on
which they would otherwise be payable until the date paid at a rate equal to
120% of the applicable federal rate, compounded semiannually, as determined
under Code Section 1274(d) and the regulations thereunder.

                 (2)  In the event that the Employee and the Association jointly
determine and agree that the total parachute payments receivable under clauses
(i) and (ii) of Section 11(a)(1) hereof exceed the Maximum Amount,
notwithstanding the payment procedure set forth in Section 11(a)(1) hereof, the
Employee shall determine which and how much, if any, of the parachute payments
to which he is entitled shall be eliminated or reduced so that the total
parachute payments to be received by the Employee do not exceed the Maximum
Amount.  If the Employee does not make his determination within ten business
days after receiving a written request from the Association, the Association may
make such determination, and shall notify the Employee promptly thereof.  Within
five business days 

                                      -5-
<PAGE>
 
of the earlier of the Association's receipt of the Employee's determination
pursuant to this paragraph or the Association's determination in lieu of a
determination by the Employee, the Association shall pay to, or distribute for
the benefit of, the Employee such amounts as are then due the Employee under
this Agreement.

                 (3)  As a result of uncertainty in application of Section 280G
of the Code at the time of payment hereunder, it is possible that such payments
will have been made by the Association which should not have been made
("Overpayment") or that additional payments will not have been made by the
Association which should have been made ("Underpayment"), in each case,
consistent with the calculations required to be made under Section 11(a)(1)
hereof. In the event that the Employee, based upon the assertion by the Internal
Revenue Service against the Employee of a deficiency which the Employee believes
has a high probability of success, determines that an Overpayment has been made,
any such Overpayment paid or distributed by the Association to or for the
benefit of Employee shall be treated for all purposes as a loan ab initio which
                                                                -- ------
the Employee shall repay to the Association together with interest at the
applicable federal rate provided for in Section 7872(f)(2)(B) of the Code;
provided, however, that no such loan shall be deemed to have been made and no
amount shall be payable by the Employee to the Association if and to the extent
such deemed loan and payment would not either reduce the amount on which the
Employee is subject to tax under Section 1 and Section 4999 of the Code or
generate a refund of such taxes. In the event that the Employee and the
Association determine, based upon controlling precedent or other substantial
authority, that an Underpayment has occurred, any such Underpayment shall be
promptly paid by the Association to or for the benefit of the Employee together
with interest at the applicable federal rate provided for in Section
7872(f)(2)(B) of the Code.

      The term "Change in Control" shall mean any one of the following events:
(1) the acquisition of ownership, holding or power to vote more than 25% of the
Association's or the Company's voting stock, (2) the acquisition of the ability
to control the election of a majority of the Association's or the Company's
directors, (3) the acquisition of a controlling influence over the management or
policies of the Association or the Company by any person or by persons acting as
a "group" (within the meaning of Section 13(d) of the Securities Exchange Act of
1934) (provided that in the case of (1), (2) and (3) hereof, ownership or
control of the Association by the Company itself shall not constitute a "Change
in Control") or (4) during any period of two consecutive years, individuals who
at the beginning of such period constitute the board of directors of the Company
or the Association (the "Continuing Directors") cease for any reason to
constitute at least two-thirds thereof, provided that any individual whose
election or nomination for election as a member of the board of directors of the
Company or the Association was approved by a vote of at least two-thirds of the
Continuing Directors then in office shall be considered a Continuing Director.
For purposes of this subparagraph only, the term "person" refers to an
individual or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or any other
form of entity not specifically listed herein. The decision of the Committee as
to whether a Change in Control has occurred shall be conclusive and binding.

          (b)    Change in Control; Voluntary Termination.  Notwithstanding any
                 ----------------------------------------                      
other provision of this Agreement to the contrary, but subject to Section
11(a)(2) hereof, the Employee shall be entitled to collect the severance
benefits set forth in Section 11(a)(1) hereof in the event that either (i) the
Employee voluntarily terminates his employment under this Agreement for any
reason within the 30-day period beginning on the date of a Change in Control, or
(ii) the Employee voluntarily terminates his employment within ninety (90) days
following the occurrence of any of the following events, which has not been
consented to in advance by the Employee in writing and occur within the
                                                   ---                 
Protected Period: (i) the requirement that the Employee move his personal
residence, or perform his principal executive functions, more than thirty (30)
miles from his primary office as of the date of the change in control; (ii) a
material reduction in the Employee's base compensation as in effect on the date
of the change in control or as the same may be increased from time to time;
(iii) the failure by the Association to continue to provide the Employee with
compensation and benefits provided for under this Agreement, as the same may be
increased from time to time, or with benefits substantially similar to those
provided to him under any of the employee benefit plans in which the Employee
now or hereafter becomes a participant, or the taking of any action by the
Association which would directly or indirectly reduce any of such benefits or
deprive the Employee of any material fringe benefit enjoyed 

                                      -6-
<PAGE>
 
by him at the time of the change in control; (iv) the assignment to the Employee
of duties and responsibilities materially different from those normally
associated with his position as referenced at Section 1; (v) a failure to elect
or reelect the Employee to the Board of Directors of the Association, if the
Employee is serving on the Board on the date of the change in control; (vi) a
material diminution or reduction in the Employee's responsibilities or authority
(including reporting responsibilities) in connection with his employment with
the Association; or (vii) a material reduction in the secretarial or other
administrative support of the Employee. Said sum shall be paid in lieu of the
payment of any benefits under Section 9 hereof.

          (c)    Compliance with 12 U.S.C. Section 1828(k).  Any payments made
                 -----------------------------------------
to the Employee pursuant to this Agreement, or otherwise, are subject to and
conditioned upon their compliance with 12 U.S.C. Section 1828(k) and any
regulations promulgated thereunder.

           (d)   Trust.
                 ----- 

                    (1)  Within five business days before or after a change in
control as defined in Section 11(a) of this Agreement, the Association shall (i)
deposit, or cause to be deposited, in a grantor trust substantially in the form
of the trust (the "Trust) that the Association's Board of Directors approved on
May 18, 1995, an amount equal to 2.99 times the Employee's "base amount" as
defined in Section 280G(b)(3) of the Code, and (ii) provide the trustee of the
Trust with a written direction to hold said amount and any investment return
thereon in a segregated account for the benefit of the Employee, and to follow
the procedures set forth in the next paragraph as to the payment of such amounts
from the Trust.

                    (2)  During the twenty-seven (27) consecutive month period
following the date on which the Association makes the deposit referred to in the
preceding paragraph, the Employee may provide the trustee of the Trust with a
written notice requesting that the trustee pay to the Employee an amount
designated in the notice as being payable pursuant to Section 11(a) or (b).
Within three business days after receiving said notice, the trustee of the Trust
shall send a copy of the notice to the Association via overnight and registered
mail return receipt requested. On the tenth (10th) business day after mailing
said notice to the Association, the trustee of the Trust shall pay the Employee
the amount designated therein in immediately available funds, unless prior
thereto the Association provides the trustee with a written notice directing the
trustee to withhold such payment. In the latter event, the trustee shall submit
the dispute to non-appealable binding arbitration for a determination of the
amount payable to the Employee pursuant to Section 11(a) or (b) hereof, and the
costs of such arbitration (including any legal fees and expenses incurred by the
Employee) shall be paid by the Association. The trustee shall choose the
arbitrator to settle the dispute, and such arbitrator shall be bound by the
rules of the American Arbitration Association in making his determination. The
parties and the trustee shall be bound by the results of the arbitration and,
within 3 days of the determination by the arbitrator, the trustee shall pay from
the Trust the amounts required to be paid to the Employee and/or the
Association, and in no event shall the trustee be liable to either party for
making the payments as determined by the arbitrator.

                    (3)  Upon the earlier of (i) any payment from the Trust to
the Employee, or (ii) the date twelve (12) months after the date on which the
Association makes the deposit referred to in the first paragraph of this
subsection (d)(1), the trustee of the Trust shall pay to the Association the
entire balance remaining in the segregated account maintained for the benefit of
the Employee. The Employee shall thereafter have no further interest in the
Trust pursuant to this Agreement.

           (e) In the event that any dispute arises between the Employee and the
Association as to the terms or interpretation of this Agreement, including this
Section 11, whether instituted by formal legal proceedings or otherwise,
including any action that the Employee takes to enforce the terms of this
Section 11 or to defend against any action taken by the Association, the
Employee shall be reimbursed for all costs and expenses, including reasonable
attorneys' fees, arising from such dispute, proceedings or actions, provided
that the Employee shall obtain a final judgement by a court of competent
jurisdiction in favor of the Employee.  Such reimbursement shall be paid within

                                      -7-
<PAGE>
 
ten (10) days of Employee's furnishing to the Association written evidence,
which may be in the form, among other things, of a cancelled check or receipt,
of any costs or expenses incurred by the Employee.

     12.   Federal Income Tax Withholding.  The Association may withhold all
           ------------------------------                                   
Federal and State income or other taxes from any benefit payable under this
Agreement as shall be required pursuant to any law or government regulation or
ruling.

     13.   Successors and Assigns.
           ---------------------- 

           (a)   Association.  This Agreement shall not be assignable by the
                 -----------                                                
Association, provided that this Agreement shall inure to the benefit of and be
binding upon any corporate or other successor of the Association which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Association.

           (b)   Employee.  Since the Association is contracting for the unique
                 --------
and personal skills of the Employee, the Employee shall be precluded from
assigning or delegating his rights or duties hereunder without first obtaining
the written consent of the Association; provided, however, that nothing in this
paragraph shall preclude (i) the Employee from designating a beneficiary to
receive any benefit payable hereunder upon his death, or (ii) the executors,
administrators, or other legal representatives of the Employee or his estate
from assigning any rights hereunder to the person or persons entitled thereunto.

           (c)   Attachment.  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 exclusion, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.

     14.   Amendments.  No amendments or additions to this Agreement shall be
           ----------                                                        
binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.

     15.   Applicable Law.  Except to the extent preempted by Federal law, the
           --------------                                                     
laws of the State of Alabama shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.

     16.   Severability.  The provisions of this Agreement shall be deemed
           ------------                                                   
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.

     17.   Entire Agreement.  This Agreement, together with any understanding or
           ----------------                                                     
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.

                                      -8-
<PAGE>
 
     IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first hereinabove written.

ATTEST:                        FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION


________________________       By: ______________________________________
Secretary                          ______________________________________
                                   Authorized Member of the Board of Directors

WITNESS:


_______________________        __________________________________________
                               Gates B. Little

                                      -9-
<PAGE>
 
                                                                     EXHIBIT "A"

                  FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
                             EMPLOYMENT AGREEMENT
                        _______________________________

                        DEFERRED PAYMENT ELECTION FORM
                        _______________________________


     AGREEMENT, made this ____ day of ________, 19__, by and between _________
(the "Employee") and First Federal Savings and Loan Association (the
"Association") with respect to payment of severance compensation to the Employee
pursuant to Section 12(b) of his employment agreement ("Agreement") with the
Association, dated _______, 199__.

     NOW THEREFORE, it is mutually agreed as follows:

     1.  Form of Payment.  The Employee, by the execution hereof, in accordance
         ---------------                                                       
with Section 12(b) of the Agreement, elects to have his change in control
severance benefits (plus earnings thereon) distributed in cash as follows:

 
         [_]  in one lump sum payment.

 
         [_]  in substantially equal annual payments over a period of _____
              years (no more than 10).

     2.  In the event of the Employee's death, his benefits shall be distributed
--

         [_]  in one lump sum payment.

 
         [_]  in accordance with the payment schedule selected in paragraph 1
              hereof (with payments made as though the Employee survived to
              collect all benefits, and as though the Employee terminated
              service on the date of his death, if payments had not already
              begun).

     3.  Designation of Beneficiary.  In the event of the Employee's death
         --------------------------                                       
before he has collected all of the benefits payable pursuant to the Agreement
and this election, any such benefits payable shall be distributed to the
beneficiary or beneficiaries designated under subparagraphs a and b of this
paragraph 3 in the manner elected pursuant to paragraph 2 above:

     a.  Primary Beneficiary.  The Employee hereby designates the person(s)
         -------------------                                               
named below to be his primary beneficiary and to receive the balance of any
unpaid benefits under the Agreement:

     ===========================================================================
               Name of               Mailing Address           Percentage of
         Primary Beneficiary                                   Death Benefit
     ---------------------------------------------------------------------------
                                                                     %
     ---------------------------------------------------------------------------
                                                                     %
     ===========================================================================

                                      -1-
<PAGE>
 
     b.   Contingent Beneficiary. In the event that the primary beneficiary or
          ----------------------  
beneficiaries named above are not living at the time of the Employee's death,
the Employee hereby designates the following person(s) to be his contingent
beneficiary for purposes of the Agreement:

     ===========================================================================
            Name of                     Mailing Address         Percentage of
      Contingent Beneficiary                                    Death Benefit
     ---------------------------------------------------------------------------
                                                                       %
     ---------------------------------------------------------------------------
                                                                       %
     ===========================================================================

     4.   Effect of Election. The elections made in paragraph 1 hereof shall
          ------------------
become irrevocable 90 days prior to the change in control. The Employee may, by
submitting an effective superseding Deferred Payment Election Form at any time
and from time to time, prospectively change the beneficiary designation and the
manner of payment to a beneficiary. Such elections shall, however, become
irrevocable upon the Employee's death.

     5.   Commitments.  The Association agrees to make payment of all amounts
          -----------                                                        
due the Employee in accordance with the terms of the Agreement and the elections
made by the Employee herein.

     IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the
day and year first above-written.

WITNESS:                      EMPLOYEE

______________________        ____________________________________
                              Gates B. Little


ATTEST:                       ASSOCIATION

______________________        FIRST FEDERAL SAVING AND LOAN ASSOCIATION
Secretary

                              By _________________________________
                                 Its Chairman of the Board

                                      -2-
<PAGE>
 
                             EMPLOYMENT AGREEMENT
                             --------------------

     THIS AGREEMENT is entered into this 15th day of October 1997 (the
"Effective Date"), by and between The Southern Banc Company, Inc. (the
"Company") and Gates B. Little (the "Employee").

     WHEREAS, the Employee has heretofore been employed by the Association as
Vice President and is experienced in all phases of the business of the
Association; and

     WHEREAS, the parties desire by this writing to establish and to set forth
the employment relationship between the Company and the Employee.

     NOW, THEREFORE, it is AGREED as follows:

     1.  Employment.  The Employee is employed as Vice President of the Company.
         ---------- 
The Employee shall render such administrative  and management services for the
Company as are currently rendered and as are customarily performed by persons
situated in a similar executive capacity.  The Employee shall also promote, by
entertainment or otherwise, as and to the extent permitted by law, the business
of the Company.  The Employee's other duties shall be such as the Board of
Directors of the Company ("Board") may from time to time reasonably direct,
including normal duties as an officer of the Company.

     2.  Consideration from Company: Joint and Several Liability.  In lieu of
         -------------------------------------------------------             
paying the Employee a base salary during the term of this Agreement, the Company
hereby agrees that to the extent permitted by law, it shall be jointly and
severally liable with the Association for the payment of all amounts due under
the employment agreement of even date herewith between the Association and the
Employee.  Nevertheless, the Board may in its discretion at any time during the
term of this Agreement agree to pay the Employee a base salary for the remaining
term of this Agreement.  If the Board agrees to pay such salary, the Board shall
thereafter review, not less often than annually, the rate of the Employee's
salary, and in its sole discretion may decide to increase his salary.

     3.  Discretionary Bonuses.  The Employee shall participate in an equitable
         ---------------------                                                 
manner with all other senior management employees of the Company in
discretionary bonuses that the Board may award from time to time to the
Company's senior management employees.  No other compensation provided for in
this Agreement shall be deemed a substitute for the Employee's right to
participate in such discretionary bonuses.

     4.  (a) Participation in Retirement, Medical and Other Plans.  The
             ----------------------------------------------------      
Employee shall participate in any plan that the Company maintains for the
benefit of its employees if the plan relates to (i) pension, profit-sharing, or
other retirement benefits, (ii) medical insurance or the reimbursement of
medical or dependent care expenses, or (iii) other group benefits, including
disability and life insurance plans.  The Employee shall also be entitled at no
expense to himself, to family medical insurance throughout the term of this
Agreement and for a 3-year period beginning upon the termination of this
Agreement, regardless of his employment status. This 3-year coverage period may
be reconsidered and extended by the Board, in its sole discretion.

         (b) Employee Benefits; Expenses.  The Employee shall participate in any
             ---------------------------                                        
fringe benefits which are or may become available to the Company's senior
management employees, including for example: any stock option or incentive
compensation plans, club memberships, and any other benefits which are
commensurate with the responsibilities and functions to be performed by the
Employee under this Agreement.  The Employee shall be reimbursed for all
reasonable out-of-pocket business expenses which he shall incur in connection
with his services under this Agreement upon substantiation of such expenses in
accordance with the policies of the Company.

     5.  Term.  The Company hereby employs the Employee, and the Employee hereby
         ----                                                                   
accepts such employment under this Agreement, for the period commencing on the
Effective Date and ending thirty-six months thereafter (or such earlier date as
is determined in accordance with Section 9).  Additionally, this Agreement shall
be automatically extended to a date thirty-six months after any "Change in
Control" (as defined in Section 11 hereof), and on each 

                                      -1-
<PAGE>
 
annual anniversary date from the Effective Date, the Board shall duly consider
and determine whether to extend the Employee's term of employment under this
Agreement, and the Employee's term of employment under this Agreement may be
extended to a date up to thirty-six months thereafter provided the Board
determines in a duly adopted resolution that the performance of the Employee has
met the Board's requirements and standards and that this Agreement shall be
extended.

     6.  Loyalty; Noncompetition.
         ----------------------- 

         (a) During the period of his employment hereunder and except for
illnesses, reasonable vacation periods, and reasonable leaves of absence, the
Employee shall devote all his full business time, attention, skill, and efforts
to the faithful performance of his duties hereunder; provided, however, from
time to time, Employee may serve on the boards of directors of, and hold any
other offices or positions in, companies or organizations, which will not
present any conflict of interest with the Company or any of its subsidiaries or
affiliates, or unfavorably affect the performance of Employee's duties pursuant
to this Agreement, or will not violate any applicable statute or regulation.
"Full business time" is hereby defined as that amount of time usually devoted to
like companies by similarly situated executive officers. During the term of his
or her employment under this Agreement, the Employee shall not engage in any
business or activity contrary to the business affairs or interests of the
Company.

         (b) Nothing contained in this Paragraph 6 shall be deemed to prevent or
limit the Employee's right to invest in the capital stock or other securities of
any business dissimilar from that of the Company, or, solely as a passive or
minority investor, in any business.

     7.  Standards.  The Employee shall perform his duties under this Agreement
         ---------                                                             
in accordance with such reasonable standards as the Board may establish from
time to time.  The Company will provide Employee with the working facilities and
staff customary for similar executives and necessary for him to perform his
duties.

     8.  Vacation and Sick Leave.  At such reasonable times as the Board shall
         -----------------------                                              
in its discretion permit, the Employee shall be entitled, without loss of pay,
to absent himself voluntarily from the performance of his employment under this
Agreement, all such voluntary absences to count as vacation time; provided that:

         (a) The Employee shall be entitled to an annual vacation in accordance
with the policies that the Board periodically establishes for senior management
employees of the Company.

         (b) The Employee shall not receive any additional compensation from the
Company on account of his failure to take a vacation or sick leave, and the
Employee shall not accumulate unused vacation from one fiscal year to the next,
except in either case to the extent authorized by the Board.

         (c) In addition to the aforesaid paid vacations, the Employee shall be
entitled without loss of pay, to absent himself voluntarily from the performance
of his employment with the Company for such additional periods of time and for
such valid and legitimate reasons as the Board may in its discretion determine.
Further, the Board may grant to the Employee a leave or leaves of absence, with
or without pay, at such time or times and upon such terms and conditions as such
Board in its discretion may determine.

         (d) In addition, the Employee shall be entitled to an annual sick leave
benefit as established by the Board.

     9.  Termination and Termination Pay.  Subject to Section 11 hereof, the
         -------------------------------                                    
Employee's employment hereunder may be terminated under the following
circumstances:

         (a) Death.  The Employee's employment under this Agreement shall
             -----
terminate upon his death during the term of this Agreement, in which event the
Employee's estate shall be entitled to receive the compensation due the Employee
through the last day of the calendar month in which his death occurred.

                                      -2-
<PAGE>
 
         (b) Disability.  The Company may terminate the Employee's employment
             ----------
after having established the Employee's Disability. For purposes of this
Agreement, "Disability" means a physical or mental infirmity which impairs the
Employee's ability to substantially perform his duties under this Agreement and
which results in the Employee becoming eligible for long-term disability
benefits under the Company's long-term disability plan (or, if the Company has
no such plan in effect, which impairs the Employee's ability to substantially
perform his duties under this Agreement for a period of one hundred eighty (180)
consecutive days). The Employee shall be entitled to the compensation and
benefits provided for under this Agreement for (i) any period during the term of
this Agreement and prior to the establishment of the Employee's Disability
during which the Employee is unable to work due to the physical or mental
infirmity, or (ii) any period of Disability which is prior to the Executive's
termination of employment pursuant to this Section 9(b).

         (c) Just Cause.  The Board may, by written notice to the Employee,
             ----------                                                    
immediately terminate his employment at any time, for Just Cause.  The Employee
shall have no right to receive compensation or other benefits for any period
after termination for Just Cause.  Termination for "Just Cause" shall mean
termination because of, in the good faith determination of the Board, the
Employee's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement.  No act, or failure to act, on the
Employee's part shall be considered "willful" unless he has acted, or failed to
act, with an absence of good faith and without a reasonable belief that his
action or failure to act was in the best interest of the Association.
Notwithstanding the foregoing, the Employee shall not be deemed to have been
terminated for Just Cause unless there shall have been delivered to the Employee
a copy of a resolution duly adopted by the affirmative vote of not less than a
majority of the entire membership of the Board at a meeting of the Board called
and held for the purpose (after reasonable notice to the Employee and an
opportunity for the Employee to be heard before the Board), finding that in the
good faith opinion of the Board, the Employee was guilty of conduct set forth
above in the second sentence of this subsection (c) and specifying the
particulars thereof in detail.

         (d) Without Just Cause. The Board may, by written notice to the
             ------------------
Employee, immediately terminate his employment at any time for a reason other
than Just Cause, in which event the Employee shall be entitled to receive the
following compensation and benefits (unless such termination occurs within the
time period that begins on the date six months before a "Change in Control" (as
defined in Section 11 hereof) and ends on the later of the second annual
anniversary of the Change in Control or the expiration date of this Agreement
(the "Protected Period"), in which event the benefits and compensation provided
for in Section 11 shall apply): (i) any salary provided pursuant to Section 2
hereof, up to the date of termination of the term as provided in Section 5
hereof (including any renewal term) of this Agreement (the "Expiration Date"),
plus said salary for an additional 12-month period, and (ii) at the Employee's
election either (A) cash in an amount equal to the cost to the Employee of
obtaining all health, life, disability and other benefits which the Employee
would have been eligible to participate in through the Expiration Date based
upon the benefit levels substantially equal to those that the Company provided
for the Employee at the date of termination of employment or (B) continued
participation under such Company benefits plans through the Expiration Date, but
only to the extent the Employee continues to qualify for participation therein.
All amounts payable to the Employee shall be paid, at the option of the
Employee, either (I) in periodic payments through the Expiration Date, or (II)
in one lump sum within ten (10) days of such termination.

         (e) Voluntary Termination by Employee.  Subject to Section 11 hereof,
             ---------------------------------                         
the Employee may voluntarily terminate employment with the Company during the
term of this Agreement, upon at least 90 days' prior written notice to the Board
of Directors, in which case the Employee shall receive only his compensation,
vested rights and employee benefits up to the date of his termination.

     10. No Mitigation.  The Employee shall not be required to mitigate the
         -------------                                                     
amount of any payment provided for in this Agreement by seeking other employment
or otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Employee in any subsequent employment.

     11. Change in Control.
         ----------------- 

                                      -3-
<PAGE>
 
          (a) Notwithstanding any provision herein to the contrary, if the
Employee's employment under this Agreement is terminated by the Company, without
the Employee's prior written consent and for a reason other than Just Cause
during the Protected Period, the Employee shall be paid an amount equal to the
difference between (i) the product of 2.99 times his "base amount" as defined in
Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code")
and regulations promulgated thereunder, and (ii) the sum of any other parachute
payments (as defined under Section 280G(b)(2) of the Code) that the Employee
receives on account of the Change in Control. Said sum shall be paid in the
manner set forth in the Employee's Employment Agreement with the Association.

      The term "Change in Control" shall mean any one of the following events:
(1) the acquisition of ownership, holding or power to vote more than 25% of the
Association's or the Company's voting stock, (2) the acquisition of the ability
to control the election of a majority of the Association's or the Company's
directors, (3) the acquisition of a controlling influence over the management or
policies of the Association or the Company by any person or by persons acting as
a "group" (within the meaning of Section 13(d) of the Securities Exchange Act of
1934) (provided that in the case of (1), (2) and (3) hereof, ownership or
control of the Association by the Company itself shall not constitute a "Change
in Control") or (4) during any period of two consecutive years, individuals who
at the beginning of such period constitute the board of directors of the Company
or the Association (the "Continuing Directors") cease for any reason to
constitute at least two-thirds thereof, provided that any individual whose
election or nomination for election as a member of the board of directors of the
Company or the Association was approved by a vote of at least two-thirds of the
Continuing Directors then in office shall be considered a Continuing Director.
For purposes of this subparagraph only, the term "person" refers to an
individual or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or any other
form of entity not specifically listed herein.  The decision of the Committee as
to whether a Change in Control has occurred shall be conclusive and binding.

          (b) Notwithstanding any other provision of this Agreement to the
contrary, the Employee shall be entitled to collect the severance benefits set
forth in Section 11(a) hereof in the event that either (i) the Employee
voluntarily terminates his employment under this Agreement for any reason within
the 30-day period beginning on the date of a Change in Control, or (ii) the
Employee voluntarily terminates his employment within ninety (90) days following
the occurrence of any of the following events, which have not been consented to
in advance by the Employee in writing and occur during the Protected Period: (i)
                                      ---  
the requirement that the Employee move his personal residence, or perform his
principal executive functions, more than thirty-five (35) miles from his primary
office as of the date of the change in control; (ii) a material reduction in the
Employee's base compensation as in effect on the date of the change in control
or as the same may be increased from time to time; (iii) the failure by the
Company to continue to provide the Employee with compensation and benefits
provided for under this Agreement, as the same may be increased from time to
time, or with benefits substantially similar to those provided to him under any
of the employee benefit plans in which the Employee now or hereafter becomes a
participant, or the taking of any action by the Company which would directly or
indirectly reduce any of such benefits or deprive the Employee of any material
fringe benefit enjoyed by him at the time of the change in control; (iv) the
assignment to the Employee of duties and responsibilities materially different
from those normally associated with his position as referenced at Section 1; (v)
a failure to elect or reelect the Employee to the Board, if the Employee is
serving on the Board on the date of the change in control; or (vi) a material
diminution or reduction in the Employee's responsibilities or authority
(including reporting responsibilities) in connection with his employment with
the Company. Said sum shall be paid in lieu of the payment of any benefits under
Section 9 hereof.

          (c) Any payments made to the Employee pursuant to this Agreement, or
otherwise, are subject to and conditioned upon their compliance with 12 U.S.C.
Section 1828(k) and any regulations promulgated thereunder.

          (d) In the event that any dispute arises between the Employee and the
Company as to the terms or interpretation of this Agreement, including this
Section 11, whether instituted by formal legal proceedings or otherwise,
including any action that the Employee takes to enforce the terms of this
Section 11 or to defend against any action taken by the Company, the Employee
shall be reimbursed for all costs and expenses, including reasonable attorneys'
fees, arising from such dispute, proceedings or actions, provided that the
Employee shall obtain a final 

                                      -4-
<PAGE>
 
judgement by a court of competent jurisdiction in favor of the Employee. Such
reimbursement shall be paid within ten (10) days of Employee's furnishing to the
Company written evidence, which may be in the form, among other things, of a
cancelled check or receipt, of any costs or expenses incurred by the Employee.

     12.  Successors and Assigns.
          ---------------------- 

          (a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Company which shall acquire, directly or
indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Company.

          (b) Since the Company is contracting for the unique and personal
skills of the Employee, the Employee shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Company.

     13.  Amendments.  No amendments or additions to this Agreement shall be
          ----------                                                        
binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.

     14.  Applicable Law.  Except to the extent preempted by Federal law, the
          --------------                                                     
laws of the State of Alabama shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.

     15.  Severability.  The provisions of this Agreement shall be deemed
          ------------                                                   
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.

     16.  Entire Agreement.  This Agreement, together with any understanding or
          ----------------                                                     
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.

     IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first hereinabove written.

ATTEST:                                      THE SOUTHERN BANC COMPANY, INC.


____________________                         By: ___________________________
                                                 ___________________________ 
Secretary                                        Authorized Member of the 
                                                 Board of Directors
                                                 

WITNESS:


____________________
                                             ---------------------------
                                                 Gates B. Little

                                      -5-