<PAGE>
 
                         SUPPLEMENTAL INCOME AGREEMENT


     AGREEMENT entered into as of the 1st day of October, 1989, between Home
Savings and Loan Association, a domestic Corporation having its principal office
in Thomasville, North Carolina (hereinafter referred to as the Company) and
James G. Hudson, Jr. hereinafter referred to as the Employee).

                              W I T N E S S E T H:

     WHEREAS, the Employee has been an Employee of the Company since October 2,
1972, and,

     WHEREAS, the value of the Employee is such that assurance of his continued
service is essential to the future growth and profits of the Company; and,

     WHEREAS, the Company desires to retain the service of the Employee, and
realizes that if the Employee were to terminate his employment it would suffer a
substantial financial loss;

     NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:

     1.  Remuneration:  During the period of the Employee's employment with the
         ------------                                                          
Company, the Company will pay the Employee for services to be rendered:

         A.  Cash amounts at rates and times mutually agreed upon; and,

         B.  Additional amounts, payment of which will be deferred pursuant to
the terms hereinafter set forth.

     2.  Retirement Benefit:  Upon the attainment of the first day of the month
         ------------------                                                    
following the Employee's 65th birthday, the Company will commence to pay the
Employee $1,500 monthly for a continuous period of fifteen years.  Such initial
monthly income shall be increased 5% for each additional full year of service of
the employee, beginning after the first year from the date of this agreement,
except that there will be no increases in benefits after the attainment of age
65 and also no increases in benefits for more than ten years.  In the event of
the death of the last named beneficiary before all the unpaid payments have been
made, the balance of any amount which remains unpaid at said death shall be
commuted on the basis of eight percent per annum compounded interest and shall
be paid in a single sum to the executor or administrator of the estate of the
last named beneficiary to die.  In the absence of such beneficiary designation,
any amount remaining unpaid at the Employee's death shall be commuted on the
basis of eight percent per annum compound interest and shall be paid in a single
sum to the executor or administrator of the Employee's estate.
<PAGE>
 
     3.  Death Benefit:  Should the Employee die prior to the attainment of the
         -------------                                                         
first day of the month following his birthday, the Company (beginning at a date
to be determined by the Company but within six months from the date of such
death) will commence to pay $1,500 monthly for a continuous period of fifteen
years to  such beneficiary or beneficiaries as the Employee has directed by
filing with the Company a notice in writing.  Such initial monthly income
increases shall be increased 5% for each additional full year of service of the
employee beginning after the attainment of age 65 and no increases in benefits
for more then ten years.  Irrespective of the above, however, if the Employee
dies as a result of suicide within two years of the execution of this agreement,
no death benefit shall be payable.  In the event of the death of the last named
beneficiary before all the unpaid payments have been made, the balance of any
amount which remains unpaid at said death shall be commuted on the basis of
eight percent per annum compound interest and shall be paid in a single sum to
the executor or administrator of the state of the last named beneficiary to die.
In the absence of any such beneficiary designation, any amount remaining unpaid
at the Employee's death shall be commuted on the basis of eight percent per
annum compound interest and shall be paid in a single sum to the executor or
administrator of the Employee's estate.

     4.  Termination of Employment:  If the Employee voluntarily terminates his
         -------------------------                                             
Employment for reasons other than death or the attainment of his 65th birthday,
he or his beneficiary, as applicable, shall be entitled upon the attainment of
his 65th birthday, or his prior death, to a percentage of the retirement
benefits stated in Section 2 of this Agreement as determined by the following
table:

<TABLE>
<CAPTION>
                                          PERCENTAGE OF RETIREMENT
   FULL YEARS OF SERVICE UPON         BENEFITS STATED IN SECTION 2 OF
   VOLUNTARILY TERMINATION OF           THIS AGREEMENT TO WHICH THE
          EMPLOYMENT                        EMPLOYEE IS ENTITLED
          ----------                        --------------------
  <S>                                 <C>        
           Under 20                                 0%

             20                                    50%

             21                                    60%

             22                                    70%

             23                                    80%

             24                                    90%

             25                                   100%

</TABLE>

Irrespective of the above, however, if the Employee's employment is terminated
by the Employer for reasons other than cause, he or his beneficiary, as
applicable, shall be entitled upon the attainment of his 65th birthday, or his
prior death to 100% of the retirement benefits stated in Section 2 of this

                                       2
<PAGE>
 
agreement.  If the Employee's employment is terminated for cause, neither he or
his beneficiary shall receive any benefit payments under this agreement.

     5.  Forfeiture Provisions:
         ---------------------

         A.  During the period the retirement benefit is payable to the Employee
     under Section 2 of this Agreement, the Employee shall not engaged in
     business activities in Davidson County, North Carolina, which are in
     competition with the Company without first obtaining the written consent of
     the Company.

         B.  During the period the retirement payment is payable to the Employee
     under Section 2 of the Agreement, the Employee shall be available to render
     consulting services to the Company upon request by an officer of the
     Company, but such requests shall not be made more frequently than once each
     month. The Employee shall not be considered to have breached this condition
     if he is unable to consult because of his mental or physical disability.

         C.  Payment of the retirement benefit under this Agreement may be
     terminated by the Company, if the Employee fails to comply with either of
     the conditions set forth in paragraph (A) and (B) of this Section 5.

     6.  General Provisions:
         ------------------ 

         A.  Except as otherwise provided by this Agreement, it is agreed that
     neither the Employee, nor his beneficiary shall have any right to commute,
     sell, assign, transfer or otherwise convey the right to receive any
     payments hereunder, which payments and the right thereto are expressly
     declared to be nonassignable and nontransferable.

         B.  The benefits payable under this Agreement shall be independent of,
     and in addition to, any other employment agreements that may exist from
     time to time between the parties hereto, concerning any other compensation
     payable by the Company to the Employee whether as salary, bonus, or
     otherwise. This Agreement shall not be deemed to constitute a contract of
     employment between the parties hereto, nor shall any provision hereof
     restrict the right of the Company to discharge the Employee or restrict the
     right of the Employee to terminate his employment.

         C.  The rights of the Employee under this Agreement and of any
     beneficiary of the Employee shall be solely those of an unsecured creditor
     of the Company. Any asset acquired by the Company in connection with the
     liabilities assumed by it hereunder, shall not be deemed to be held under
     any trust for the benefit of the Employee or his beneficiaries or to be
     considered security for the performances of the obligations of the Company
     but shall be, and remain, a general, unpledged, unrestricted asset of the
     Company.

                                       3
<PAGE>
 
         D.  The Company hereby reserves the right to accelerate the payments
     specified in Section 2, 3 and 4 above without the consent of the Employee,
     his estate, beneficiaries, or any other person claiming through or under
     him.

         E.  The Company agrees that it will not merge or consolidate with any
     other Company or organization, or permit its business activities to be
     taken over by any other organization unless and until the succeeding or
     continuing Company or other organization shall expressly assume the rights
     and obligations of the Company herein set forth. The Company further agrees
     that it will not cease its business activities or terminate its existence,
     other than as heretofore set forth in this Section, without having made
     adequate provision for the fulfilling of its obligations hereunder.

         F.  This Agreement shall be binding upon and inure to the benefit of
     the parties, their respective legal representatives, and any "Successor" of
     the Company, which shall be deemed substituted for the Company under the
     terms of this Agreement. As used in this Agreement the term "Successor"
     shall include any person, firm, corporation or other business entity which
     at anytime, whether by merger purchase or otherwise, acquire all or
     substantially all of the Corporation's assets or business.

         G.  This Agreement may be revoked or amended in whole or in part by a
     writing signed by both of the parties hereto.

         H.  This Agreement shall be subject to and construed under the laws of
     the State of North Carolina.

     IN WITNESS WHEREOF, the said Company has caused this Agreement to be signed
in its Corporate name by its duly authorized officer, and impressed with its
corporate seal, attested by its secretary, and the said Employee has hereunto
set his hand and seal, all on the day and year first above written.




                                      HOME SAVINGS & LOAN ASSOCIATION

                                      By:  /s/ James G. Hudson, Jr., President
                                          ------------------------------------

                                           /s/ James G. Hudson, Jr., 
                                          ------------------------------------
                                                    The Employee
ATTEST:

/s/ Drema Michael
-----------------------------------

-----------------------------------
          Witness

                                       4
<PAGE>
 
                         SUPPLEMENTAL INCOME AGREEMENT


     AGREEMENT entered into as of the 1st day of March, 1991, between Home
Savings and Loan Association of Thomasville, a domestic corporation having its
principal office in Thomasville, North Carolina (hereinafter referred to as the
"Company") and James G. Hudson, Jr. (hereinafter referred to as the "Employee").

                                  WITNESSETH:

     WHEREAS, the Employee has been an Employee of the Company since October 2,
1972; and

     WHEREAS, the value of the Employee is such that assurance of his continued
service is essential to the future growth and profits of the Company; and

     WHEREAS, the Company desires to retain the service of the Employee, and
realizes that if the Employee were to terminate his employment it would suffer a
substantial financial loss;

     NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto mutually agree as follows:

     1.   Remuneration:  During the period of the Employee's employment with the
          ------------                                                          
Company, the Company will pay the Employee for services to be rendered;

          A.   Cash amounts at rates and time mutually agreed upon; and

          B.   Additional amounts, payment of which will be deferred pursuant to
     the terms hereinafter set forth.

     2.   Retirement Benefit:  Upon the attainment of the first day of the month
          ------------------                                                    
following the Employee's 65th birthday, the Company will commence to pay the
Employee $592 monthly for a continuous period of fifteen years.  Such initial
annual income shall be increased 5% annually for each additional full year of
service of the Employee, beginning after the first year from the date of this
agreement, except that there will be no increases in benefits after the
attainment of age 65 and also no increases in benefits for more than 10 years.
In the event of the death of the last named beneficiary before all of the unpaid
payments have been made, the balance of any amount which remains unpaid at said
death shall be commuted on the basis of eight percent per annum compound
interest and shall be paid in a single sum to the executor or administrator of
the estate of the last named beneficiary to die.  In the absence of such
beneficiary designation, any amount remaining unpaid at the Employee's death
shall be commuted on the basis of eight percent per annum compound interest and
shall be paid in a single sum to the executor or administrator of the Employee's
estate.

                                       5
<PAGE>
 
     3.   Death Benefit:  Should the Employee die prior to the attainment of the
          -------------                                                         
first day of the month following his 65th birthday, the Company (beginning at a
date to be determined by the Company but within six months from the date of such
death) will commence to pay $592 monthly for a continuous period of fifteen
years to such beneficiary or beneficiaries as the Employee has directed by
filing with the Company a notice in writing.  Such initial monthly income
increases shall be increased 5% annually for each additional full year of
service of the Employee beginning after the attainment of age 65 and no
increases in benefits for more than 10 years.  Irrespective of the above,
however, if the Employee dies as a result of suicide within two years of the
execution of this agreement, no death benefit shall be payable.  In the event of
the death of the last named beneficiary before all the unpaid payments have been
made, the balance of any amount which remains unpaid at said death shall be
commuted on the basis of eight percent per annum compound interest and shall be
paid in a single sum to the executor or administrator of the estate of the last
named beneficiary to die.  In the absence of any such beneficiary designation
any amount remaining unpaid at the Employee's death shall be commuted on the
basis of eight percent per annum compound interest shall be paid in a single sum
to the executor or administrator of the Employee's estate.

     4.   Termination of Employment:  If the Employee terminates his employment
          -------------------------                                            
for reasons other than death or the attainment of his 65th birthday, he or his
beneficiary, as applicable, shall be entitled upon the attainment of his 65th
birthday, or his prior death, to a percentage of the retirement benefits stated
in Section 2 of this Agreement as determined by the following table:

<TABLE>
<CAPTION>
 
                                                 PERCENTAGE OF RETIREMENT   
  FULL YEARS OF SERVICE UPON                 BENEFITS STATED IN SECTION 2 OF
  VOLUNTARILY TERMINATION OF                   THIS AGREEMENT TO WHICH THE  
          EMPLOYMENT                               EMPLOYEE IS ENTITLED      
          ----------                               --------------------
                           
  <S>                                          <C>
           Under 20                                         0%
                                                     
             20                                            50%
                                                     
             21                                            60%
                                                     
             22                                            70%
                                                     
             23                                            80%
                                                     
             24                                            90%
                                                     
             25                                           100%

</TABLE>

Irrespective of the above, however, if the Employee's employment is terminated
by the Employer for reasons other than cause, he or his beneficiary, as
applicable, shall be entitled upon the attainment of his 65th birthday, or his
prior death, to 100% of the retirement benefits stated in Section 2 of this
agreement.  If the Employee's employment is terminated for cause, neither he nor
his beneficiary shall receive any benefit payments under this agreement.

                                       6
<PAGE>
 
5.   Forfeiture Provisions:
     --------------------- 

     A.   During the period the retirement benefit is payable to the Employee
under Section 2 of this Agreement, the Employee shall not engage in business
activities in Davidson County, North Carolina, which are in competition with the
Company, without first obtaining the written consent of the Company.

     B.   During the period the retirement payment is payable to the Employee
under Section 2 of the Agreement, the Employee shall be available to render
consulting services to the Company upon request by an officer of the Company,
but such requests shall not be made more frequently than once each month.  The
Employee shall not be considered to have breached this condition if he is unable
to consult because of his mental or physical disability.

     C.   Payments of the retirement benefit under this Agreement may be
terminated by the Company, if the Employee fails to comply with either of the
conditions set forth in paragraph (A) and (B) of this Section 5.

6.   General Provisions:
     ------------------ 

     A.   Except as otherwise provided by this Agreement, it is agreed that
neither the Employee, nor his beneficiary, shall have any right to commute,
sell, assign, transfer or otherwise convey the right to receive any payments
hereunder, which payments and the right thereto are expressly declared to be
nonassignable and nontransferable.

     B.   The benefits payable under this Agreement shall be independent of, and
in addition to, any other employment agreements that may exist from time to time
between the parties hereto, concerning any other compensation payable by the
Company to the Employee whether as salary, bonus or otherwise.  This Agreement
shall not be deemed to constitute a contract of employment between the parties
hereto, nor shall any provision hereof restrict the right of the Company to
discharge the Employee or restrict the right of the Employee to terminate his
employment.

     C.   The rights of the Employee under this Agreement and of any beneficiary
of the Employee shall be solely those of an unsecured creditor of the Company.
Any asset acquired by the Company in connection with the liabilities assumed by
it hereunder shall not be deemed to be held under any trust for the benefit of
the Employee or his beneficiaries or to be considered security for the
performances of the obligations of the Company but shall be, and remain, a
general, unpledged, unrestricted asset of the Company.

     D.   The Company hereby reserves the right to accelerate the payments
specified in Section, 2, 3 and 4 above without the consent of the Employee, his
estate, beneficiaries, or any other person claiming through or under him.

                                       7
<PAGE>
 
          E.   The Company agrees that it will not merge or consolidate with any
     other Company or organization, or permit its business activities to be
     taken over by any other organization unless and until the succeeding or
     continuing Company or other organization shall expressly assume the rights
     and obligations of the Company herein set forth. The Company further agrees
     that it will not cease its business activities or terminate its existence
     other than as heretofore set forth in this Section, without having made
     adequate provision for the fulfilling of its obligations hereunder.

          F.   This Agreement shall be binding upon and inure to the benefit of
     the parties, their respective legal representatives, and any "Successor" of
     the Company, which shall be deemed substituted for the Company under the
     terms of this Agreement. As used in this Agreement, the term "Successor"
     shall include any person, firm, corporation or other business entity which
     at anytime, whether by merger, purchase or otherwise, acquire all or
     substantially all of the Corporation's assets or business.

          G.   This Agreement may be revoked or amended in whole or in part by a
     writing signed by both of the parties hereto.

          H.   This Agreement shall be subject to and construed under the laws
     of the State of North Carolina.

     IN WITNESS WHEREOF, the said Company has caused this Agreement to be signed
in its corporate name by its duly authorized officer, and impressed with its
corporate seal, attested by its secretary, and the said Employee has hereunto
set his hand and seal, all on the date and year first above written.


                                 HOME SAVINGS AND LOAN ASSOCIATION

                                 By:  /s/ James G. Hudson, Jr., President
                                    ---------------------------------------


                                      /s/ James G. Hudson, Jr.
                                    ---------------------------------------
                                                  The Employee

ATTEST:

  /s/ Drema Michael
-----------------------------------

WITNESS: 
         -------------------------- 

                                       8
<PAGE>
 
                  AMENDMENT TO SUPPLEMENTAL INCOME AGREEMENTS

     THIS AGREEMENT entered into as of the 3rd day of October, 1996 between HOME
SAVINGS, SSB, a North Carolina-chartered savings bank (the "Company") and JAMES
G. HUDSON, JR. (the "Employee").

                                  WITNESSETH:
                                  ---------- 

     WHEREAS, the Company and the Employee have entered into two separate
Supplemental Income Agreements dated as of October 1, 1989 (the "1989 Income
Agreement") and March 1, 1991 (the "1991 Income Agreement"); and

     WHEREAS, the parties desire to amend the 1989 Income Agreement and 1991
Income Agreement to provide that the retirement benefit provided for under the
Agreements shall not become payable until the actual retirement of the Employee
and to make certain amendments to the death benefit provided for therein.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and other good and valuable consideration, the parties agree as
follows:
 
    1.   The first sentence of Paragraph 2 of the 1989 Income Agreement shall
be deleted and replaced with the following:

          "Upon the first day of the month following the Employee's voluntary
          termination of his employment on or after the attainment of his 65th
          birthday, for reasons other than death, the Company will commence to
          pay the Employee $1,500.00 monthly for a continuous period of 15
          years."

     2.   The first sentence of the 1991 Income Agreement shall be deleted and
replaced with the following:

          "Upon the first day of the month following the Employee's voluntary
          termination of his employment on or after the attainment of his 65th
          birthday, for reasons other than death, the Company will commence to

                                       9
<PAGE>
 
          pay the Employee $592.00 monthly for a continuous period of 15 years."

     3.   The first two sentences of Paragraph 3 of the 1989 Income Agreement
entitled "Death Benefit" shall be deleted and replaced with the following:

          "Should the Employee die prior to his actual retirement on or after
          age 65, the Company (beginning at a date to be determined by the
          Company but within six months from the date of such death) will
          commence to pay $1,500.00 monthly for a continuous period of 15 years
          to such beneficiary or beneficiaries as the Employee has directed by
          filing with the Company a notice in writing.  Such initial monthly
          income shall be increased 5% for each additional full year of service
          of the Employee beginning after the first year from the date of this
          Agreement, except that there will be no increases in benefits for more
          than 10 years."

     4.   The first two sentences of Paragraph 3 of the 1991 Income Agreement
entitled "Death Benefit" shall be deleted and replaced with the following:

          "Should the Employee die prior to his actual retirement on or after
          age 65, the Company (beginning at a date to be determined by the
          Company but within six months from the date of such death) will
          commence to pay $592.00 monthly for a continuous period of 15 years to
          such beneficiary or beneficiaries as the Employee has directed by
          filing with the Company a notice in writing.  Such initial monthly
          income shall be increased 5% for each additional full year of service
          of the Employee beginning after the first year from the date of this
          Agreement, except that there will be no increases in benefits for more
          than 10 years."

     5.   Except as set forth above, the 1989 Income Agreement and the 1991
Income Agreement shall remain in full force and effect and be unchanged.

     WITNESS the signatures and seals of the undersigned, this the day and year
first above written.

                              HOME SAVINGS, SSB


                              By:    /s/ James G. Hudson, Jr.
                                 -------------------------------------
                                    President

                                     /s/ James G. Hudson, Jr.        (SEAL) 
                              ----------------------------------------
                                    James G. Hudson, Jr.

                                       10