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                                                                    EXHIBIT 10.2


                          SOUTHFIRST BANCSHARES, INC.

                              EMPLOYMENT AGREEMENT
                                October 1, 1997

                               (Joe K. McArthur)


                 THIS AGREEMENT is entered into as of the first day of October,
1997 (the "Effective Date"), by and between SouthFirst Bancshares, Inc. , the
parent and holding company (the "Holding Company") of First Federal of the
South (the "Association") and Joe K. McArthur (the "Employee").

                 WHEREAS, the Employee has heretofore been employed by the
Holding Company as Executive Vice-President and Chief Operating Officer and is
experienced in all phases of the business of the Holding Company; and

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

                 NOW, THEREFORE, it is AGREED as follows:

                 1.       Employment.  The Employee is hereby employed as the
Executive Vice-President and Chief Operating Officer of the Holding Company.
The Employee shall render such administrative and management services for the
Holding 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 Holding Company.  The Employee's other duties shall be such
as the Board of Directors of the Holding Company ("Board") may from time to
time reasonably direct, including normal duties as an officer of the Holding
Company.

                 2.       Consideration from Holding Company:  Joint and
Several Liability.  The Holding Company, in lieu of paying the Employee a base
salary during the term of this Agreement,  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 (the "Association Contract").
Nevertheless, the Board may in its discretion, at any time during the term of
this Agreement, determine and agree to pay the Employee a base salary for the
remaining term of this Agreement; provided that, prior to such determination by
the Board, the term "base salary" as used herein shall refer to the base salary
paid to Employee by the Association under the Association Contract.  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.       Performance Bonus.  Beginning on the Effective Date,
and in addition to Employee's base salary, Employee shall be eligible to
receive such performance bonuses as may be determined in the sole discretion of
the Board.

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

                 5.       Additional Compensation.

                          (a)     Participation in Retirement, Medical and
Other Plans.  The Employee shall participate in any plan that the Holding
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.

                          (b)     Employee Benefits; Expenses.  The Employee
shall participate in any fringe benefits which are, or may become, available to
the Holding Company's senior management employees, including for example: any
stock option or incentive compensation plans, club memberships, provision of
company owned or leased automobile, 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 Holding Company, including country club
initiation fees and dues, which further the interests of the Holding Company
and Association.

                          (c)     Stock Options.  Beginning on the Effective
Date, and in addition to other compensation provided to the Employee pursuant
to this Agreement, and in addition to the Employee's participation in any
incentive stock option plan adopted by the Holding Company, Employee shall be
eligible to receive a grant of such stock options, pursuant to such provisions
therein regarding amount, exercise price, vesting, expiration and other
relevant option terms, all as may be determined in the sole discretion of the
Board.

                 6.       Term.  The Holding 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 36 months thereafter
(or such earlier date as is determined in accordance with Section 10).
Additionally, on each anniversary of the Effective Date, this Agreement and the
Employee's term of employment shall be extended for an additional one-year
period beyond the then effective expiration date, 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.

                 7.       Loyalty; Full Time and Attention.

                          (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, that, 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 Holding
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 employment under this
Agreement, the Employee shall not engage in any business or activity

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contrary to the business affairs or interests of the Holding Company, or be
gainfully employed in any other position or job other than as provided above.

                          (b)     Nothing contained in this Paragraph 7 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 Holding
Company, or, solely as a passive or minority investor, in any business.

                 8.       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 Holding Company will provide Employee
with the working facilities and staff customary for similar executives and
necessary for him to perform his duties.

                 9.       Vacation, Sick Leave and Annual Physical Examination.

                 (a)      The Employee shall be entitled, without loss of pay,
to absent himself voluntarily from the performance of his duties under this
Agreement in accordance with the terms set forth below, all such voluntary
absences to count as vacation time; provided that:

                          (i)     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 Holding Company.

                          (ii)    The Employee shall not receive any additional
compensation from the Holding Company on account of his failure to take a
vacation, 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.

                          (iii)   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 obligations with the Holding
Company for such additional periods of time and for such valid and legitimate
reasons as the Board may in its discretion approve.  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 the Board in its
discretion may determine.

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

                 (b)      The Employee, at least once during each 12-month
period, beginning on the Effective Date and each anniversary thereof, shall
schedule and submit to a full physical examination by a licensed medical
physician and, if requested, shall submit the findings of such examination to
the Board of Directors.

                 10.      Termination and Termination Pay.  Subject to the
provisions of Section 12 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 the event of 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.

                          (b)     Disability.  The Holding Company may
terminate the Employee's employment after having established, through a
determination by the Board, the Employee's Disability.  For purposes of this
Agreement, "Disability" means a physical or mental infirmity which impairs the
Employee's

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ability to substantially perform his duties under this Agreement and which
results in the Employee becoming eligible for long-term disability benefits
under the Holding Company's long-term disability plan or under any disability
insurance otherwise provided to Employee (or, if the Holding 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 10(b).

                          (c)     For Cause.  The Board may, by written notice
to the Employee, immediately terminate his employment at any time, for Cause.
The Employee shall have no right to receive compensation or other benefits for
any period after termination for Cause.  Termination for "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.  Notwithstanding the foregoing, the
Employee shall not be deemed to have been terminated for 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 (excluding the Employee, if a member 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 Cause.  Subject to the provisions of
Section 12 hereof, the Board may, by written notice to the Employee,
immediately terminate his employment at any time for any reason; provided that
if such termination is for any reason other than pursuant to Sections 9 (a) (b)
or (c) above, the Employee shall be entitled to receive the following
compensation and benefits: (i) the base salary provided pursuant to Section 2
hereof, up to the date of expiration of the term (including any renewal term
then in effect) of this Agreement (the "Termination Date"), plus said salary
for an additional 12-month period, and (ii) the cost to the Employee of
obtaining all health, life, disability and other benefits (excluding any bonus,
stock option or other compensation benefits) which the Employee would have been
eligible to participate in through the Termination Date based upon the benefit
levels substantially equal to those that the Holding Company provided for the
Employee at the date of termination of employment.  Said sum shall be paid, at
the option of the Employee, either (I) in periodic payments over the remaining
term of this Agreement, as if the Employee's employment had not been
terminated, or (II) in one lump sum within ten (10) days of such termination;
provided however, that the amount to be paid by the Association to the Employee
hereunder shall not exceed three (3) times the Employee's "average annual
compensation".  The Employee's "annual average compensation" shall be the
average of the total annual "compensation" acquired by the Employee during each
of the five (5) fiscal years (or the number of full fiscal years of employment,
if the Employee's employment is less than five (5) years at the termination
thereof) immediately preceding the date of termination.  The term
"compensation" shall mean any money or provision of any other thing of value in
consideration of employment, paid or guaranteed hereunder this Agreement,
including, without limitation, base salary, bonuses, pension and profit sharing
plans, directors fees or committee fees, fringe benefits and deferred
compensation accruals.

                          (e)     Voluntary Termination by Employee.  Subject
to the provisions of Section 12 hereof, the Employee may voluntarily terminate
employment with the Holding Company during the term of this Agreement, upon at
least 60 days' prior written notice to the Board of Directors, in which case
the

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Employee shall receive only his compensation, vested rights and employee
benefits accrued up to the date of his termination.

                 11.      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.

                 12.      Change in Control.

                          (a)     Notwithstanding any provision herein to the
contrary, if the Employee's employment under this Agreement is terminated by
the Holding Company, without the Employee's prior written consent and for a
reason other than for Cause, death or Disability in connection with or within
twenty-four (24) months after any change in control of the Holding Company or
the Association, 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
28OG(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 28OG(b)(2) of the Code) that the Employee
receives on account of the change in control.]  Said sum shall be paid in one
lump sum within ten (10) days of such termination.  The term "change in
control" shall mean (1) an increase in the ownership, holding or power to vote
by any person to more than 25% of the Holding Company's or Association's voting
stock, (2) a change in the ownership or possession of the ability to control
the election of a majority of the Holding Company's or Association's directors,
(3) a change in the ownership or possession of the ability to exercise a
controlling influence over the management or policies of the Holding Company or
the Association by any person or by persons acting as a "group" (within the
meaning of Section 13(d) of the Securities Exchange Act of 1934) (except in the
case of (1), (2) and (3) hereof, ownership or control of the Holding Company or
its directors by the Association 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
Association or the Holding Company (the "Company Board") (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 Company Board was approved by a vote of at least two-thirds of
the Continuing Directors then in office shall be considered a Continuing
Director.  The term "person" means an individual other than the Employee,
individuals acting in concert or as a "group", a corporation, partnership,
trust, association, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not specifically listed
herein.

                          (b)     Notwithstanding any other provision of this
Agreement to the contrary, the Employee may voluntarily terminate his
employment under this Agreement within twenty-four  (24) months following a
change in control of the Holding Company or the Association, and the Employee
shall thereupon be entitled to receive the payment described in Section 12(a)
of this Agreement.

                          (c)     Any and all amounts paid to Employee under
Section 10(e) of the Association Contract shall be deemed to be paid in
satisfaction of, and shall therefore offset, any amounts to be paid to Employee
pursuant to this Section 12.

                          (d)     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.

                          (e)     In the event that any dispute arises between
the Employee and the Holding Company as to the terms or interpretation of this
Agreement, including this Section 11, whether instituted

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by formal legal proceedings or otherwise, including an, action that the
Employee takes to enforce the terms of this Section 11 or to defend against any
action taken by the Holding 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 have obtained
a final 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 Holding Company written evidence, which may be in the form,
among other things, of a canceled check or receipt, of any costs or expenses
incurred by the Employee.

                 13.      Disputes.

                          In the event that any dispute arises between the
Employee and the Holding Company as to the terms or interpretation of this
Agreement, whether instituted by formal legal proceedings or otherwise,
including any action that the Employee takes to enforce the terms of this
Agreement or to defend against any action taken by the Holding 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 have obtained a final 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 Holding Company written evidence,
which may be in the form, among other things, of a canceled check or receipt,
of any costs or expenses incurred by the Employee.

                 14.      Successors and Assigns.

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

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

                 15.      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.

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

                 17.      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.

                 18.      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.  Further,
should any provision of this Agreement give rise to a discrepancy or conflict
with respect to any applicable law or regulation, then the applicable law or
regulation shall control the relevant construction and operation of this
Agreement.

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


ATTEST:                                  SOUTHFIRST BANCSHARES, INC.



                                  BY:/s/ Donald C. Stroup
---------------------------          -----------------------------------------
Secretary                                President and Chief Executive Officer


WITNESS:


                                  /s/ Joe K. McArthur
---------------------------       --------------------------------------------
                                         Joe K. McArthur ("Employee")


WITNESS:



                                  /s/ Paul A. Brown
---------------------------       ---------------------------------------------
                                         Paul A. Brown, Chairman

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