10-Q

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

FORM 10-Q

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002

OR

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-16181

ABC BANCORP
(Exact name of registrant as specified in its charter)

GEORGIA
(State of incorporation)
58-1456434
(IRS Employer ID No.)

24 SECOND AVE., SE MOULTRIE, GA 31768
(Address of principal executive offices)

(229) 890-1111
(Registrant’s telephone number)

             Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

There were 9,845,136 shares of Common Stock outstanding as of September 30, 2002.

1

ABC BANCORP
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2002

TABLE OF CONTENTS

			Page
PART I	FINANCIAL INFORMATION
	Item
	1.	Financial Statements
		Consolidated Balance Sheets	3
		Consolidated Statements of Income and Comprehensive Income	4
		Consolidated Statements of Cash Flows	6
		Notes to Consolidated Financial Statements	7
	2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
	3.	Quantitative and Qualitative Disclosures about Market Risk	12
	4.	Controls & Procedures	13
PART II	OTHER INFORMATION
	4.	Submission of Matters to a Vote of Securities Holders	13
	6.	Exhibits and Reports on Form 8-K	13

SIGNATURE 14

2

ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)

	30-Sep 2002			Dec 31 2001
Assets
Cash and due from banks	$	124,465		$	157,475
Securities available for sale, at fair value		138,254			156,835
Federal funds sold		0			44
Loans		847,297			805,076
Less allowance for loan losses		14,808			14,944
Loans, net		832,489			790,132
Premises and equipment, net		26,637			26,821
Intangible assets		4,795			6,074
Goodwill		19,240			19,240
Other assets		17,945			20,265
	$	1,163,825		$	1,176,886
Liabilities and Stockholders’ Equity
Deposits
Noninterest-bearing demand		112,785			125,522
Interest-bearing demand		243,199			254,301
Savings		65,362			62,536
Time, $100,000 and over		157,529			156,562
Other time		313,407			332,235
Total deposits		892,282			931,156
Federal funds purchased & securities sold under agreements to repurchase		3,226			3,792
Other borrowings		117,832			95,293
Other liabilities		9,137			7,997
Trust preferred securities		34,500			34,500
Total liabilities		1,056,977			1,072,738
Stockholders’ equity
Common stock, par value $1; 30,000,000 shares authorized; 10,806,269 and        10,790,369 shares issued, respectively		10,806			10,790
Capital surplus		45,831			45,616
Retained earnings		57,664			53,584
Accumulated other comprehensive income		1,602			1,034
Unearned compensation		(552	)		(656	)
		115,351			110,368
Less cost of shares acquired for the treasury, 961,133 and 790,982 shares		(8,503	)		(6,220	)
Total stockholders' equity		106,848			104,148
	$	1,163,825		$	1,176,886

See Notes to Consolidated Financial Statements.

3

ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(Dollars in Thousands)
(Unaudited)

	2002			2001
Interest income
Interest and fees on loans	$	16,526		$	17,508
Interest on taxable securities		2,077			2,374
Interest on nontaxable securities		47			215
Interest on deposits in other banks		216			198
Interest on federal funds sold		—			16
		18,866			20,311
Interest expense
Interest on deposits		4,833			8,244
Interest on federal funds purchased and securities sold under agreements to        repurchase		20			32
Interest on other borrowings		1,996			994
		6,849			9,270
Net interest income		12,017			11,041
Provision for loan losses		2,224			1,281
Net interest income after provision for loan losses		9,793			9,760
Other income
Service charges on deposit accounts		2,669			1,945
Other service charges, commissions and fees		746			710
Other		10			170
Gain on sale of securities		1,617			12
		5,042			2,837
Other expense
Salaries and employee benefits		5,965			4,781
Equipment and occupancy expense		1,271			1,393
Other operating expenses		3,776			2,488
		11,012			8,662
Income before income taxes		3,823			3,935
Applicable income taxes		1,253			1,328
Net income	$	2,570		$	2,607
Other comprehensive income, net of tax:
Unrealized holding gains (losses) arising during period, net of tax	$	783		$	1,125
Reclassification adjustment for gains included in net income, net of tax	$	(1,067	)	$	(7	)
Comprehensive income	$	2,286		$	3,725
Income per common share-Basic	$	0.26		$	0.27
Income per common share-Diluted	$	0.26		$	0.27
Average shares outstanding		9,852,046			9,729,237

See Notes to Consolidated Financial Statements.

4

ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(Dollars in Thousands)
(Unaudited)

	2002			2001
Interest income
Interest and fees on loans	$	49,473		$	48,258
Interest on taxable securities		6,463			6,780
Interest on nontaxable securities		144			675
Interest on deposits in other banks		754			550
Interest on federal funds sold		1			44
		56,835			56,307
Interest expense
Interest on deposits		15,731			23,149
Interest on federal funds purchased and securities sold under agreements to        repurchase		94			120
Interest on other borrowings		5,544			2,570
		21,369			25,839
Net interest income		35,466			30,468
Provision for loan losses		3,957			2,497
Net interest income after provision for loan losses		31,509			27,971
Other income
Service charges on deposit accounts		7,476			5,192
Other service charges, commissions and fees		2,341			1,849
Other		219			316
Gain on sale of securities		1,639			11
		11,675			7,368
Other expense
Salaries and employee benefits		17,554			13,746
Equipment and occupancy expense		3,695			3,660
Other operating expenses		10,569			7,379
		31,818			24,785
Income before income taxes		11,366			10,554
Applicable income taxes		3,741			3,459
Net income	$	7,625		$	7,095
Other comprehensive income, net of tax:
Unrealized holding gains arising during period, net of tax	$	1,650		$	2,790
Reclassification adjustment for gains included in net income, net of tax	$	(1,082	)	$	(7	)
Comprehensive income	$	8,193		$	9,878
Income per common share-Basic	$	0.77		$	0.79
Income per common share-Diluted	$	0.77		$	0.79
Average shares outstanding		9,883,491			8,949,696

See Notes to Consolidated Financial Statements.

5

ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(Dollars in Thousands)
(Unaudited)

	2002			2001
OPERATING ACTIVITIES
Net Income	$	7,625		$	7,095
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,743			1,885
Provision for loan losses		3,957			2,497
Amortization of intangible assets		1,279			785
Other prepaids, deferrals and accruals, net		3,505			2,926
Total adjustments		10,484			8,093
Net cash provided by operating activities		18,109			15,188
INVESTING ACTIVITIES
Proceeds from maturities of investment securities		42,309			74,610
Purchase of investment securities		(68,403	)		(41,812	)
Proceeds from sales of securities available for sale		45,538			40
Decrease in federal funds sold		44			7,940
Increase in loans		(46,314	)		(66,221	)
Net cash received from acquisitions		—			12,421
Purchase of premises and equipment		(1,559	)		(1,177	)
Net cash used in investing activities		(28,385	)		(14,199	)
FINANCING ACTIVITIES
Net increase (decrease) in deposits		(38,874	)		1,474
Net increase (decrease) in federal funds purchased and securities sold under        agreements to repurchase		(566	)		1,891
Increase in other borrowings		22,539			36,900
Dividends paid		(3,550	)		(3,260	)
Acquisition stock issue cost					(432	)
Purchase of treasury stock		(2,283	)		—
Net cash provided by (used in) financing activities		(22,734	)		36,573
Net increase (decrease) in cash and due from banks	$	(33,010	)	$	37,562
Cash and due from banks at beginning of period		157,475			43,363
Cash and due from banks at end of period	$	124,465		$	80,925

See Notes to Consolidated Financial statements.

6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         The accounting and reporting policies of ABC Bancorp and subsidiaries (the “Company”) conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. The interim consolidated financial statements included herein are unaudited, but reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the consolidated financial position and results of operations for the interim periods presented. All adjustments reflected in the interim financial statements are of a normal, recurring nature. Such financial statements should be read in conjunction with the financial statements and notes thereto and the report of independent auditors included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001. The results of operations for the nine months ended September 30, 2002 are not necessarily indicative of the results to be expected for the full year.

NOTE 2.      RECENTLY ADOPTED ACCOUNTING STANDARDS

         In September 2001, the Financial Accounting Standards Board issued two new accounting standards: Statement of Financial Standards (“SFAS”) No 141, “Business Combinations” and SFAS No. 142 “Goodwill and Other Intangible Assets.” SFAS No 141, which was effective immediately, requires that all business combinations consummated after September 30, 2001 be accounted for by the purchase method unless the combination was initiated on or prior to that date and it meets the conditions to be accounted for by the pooling-of-interests method in accordance with AFB Opinion No. 16, “Business Combinations.” Under SFAS No. 142, goodwill and intangible assets that management concludes have indefinite useful lives will no longer be amortized, but will be subject to impairment tests performed at least annually. The Company was required to adopt SFAS No. 142 on January 1, 2002. During October, 2002, the Company performed the required annual impairment tests of goodwill and indefinite-lived intangible assets as of September 30, 2002. The test results indicated that there was no impairment of goodwill and indefinite-lived intangible assets for all acquisitions.

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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

         Liquidity management involves the matching of the cash flow requirements of customers, who may be either depositors desiring to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs, and the ability of ABC Bancorp and its subsidiaries (the “Company”) to meet those needs. The Company strives to maintain an adequate liquidity position by managing the balances and maturities of interest-earning assets and interest-bearing liabilities so that the balance it has in short-term investments at any given time will adequately cover any reasonably anticipated immediate need for funds. Additionally, the subsidiary Banks (the “Banks”) maintain relationships with correspondent banks which could provide funds to them on short notice, if needed.

         The liquidity and capital resources of the Company are monitored continuously by the Company’s Board-authorized Asset and Liability Management Committee, and on a periodic basis by state and federal regulatory authorities. As determined under guidelines established by these regulatory authorities, the Company’s and the Banks’ liquidity ratios at September 30, 2002 were considered satisfactory. At that date, the Banks’ short-term investments were adequate to cover any reasonably anticipated immediate need for funds. The Company is aware of no events or trends likely to result in a material change in liquidity. During the nine months ended September 30, 2002, total capital increased $2,700,000 to $106,848,000. Of this change, $4,075,000 resulted from the retention of earnings (net of $3,550,000 dividends paid to shareholders), plus $340,000 for the accrual for grants of restricted shares as incentive to certain employees, plus $568,000 in other comprehensive income, net of taxes, less $2,283,000 for the purchase of Treasury Stock.

         At September 30, 2002, ABC had binding commitments for capital expenditures of approximately $100,000. The Company anticipates that approximately $100,000 will be required for capital expenditures during the remainder of 2002. Additional expenditures may be required for other mergers and acquisitions.

Results of Operations

         The Company’s results of operations are determined by its ability to effectively manage interest income and expense, to minimize loan and investment losses, to generate noninterest income and to control noninterest expense. Since interest rates are determined by market forces and economic conditions beyond the control of the Company, the ability to generate net interest income is dependent upon the Banks’ ability to obtain an adequate spread between the rate earned on interest-earning assets and the rate paid on interest-bearing liabilities. Thus, the key performance measure for net interest income is the interest margin or net yield, which is taxable-equivalent net interest income divided by average earning assets.

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         The primary component of consolidated earnings is net interest income, or the difference between interest income on interest-earning assets and interest paid on interest-bearing liabilities. The net interest margin is net interest income expressed as a percentage of average interest-earning assets. Interest-earning assets consist of loans, investment securities and Federal funds sold. Interest-bearing liabilities consist of deposits and borrowings, such as Federal funds purchased, securities sold under repurchase agreements and Federal Home Loan Bank advances. A portion of interest income is earned on tax-exempt investments, such as state and municipal bonds, and on loans to states and municipalities. This tax-exempt income and its resultant yields are stated on a taxable-equivalent basis in order to be comparable to taxable investments and loans.

Comparison of Statements of Income

         The net interest margin on a taxable-equivalent basis was 4.54% and 4.91% during the nine months ended September 30, 2002 and 2001, respectively, a decrease of 37 basis points. These variances are attributable to fluctuations in the average rates charged and fees earned on loans and the average rates paid on deposit accounts. Several decreases in key interest rates by the Federal Reserve Bank during the last half of 2001 and first half of 2002 also attributed to the decrease in net interest margin, because the rate of yield on certain variable-rate assets decreased immediately, whereas most interest-bearing liabilities are fixed-rate, and thus rates could not be decreased until maturity.

         Net interest income was $35.5 million as compared to $30.5 million during the nine months ended September 30, 2002 and 2001, respectively, representing an increase of 16.39%. This increase of $5 million was largely attributable to the new acquisitions which contributed $4.2 million of this increase.

         The provision for loan losses is a charge to earnings in the current period to replenish the allowance for loan losses and maintain it at the level management determines is adequate. The provision for loan losses charged to earnings amounted to $3,957,000 and $2,497,000 during the nine months ended September 30, 2002 and 2001. This $1,460,000 increase in 2002 over 2001 was primarily attributable to replenishing the reserve for loan losses to an adequate level due to $4.1 million in charge offs, net of recoveries, for the first nine months and also for the 5.22% growth in the loan portfolio. Charge offs, net of recoveries, for the first nine months of 2001 amounted to $1,005,000. The comparatively high net charge offs for the first nine months of 2002 resulted in part from anticipated charge offs against reserves established in connection with two acquisitions made during 2001, and in part from an aggressive effort during the first two quarters of 2002 to resolve a number of small non-performing loans on the books of the subsidiary banks.

         The allowance for loan losses represents a reserve for potential losses in the loan portfolio. The adequacy of the allowance for loan losses is evaluated quarterly based on a review of all significant loans, with a particular emphasis on non-accruing, past due and other loans that management believes require attention. Another factor used in determining the adequacy of the reserve is management’s judgment about factors affecting loan quality and assumptions about the local and national economy.

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         The allowance for loan losses totaled $14.81 million and $14.94 million as of September 30, 2002 and December 31, 2001, respectively. The allowance for loan losses as a percentage of total loans was 1.75% and 1.86% as of September 30, 2002 and December 31, 2001, respectively.

         Non-performing assets were $9.5 million and $13.2 million as of September 30, 2002 and December 31, 2001, respectively. The ratio of non-performing assets as a percentage of the loan loss reserve was 64.4% and 88.4% as of September 30, 2002 and December 31, 2001, respectively.

         Management considers the allowance for loan losses as of September 30, 2002 adequate to cover potential losses in the loan portfolio.

         Following is a comparison of noninterest income for the nine months ended September 30, 2002 and 2001 (dollars in thousands).

	Nine months Ended September
	2002		2001
Service charges on deposits	$	7,476	$	5,192
Other service charges, commissions and fees		2,341		1,849
Other income		219		316
Gain (Loss) on sale of securities		1,639		11
Total noninterest income	$	11,675	$	7,368

         Total noninterest income for the nine months ended September 30, 2002 was $4,307,000 higher than during the same period in 2001. Three recent acquisitions are reflected in 2002’s results. Approximately $923,000 of the increase is attributable to these acquisitions. Approximately 90% of the remaining increase is attributable to three retail-related initiatives: (1) an increase in mortgage loan fees; (2) an increase in credit life insurance premiums; and (3) a new program to increase overdraft fees on deposit accounts.

         Additionally insufficient fund charges on checking deposit accounts in all other subsidiary banks increased $1,850,000 during the nine months ended September 30, 2002 as compared to the same period last year. This increase is mostly attributable to an increase in the per item charge for overdrafts. Other service charges, commissions and fees increased because of enhanced income from the Company’s retail division, particularly mortgage financing. Of the $492,000 increase, 78% or $386,000 was attributable to mortgage financing.

         Following is an analysis of noninterest expense for the nine months ended September 30, 2002 and 2001 (dollars in thousands).

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	Nine months Ended September
	2002		2001
Salaries and employee benefits	$	17,554	$	13,746
Occupancy and equipment expense		3,695		3,660
Other expense		10,569		7,379
Total noninterest expense	$	31,818	$	24,785

         Total noninterest expense for the nine months ended September 30, 2002 was $7,033,000 higher than during the same period in 2001.

         Salaries and employee benefits for the nine months ended September 30, 2002 were $3,808,000 or 27.7% higher than during the same period in 2001 of which $260,000 represented a non-recurring charge for severance pay. The new acquisitions accounted for approximately $1,726,000 of the increase. The remaining $1,822,000 related to normal increases in salaries and employee benefits, and an increase in the number of employees throughout the Company. Of the $3,190,000 million increase in other expense, $1,819,000 is attributable to other expenses of the acquired banks, and $102,000 is attributable to systems conversion expenses of the acquired banks.

         Following is a condensed summary of net income during the nine months ended September 30, 2002 and 2001 (dollars in thousands).

	Nine months Ended September
	2002		2001
Net interest income	$	35,466	$	30,468
Provision for loan losses		3,957		2,497
Other income		11,675		7,368
Other expense		31,818		24,785
Income before income taxes		11,366		10,554
Applicable income taxes		3,741		3,459
Net income	$	7,625	$	7,095

         Net income increased $530,000 or 7.47% to $7,625,000 for the nine months ended September 30, 2002 as compared to $7,095,000 for the nine months ended September 30, 2001. Net interest income of ABC and its subsidiaries increased $4,998,000, the provision for loan losses increased by $1,460,000 and all other noninterest expense increased by $7,033,000.

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Comparison of Balance Sheets

         Total assets decreased by $13 million, or 1.10% to $1,164 million at September 30, 2002 from $1,177 million at December 31, 2001.

         Total earning assets decreased by $7 million, or .66%, to $1,061 million at September 30, 2002 from $1,068 million at December 31, 2001.

         Loans, net of the allowance for loan losses, increased by $42 million, or 5.32% to $832 million at September 30, 2002 from $790 million at December 31, 2001.

         Total deposits decreased by $39 million, or 4.19% to $892 million at September 30, 2002 from $931 million at December 31, 2001. Approximately 12.67% and 13.53% of deposits were noninterest-bearing as of September 30, 2002 and December 31, 2001, respectively.

         The decrease in total assets and deposits was due to an intentional reduction in non-core deposits. Retaining maturing deposits would have required paying higher rates than were desired because of current market pressures. Given the Company’s current loan funding projections and alternative funding sources available, a significant amount of maturing deposits were not renewed.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company is exposed only to U. S. dollar interest rate changes and, accordingly, the Company manages exposure by considering the possible changes in the net interest margin. The Company does not have any trading instruments nor does it classify any portion of the investment portfolio as held for trading. The Company does not engage in any hedging activities or enter into any derivative instruments with a higher degree of risk than mortgage backed securities which are commonly pass through securities. Finally, the Company has no exposure to foreign currency exchange rate risk, commodity price risk, and other market risks.

         Interest rates play a major part in the net interest income of a financial institution. The sensitivity to rate changes is known as “interest rate risk.” The repricing of interest earning assets and interest-bearing liabilities can influence the changes in net interest income. As part of the Company’s asset/liability management program, the timing of repriced assets and liabilities is referred to as Gap management. It is the policy of the Company to maintain a Gap ratio in the one-year time horizon of .80 to 1.20.

         The Company uses simulation analysis to monitor changes in net interest income due to changes in market interest rates. The simulation of rising, declining and flat interest rate scenarios allows management to monitor and adjust interest rate sensitivity to minimize the impact of market interest rate swings. The analysis of the impact on net interest income over a twelve month period is subjected to a gradual 200 basis point increase or decrease in market rates on net interest income and is monitored on a

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quarterly basis. The most recent simulation model projects net interest income would increase 5.28% if rates rise gradually over the next year. On the other hand, the model projects net interest income to decrease 8.02% if rates decline over the next year.

ITEM 4.    CONTROLS AND PROCEDURES

(a)      Evaluation of Disclosure Controls and Procedures.

         The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic filings under the Exchange Act.

(b)      Changes in Internal Controls.

         Since the Evaluation Date, there have not been any significant changes in the Company’s internal controls or in other factors that could significantly affect such controls.

Part II.      Other Information

Item 4.    Submission of Matters to a Vote of Securities Holders

         There were no matters submitted to a vote of securities holders during the quarter ended September 30, 2002.

Item 6.    Exhibits and Reports on Form 8-K

         (a)      Exhibits

Exhibit 99.1 Section 906 Certification
Exhibit 99.2 Section 906 Certification
Exhibit 10.1 Commission Agreement
Exhibit 10.2 Termination Agreement

         (b)      Reports on Form 8-K

         None

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SIGNATURE

         Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the Undersigned thereunto duly authorized:

	ABC BANCORP
11/13/02	/s/ W. EDWIN LANE, JR.
Date	W. EDWIN LANE, JR. EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER (Duly authorized officer and principal financial/accounting officer)

I, Kenneth J. Hunnicutt, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of ABC Bancorp;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

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(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: Nov 13, 2002

/s/ KENNETH J. HUNNICUTT

Kenneth J. Hunnicutt,
President and Chief Executive Officer

I, W. Edwin Lane, Jr., certify that:

1.	I have reviewed this quarterly report on Form 10-Q of ABC Bancorp;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

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4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
(b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
(c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: 11/13/02

/s/ W. EDWIN LANE, JR.,

W. Edwin Lane, Jr.,
Chief Financial Officer

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EX-10.1

EXHIBIT 10.1

COMMISSION AGREEMENT

         THIS COMMISSION AGREEMENT (the “Agreement”) is entered into as of the 12th day of September, 2002, by and between ABC BANCORP, a Georgia corporation (the “Company”), and JERRY L. KEEN, an individual resident of the State of Georgia (“Keen”).

WITNESSETH:

         WHEREAS, upon the terms and conditions set forth herein, the Company wishes to compensate Keen for the provision of certain brokerage, investment services and certain life insurance products to certain of the customers of the Company and its subsidiaries introduced thereto by Keen;

         WHEREAS, Keen desires to be so compensated; and

         WHEREAS, the Company desires reasonable protection of its confidential business and customer information which it has developed over the years at substantial expense and also desires assurance that Keen will not compete with the Company for a reasonable period of time after the termination or expiration of this Agreement, except as otherwise provided herein.

         NOW, THEREFORE, in consideration of these premises, the mutual covenants and undertakings herein contained, the Company and Keen, each intending to be legally bound, covenant and agree as follows:

         1.       Term. The term of this Agreement shall begin on the date (the “Effective Date”) that Keen satisfies all sponsorship requirements of Raymond James Financial Services (“Raymond James”), including, without limitation, a physical examination, drug screen test and credit check, and, unless otherwise earlier terminated pursuant to Section 3 hereof, shall end on the date which is three (3) years following the Effective Date (hereinafter referred to as the “Term”).

         2.       Fees and Commissions.

         (A)      On the Effective Date, the Company shall make a one-time payment in the amount of One Hundred Thousand and No/100 Dollars ($100,000.00) to Keen by delivery of cash or a Company check made payable to Keen.

         (B)      On the first regular payroll payment date of the Company following the first, second and third anniversaries of the Effective Date, Keen will be paid (a) Twenty-Five Thousand and No/100 Dollars ($25,000.00) if, during the twelve (12) month period immediately preceding such anniversary, The First Bank of Brunswick, a wholly-owned subsidiary of the Company (“First Bank”), earns between $240,000 and $279,999 of gross commissions and fees from the provision of brokerage and investment services (other than sales of fixed annuities

through PFIC and credit life and accident & health insurance) to its customers during such year, or (b) Fifty Thousand and No/100 Dollars ($50,000.00) if, during the twelve (12) month period immediately preceding such anniversary, First Bank earns between $280,000 and $349,999 of gross commissions and fees from the provision of brokerage and investment services (other than sales of fixed annuities through PFIC and credit life and accident & health insurance) to its customers during such year, or (c) Seventy-Five Thousand and No/100 Dollars ($75,000.00) if, during the twelve (12) month period immediately preceding such anniversary, First Bank earns $350,000 or more of gross commissions and fees from the provision of brokerage and investment services (other than sales of fixed annuities through PFIC and credit life and accident & health insurance) to its customers during such year (each such yearly payment pursuant to this Section 2(B) shall be hereinafter referred to as the “Yearly Commission Fee”); provided, however, that if, during the first year or the second year of the Term, First Bank earns more than $350,000 of gross commissions and fees from the provision of such brokerage and investment services to its customers, then the Yearly Commission Fee for any such year will be increased by an amount equal to the product obtained by multiplying $75,000 by a fraction, the numerator of which shall be the actual amount of such gross commissions and fees, and the denominator of which shall be $350,000.

         (C)      Except as set forth in Section 4 hereof, in no event shall any fees required to be paid at the end of any period be prorated if this Agreement is terminated prior to the end of such period. Notwithstanding anything to the contrary in this Section 2 or otherwise, in no event shall the amount of all fees and commissions paid by the Company to Keen under this Agreement exceed Three Hundred Thousand and No/100 Dollars ($300,000.00) in the aggregate.

         3.       Termination. Subject to the respective continuing obligations of the parties hereto, including, without limitation, those set forth in Subsections 5(A), 5(B), 5(C) and 5(D) hereof, this Agreement may be terminated prior to the expiration of the Term as follows:

         (A)      The Company, by providing a Notice of Termination (as hereinafter defined) to Keen, may terminate this Agreement immediately if Keen’s employment with the Company is terminated for cause. For purposes of this Subsection 3(A), “cause” shall exist (i) if Keen is convicted of (from which no appeal may be taken), or pleads guilty to, any act of fraud, misappropriation or embezzlement, or any felony, (ii) if, in the determination of the Board of Directors (the “Board”) or the Chief Executive Officer of the Company, Keen has engaged in gross or willful misconduct materially damaging to the business of the Company (it being understood, however, that neither conduct pursuant to Keen’s exercise of his good faith business judgment nor unintentional physical damage to any property of the Company by Keen shall be a ground for such a determination by the Board), (iii) if Keen at any time fails to maintain any sponsorship requirement of Raymond James, or (iv) if Keen has failed, without reasonable cause, to follow written instructions of the Board or the Chief Executive Officer of the Company consistent with Keen’s position as Brokerage Services Manager of the Company and, after written notice from the Company of such failure, Keen at any time thereafter again so fails.

         (B)      Keen, by providing a Notice of Termination to the Company, may terminate this Agreement immediately upon a Change of Control. For purposes of this Subsection 3(B), a “Change of Control” shall mean any of the following events:

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          (i)    Unless approved by the affirmative vote of at least two-thirds (2/3) of those members of the Board who are in office immediately prior to the event(s) and who are not employees of the Company:

          (a)      the merger or consolidation of the Company with, or the sale of all or substantially all of the assets of the Company to, any person or entity or group of associated persons or entities; or

          (b)      the direct or indirect beneficial ownership, in the aggregate, of securities of the Company representing twenty percent (20%) or more of the total combined voting power of the Company’s then issued and outstanding securities by any person or entity, or group of associated persons or entities acting in concert, not affiliated (within the meaning of the Securities Act of 1933, as amended) with the Company as of the date hereof; provided, however, that the Board may, at any time and in its sole discretion, increase the ownership percentage threshold of this item (b) to an amount not exceeding forty percent (40%); or

          (c)      the shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company.

         (ii)    A change in the composition of the Board at any time during any consecutive twenty-four (24) month period such that the “Continuity Directors” cease for any reason to constitute at least a seventy percent (70%) majority of the Board. For purposes of this Agreement, “Continuity Directors” shall mean those members of the Board who either:

          (a)      were directors at the beginning of such consecutive twenty-four (24) month period; or

          (b)      were elected by, or on the nomination or recommendation of, at least a two-thirds (2/3) majority of the Board.

         (C)      Keen, by providing a Notice of Termination to the Company at least thirty (30) days prior to the Date of Termination (as hereinafter defined) specified therein, may terminate this Agreement for any reason other than as a result of a Change of Control.

         (D)      The Company, by providing a Notice of Termination to Keen at least thirty (30) days prior to the Date of Termination specified therein, may terminate this Agreement for any reason or for no reason.

         (E)      This Agreement shall terminate upon the Keen’s death or disability. For purposes of this Agreement, “disability” shall be defined as Keen’s inability by reason of illness or other physical or mental incapacity to perform the duties required by his employment with the Company for any consecutive one hundred eighty (180) day period.

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          (F)    This Agreement will terminate immediately upon Executive receiving an aggregate of Three Hundred Thousand and No/100 Dollars ($300,000.00) pursuant hereto.

Upon a termination of this Agreement as provided herein, the terms of this Agreement shall be of no further force or effect; provided, however, that the terms of Subsections 5(A) through 5(E) hereof shall survive any termination or expiration of this Agreement as set forth therein.

         4.       Fees Upon Termination. In the event of the termination of this Agreement pursuant to Subsections 3(A) through 3(E) hereof, commission fees shall continue to be paid by the Company to Keen as follows:

         (A)      In the event of a termination pursuant to Subsection 3(A) or Subsection 3(C) hereof, all commission fees provided for herein shall be paid as provided in Section 2 hereof through and including the Date of Termination specified in the Notice of Termination; provided, however, that if the event of termination pursuant to Subsection 3(A) or Subsection 3(C) hereof occurs within twelve (12) months after the Effective Date, then Keen shall pay to the Company on the Date of Termination specified in the Notice of Termination cash in the amount of Seventy-Five Thousand and No/100 Dollars ($75,000) multiplied by a fraction, the numerator of which shall be the number of full calendar months remaining during the first year of the Term, and the denominator of which shall be 12.

         (B)      In the event of a termination pursuant to Subsection 3(B) or Subsection 3(D) hereof, all commission fees provided for herein shall be paid as provided in Section 2 hereof through the Date of Termination specified in the Notice of Termination. In addition, if such termination is a termination pursuant to Subsection 3(B) hereof, the Company may elect, at its sole option and in its sole discretion, to pay Keen all commissions and fees set forth in Section 2 hereof for the entire Term that remain unpaid (not to exceed the limitation set forth in Section 2(C) hereof) on the Date of Termination specified in the Notice of Termination; provided, however, that if the Company does not make such payments upon such a termination, then Keen shall not be prohibited by the terms of Section 5(D)(iii) hereof from soliciting the Brokerage Business (as hereinafter defined) of any customer of the Company or any of its subsidiaries for which Keen provided brokerage and investment services prior to the Effective Date.

         (C)      In the event of a termination pursuant to Subsection 3(E) hereof, commission fees provided for herein shall be paid as provided in Section 2 hereof (i) in the event of Keen’s death, through the date of death, or (ii) in the event of Keen’s disability, through the Date of Termination specified in the Notice of Termination.

         5.       Restrictive Covenants.

         (A)      Keen acknowledges that (i) the Company has separately bargained and paid additional consideration for the restrictive covenants set forth herein; and (ii) the Company will provide benefits to Keen hereunder in reliance upon such covenants in view of the unique and essential nature of the services Keen will perform on behalf of the Company and the irreparable injury that would befall the Company should Keen breach such covenants.

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          (B)    Keen further acknowledges that his position with the Company will place him in a position of confidence and trust with employees of the Company and its subsidiaries and affiliates and with the Company’s other constituencies and will allow him access to confidential information concerning the Company and its subsidiaries and affiliates.

         (C)      Keen further acknowledges that the type and periods of restrictions imposed by the covenants in this Section 5 are fair and reasonable and that such restrictions will not prevent Keen from earning a livelihood.

         (D)      Having acknowledged the foregoing, Keen covenants and agrees with the Company as follows:

         (i)      During the Term and for a period of two (2) years after the termination or expiration of this Agreement for any reason or for no reason, Keen shall not divulge or furnish any confidential information of the Company acquired by him from the Company to any person, firm or corporation, other than to the Company or its subsidiaries or upon its or their written request, or use any such confidential information (which shall at all times remain the property of the Company) directly or indirectly for Keen’ own benefit or for the benefit of any person, firm or corporation other than the Company. For purposes hereof, the term “confidential information” shall mean the Company’s and its subsidiaries’ non-public, confidential or proprietary information other than the Company’s or its subsidiaries’ trade secrets (as such term is defined in §10-1-761 of the Official Code of Georgia Annotated), including, without limitation, any and all tangible and intangible information, whether oral, in writing or in any other medium, whether developed by Keen or furnished to Keen by third parties at the direction of the Company, concerning the policies, plans, procedures or customers of the Company or its subsidiaries or the business, financial condition, operations, assets, liabilities and contingencies of the Company or its subsidiaries.

         (ii)    Keen hereby agrees that he will not directly or indirectly disclose to anyone, or use or otherwise exploit for his own benefit or for the benefit of anyone other than the Company and its subsidiaries, any trade secrets (as such term is defined in §10-1-761 of the Official Code of Georgia Annotated) of the Company or any of its subsidiaries for as long as they remain trade secrets.

         (iii)   During the Term and for a period of two (2) years after the termination or expiration of this Agreement for any reason or for no reason, Keen shall not, directly or indirectly, use any of the Company’s confidential information or trade secrets to provide Brokerage Business to, or solicit the Brokerage Business of, any customer of the Company or any of its subsidiaries (including, without limitation, any customer of Keen prior to the Effective Date), or assist any actual or potential competitor of the Company or any of its subsidiaries to provide Brokerage Business to, or solicit the Brokerage Business of, any such customer using such confidential information or trade secrets. For purposes hereof, the term “Brokerage Business” shall mean the business of offering, selling or otherwise providing securities, insurance or annuities brokerage, investment

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banking or investment advisory products or services, as conducted by the Company or any of its subsidiaries during Keen’s employment with the Company.

         (iv)    At the Company’s request upon the termination or expiration of this Agreement, Keen shall immediately turn over to the Company all business correspondence, letters, papers, reports, customer lists, financial statements, credit reports or other confidential information or documents of the Company or its affiliates in the possession or control of Keen, all of which writings are and will continue to be the sole and exclusive property of the Company or its affiliates, as the case may be.

         (E)      Keen acknowledges that irreparable loss and injury would result to the Company upon the breach of any of the covenants contained in this Section 5 and that damages arising out of such breach would be difficult to ascertain. Keen hereby agrees that, in addition to all other remedies provided at law or in equity, the Company may petition and obtain from a court of law or equity, without the necessity of proving actual damages and without posting bond or other security, both temporary and permanent injunctive relief to prevent a breach by Keen of any covenant contained in this Section 5, and shall be entitled to an equitable accounting of all earnings, profits and other benefits arising out of any such breach. In the event that the provisions of this Section 5 should ever be deemed to exceed the time, geographic or any other limitations permitted by applicable law, such provisions shall be deemed reformed to the maximum extent permitted thereby.

         6.       Notice of Termination and Date of Termination. Any termination of this Agreement pursuant to Section 3 hereof, except in the circumstances of Keen’s death, shall be communicated by written “Notice of Termination” by the terminating party to the other party hereto. Any “Notice of Termination” pursuant to Subsection 3(A) or Subsection 3(B) hereof shall indicate the specific provisions of this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for such termination. For purposes of this Agreement, “Date of Termination” shall mean the date specified in the Notice of Termination; provided, however, that if this Agreement is terminated because of Keen’s disability, then the Date of Termination shall mean thirty (30) days after Notice of Termination is given (unless Keen shall have resumed his duties on a full-time basis during such thirty (30) day period).

         7.       Payments After Death. Should Keen die after termination of this Agreement while any amounts are payable to him hereunder, this Agreement shall inure to the benefit of and be enforceable by Keen’s executors, administrators, heirs, distributees, devisees and legatees, and all amounts payable hereunder shall be paid in accordance with the terms of this Agreement to Keen’s devisee, legatee or other designee or, if there is no such designee, to his estate.

         8.       Legal Expenses. If any legal action, proceeding in arbitration or other proceeding is brought for the enforcement of this Agreement, or because of any alleged dispute, breach, default or misrepresentation in connection with any provision of this Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys’ fees, court costs and all expenses incurred in that action or proceeding, even if not taxable as court costs, plus in each case interest at the “Applicable Federal Rate” (as such term is defined in

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Section 1274(d) of the Internal Revenue Code of 1986, as amended), in addition to any other relief to which such party or parties may be entitled.

         9.       Notices. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to Keen:	Jerry L. Keen 48 Captains Walk St. Simons Island, Georgia 31522
If to the Company:	ABC Bancorp 24 2nd Avenue, S.E. Moultrie, Georgia 31768 Attention: Chief Executive Officer

or to such address as either party hereto furnishes to the other party in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

         10.      Governing Law. The validity, interpretation, and performance of this Agreement shall be governed by the laws of the State of Georgia, without giving effect to the conflicts of laws principles thereof.

         11.      Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and upon their respective heirs, personal representatives, administrators, successors and assigns, as the case may be.

         12.      Modification. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by Keen and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of dissimilar provisions or conditions at the same or any prior subsequent time.

         13.      Severability. Any provision hereof which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by law, the parties hereto waive any provision of law which renders any such provision prohibited or unenforceable in any respect. In the event that any provision of this Agreement should ever be deemed to exceed the time, geographic, product or service or any other limitations permitted by applicable law, then such provision shall be deemed reformed to the maximum extent permitted by applicable law.

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         14.      Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. Executed counterparts may be delivered via facsimile transmission.

         15.      Assignment. This Agreement is personal in nature and neither party hereto shall, without consent of the other, assign or transfer this Agreement or any rights or obligations hereunder except as provided in Section 7 above. Without limiting the foregoing, Keen’s right to receive commission fees hereunder shall not be assignable or transferable, whether by pledge, creation of a security interest or otherwise, other than a transfer by his will or by the laws of descent or distribution as set forth in Section 7 hereof, and in the event of any attempted assignment or transfer contrary to this Section 15, the Company shall have no liability to pay any amounts so attempted to be assigned or transferred.

         16.      Rights of Keen; No Right to Continued Employment. The rights accruing to Keen hereunder shall be solely those of an unsecured creditor of the Company. This Agreement shall not be deemed to create a contract of employment between the Company or any of its subsidiaries and Keen and shall create no right in Keen to continue in the Company’s employ for any specific period of time, or to create any other rights in Keen or obligations on the part of the Company, except as set forth in this Agreement. Keen understands and agrees that he is and will remain strictly an employee “at will” of the Company.

         17.      Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof.

         18.      Participation in Negotiations. EACH OF THE UNDERSIGNED PARTIES ACKNOWLEDGES AND AGREES THAT SUCH PARTY HAS PARTICIPATED IN THE NEGOTIATION OF AND CAREFULLY READ EACH OF THE TERMS AND PROVISIONS OF THIS COMMISSION AGREEMENT AND UNDERSTANDS ITS CONTENTS, AND THAT SUCH PARTY EXECUTED THIS COMMISSION AGREEMENT AS SUCH PARTY’S OWN FREE ACT AND DEED.

[Signatures Next Page]

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         IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and delivered by its duly authorized officer, and Keen has executed and delivered this Agreement, all as of the day and year first above written.

ABC BANCORP
By:	/s/ KENNETH J. HUNNICUTT
	Kenneth J. Hunnicutt, Chairman and Chief Executive Officer

/s/ JERRY L. KEEN	(SEAL)
JERRY L. KEEN

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EX-10.2

EXHIBIT 10.2

TERMINATION AGREEMENT

         THIS TERMINATION AGREEMENT (the “Agreement”) is made and entered into as of the 8th day of August, 2002 by and between MARK D. THOMAS, an individual resident of the State of Georgia (“Thomas”), and ABC BANCORP, a Georgia corporation (“ABC”).

WITNESSETH:

         WHEREAS, ABC and Thomas entered into that certain Executive Employment Agreement dated as of July 12, 1999 (the “Employment Agreement”); and

         WHEREAS, effective as of the date hereof, ABC and Thomas each desire to (a) formally terminate the Employment Agreement in its entirety, and (b) finally, fully and irrevocably settle any disputes, differences, disagreements, uncertainties, claims, charges or complaints which ABC and Thomas may have or claim between them and give their mutual and general releases of any and all of their respective claims in the manner and subject to the conditions set forth herein;

         NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties hereto, it is hereby agreed as follows:

         1.       Cancellation of the Employment Agreement; Resignations.

         (a)      Notwithstanding any of the terms and conditions of the Employment Agreement to the contrary with respect to the termination thereof, ABC and Thomas hereby terminate the Employment Agreement, effective as of the date of this Agreement. ABC and Thomas agree that neither ABC nor Thomas shall have or possess any rights against or obligations to the other party to the Employment Agreement with respect to any of the representations, warranties, covenants and agreements set forth therein. To the extent the terms and conditions of this Agreement alter or vary the terms and conditions of the Employment Agreement, ABC and Thomas agree that the terms and conditions of this Agreement shall be deemed to have modified, amended and superseded the terms and conditions of the Employment Agreement, notwithstanding any terms or conditions therein to the contrary. ABC and Thomas further agree that ABC’s and Thomas’ obligations to each other as set forth in this Agreement shall be the only obligations of ABC and Thomas, and neither party hereto shall have any further duties or obligations to the other party hereto other than as set forth herein.

         (b)      Effective as of the date hereof, Thomas hereby resigns (i) as an officer of ABC and each of ABC’s subsidiaries, and (ii) from the Boards of Directors of ABC and each of ABC’s subsidiaries on which Thomas served prior to the date hereof.

         2.       Salary and Benefits Continuation. Notwithstanding the termination of the Employment Agreement as set forth in Section 1 hereof, and in addition to the mutual covenants,

agreements and releases granted herein, ABC agrees to (a) pay to Thomas cash in the aggregate amount of $95,833.33, less all taxes and applicable withholdings required under federal, state and local laws, at regular intervals in accordance with ABC’s normal payroll practices now or hereafter in effect between the date hereof and December 31, 2002, (ii) pay to Thomas cash in the amount of $134,166.67, less all taxes and applicable withholdings required under federal, state and local laws, on or before January 15, 2003, and (iii) issue to Thomas 2,000 shares of ABC’s common stock, par value $1.00 per share, on or before January 31, 2003 and otherwise in accordance with the terms of the restricted stock grant previously made to Thomas pursuant to ABC’s Omnibus Stock Ownership and Long Term Incentive Plan. Except as otherwise provided in this Section 2, after the date hereof, ABC will no longer provide to Thomas or his dependents any medical, hospitalization, dental or vision insurance or any employee, retirement or other compensation benefits under any of ABC’s employee benefits plans or otherwise as provided in Section 5 of the Employment Agreement, and Thomas shall not be entitled to any raises or increases in the amount of compensation set forth in this Section 2. The parties hereto acknowledge and agree that this Agreement does not in any way constitute a release or surrender by Thomas of the vested balance of his account as a participant in ABC’s 401(k) Profit Sharing Plan, and such vested balance will be held in Thomas’ name by ABC or the administrator of such plans in accordance with applicable law and the terms of such plans until ABC or such administrator receives instructions with respect to the disposition thereof.

         3.       Release by Thomas. As a material inducement to ABC to enter into this Agreement and to provide Thomas with the benefits set forth in Section 2 hereof, Thomas hereby irrevocably and unconditionally releases, waives, acquits, withdraws, retracts, forever discharges and covenants not to sue on, any and all claims, manner of actions, causes of action, whether at law or in equity, suits, judgments, debts, liens, contracts, agreements, promises, liabilities, demands, damages, losses, costs, expenses or disputes (including, without limitation, attorneys’ fees and costs), known or unknown, fixed or contingent (collectively, “Claims”), which Thomas now has, owns or holds, or claims to have, own or hold, or which Thomas at any time heretofore had, owned or held, or claimed to have, own or hold, or which Thomas can, shall or may have, own, hold or claim hereafter, directly or indirectly, individually or in any capacity, against ABC or, to the extent applicable, any and all of the ABC’s present or former affiliates, subsidiaries, predecessors, successors and assigns, as the case may be, as well as its present or former owners, shareholders, members, investors, lenders, agents, independent contractors, directors, officers, partners, employees, associates, representatives, consultants, attorneys and insurers, by reason of any act, omission, matter, cause, conduct, claim, event or thing whatsoever, from the beginning of time to, and including, the date of the execution of this Agreement, including, without limitation, any act, omission, matter, cause, conduct, claim, event or thing arising out of or relating in any way to the Employment Agreement or Thomas’ employment with ABC or services to ABC or any of its subsidiaries as a director; provided, however, that nothing in this Agreement shall be construed as a release by Thomas of his right to assert any breach by ABC of any of the terms or conditions of this Agreement.

         4.       Release by ABC. As a material inducement to Thomas to enter into this Agreement, ABC hereby irrevocably and unconditionally releases, waives, acquits, withdraws, retracts, forever discharges and covenants not to sue on, any and all Claims which ABC now has, owns or holds, or claims to have, own or hold, or which ABC at any time heretofore had, owned

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or held, or claimed to have, own or hold, or which ABC can, shall or may have, own, hold or claim hereafter, directly or indirectly, individually or in any capacity, against Thomas or, to the extent applicable, any and all of Thomas’ heirs, personal representatives, administrators, affiliates, predecessors, successors and assigns, as well as his present or former agents, representatives, consultants, attorneys and insurers, arising out of any act, omission, matter, cause, conduct, claim, event or thing whatsoever, from the beginning of time to, and including, the date of the execution of this Agreement, including, without limitation, any act, omission, matter, cause, conduct, claim, event or thing arising out of or relating in any way to the Employment Agreement or Thomas’ employment with ABC or services to ABC or any of its subsidiaries as a director; provided, however, that nothing in this Agreement shall be construed as a release by ABC of its right to assert a breach by Thomas of any of the terms or conditions of this Agreement.

         5.       Restrictive Covenants. As a further material inducement to ABC to enter into this Agreement and to provide Thomas with the benefits set forth in Section 2 hereof, Thomas covenants and agrees with ABC as follows:

         (a)      For a period of two (2) years after the date hereof, Thomas shall not divulge or furnish any confidential information of ABC acquired by him while employed by ABC to any person, firm or corporation, other than to ABC or its subsidiaries or upon its or their written request, or use any such confidential information (which shall at all times remain the property of ABC) directly or indirectly for Thomas’ own benefit or for the benefit of any person, firm or corporation other than ABC. For purposes hereof, the term “confidential information” shall mean ABC’s and its subsidiaries’ non-public, confidential or proprietary information, including, without limitation, any and all tangible and intangible information, whether oral, in writing or in any other medium, whether developed by Thomas or furnished to Thomas by third parties at the direction of ABC, concerning the policies, plans, procedures or customers of ABC or its subsidiaries or the business, financial condition, operations, assets, liabilities and contingencies of ABC or its subsidiaries.

         (b)      Thomas hereby agrees that he will not directly or indirectly disclose to anyone, or use or otherwise exploit for his own benefit or for the benefit of anyone other than ABC and its subsidiaries any trade secrets (as defined in §10-1-761 of the Official Code of Georgia Annotated) of ABC or any of its subsidiaries for as long as they remain trade secrets.

         (c)      For a period of two (2) years after the date hereof, Thomas shall not, directly or indirectly, use any of ABC’s confidential information or trade secrets to provide Banking Business (as hereinafter defined) to, or solicit the Banking Business of, any customer of ABC or any of its subsidiaries, or assist any actual or potential competitor of ABC or any of its subsidiaries to provide Banking Business to, or solicit the Banking Business of, any such customer using such confidential information or trade secrets.

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          (d)    For a period of two (2) years after the date hereof, Thomas shall not, directly or indirectly, as principal, agent or trustee, or through the agency of any corporation, partnership, trade association, agent or agency, engage in any business or venture which competes with the Banking Business within a 50-mile radius of any office or branch office location of ABC or any of its subsidiaries as of the date hereof.

         (e)      If Thomas subsequently (i) uses ABC’s confidential information or trade secrets to provide Banking Business to, or solicit the Banking Business of, any customer of ABC or any of its subsidiaries, or assists any actual or potential competitor of ABC or any of its subsidiaries to provide Banking Business to, or solicit the Banking Business of, any such customer using such confidential information or trade secrets, or (ii) engages, directly or indirectly, as principal, agent, or trustee, or through the agency of any corporation, partnership, trade association, agent or agency, in any business or venture which competes with the Banking Business within a 50-mile radius of any office or branch office location of ABC or any of its subsidiaries as of the date hereof, then ABC may immediately terminate any compensation provided to Thomas herein.

         (f)      The term “Banking Business” shall mean the business of operating a financial institution or bank holding company, including the provision of retail, commercial, trust, mortgage and investment banking products and services and the management of companies that provide such products and services, as conducted by ABC and its subsidiaries during Thomas’ employment by ABC.

         (g)      Thomas shall immediately turn over to ABC all business correspondence, letters, papers, reports, customer lists, financial statements, credit reports or other confidential information or documents of ABC or its affiliates in the possession or control of Thomas, all of which writings are and will continue to be the sole and exclusive property of ABC or its affiliates, as the case may be.

Thomas acknowledges that irreparable loss and injury would result to ABC upon the breach of any of the covenants contained in this Section 5 and that damages arising out of such breach would be difficult to ascertain. Thomas hereby agrees that, in addition to all other remedies provided at law or in equity, ABC may petition and obtain from a court of law or equity, without the necessity of proving actual damages and without posting any bond or other security, both temporary and permanent injunctive relief to prevent a breach by Thomas of any covenant contained in this Section 5, and shall be entitled to an equitable accounting of all earnings, profits and other benefits arising out of any such breach. In the event that the provisions of this Section 5 should ever be deemed to exceed the time, geographic or any other limitations permitted by applicable law, then such provisions shall be deemed reformed to the maximum extent permitted thereby.

         6.       No Disparagement. Each party hereto covenants and agrees that such party will not, directly or indirectly, either in writing or by any other medium, make any disparaging, derogatory or negative statement, comment or remark about the other party hereto or, to the extent applicable, such party’s officers, directors, employees, shareholders, investors, lenders, agents, independent contractors, associates, representatives, consultants, attorneys and family

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members; provided, however, that this Section 6 shall not be construed to require any person or entity to provide other than truthful testimony when compelled to testify.

         7.       Confidentiality of this Agreement. The parties hereto agree and acknowledge that the nature, terms, conditions and substance of this Agreement are strictly confidential and shall be kept confidential by the parties hereto and all of their agents, representatives, employees, attorneys and spouses, as the case may be, from and after the date hereof and shall not be disclosed at any time to any other person or entity whomsoever without the prior written consent of the parties to this Agreement, except (a) as necessary in the course of preparing and filing appropriate tax returns or dealing with federal or state taxing authorities; (b) in the performance of personal or business financial planning; or (c) as necessary in connection with any party hereto obtaining advice from counsel. In addition, any term hereof may be disclosed during any lawsuit or other proceeding brought to enforce the terms of this Agreement or as required pursuant to legal subpoena or court order. It is expressly understood, however, that it is each party’s intent to strictly enforce the terms of this confidentiality provision and that each such party intends to exercise all of such party’s rights to the maximum extent provided by the law if there is a breach of this or any other provision of this Agreement. The parties hereto further agree that upon the receipt of a subpoena or other legal request for information contained in or regarding the nature, terms, conditions or substance of this Agreement by any party hereto, such party shall promptly notify the other party hereto in writing of such request, if such notice is permitted by law, and shall give such other party hereto the opportunity to object to the disclosure of such information before responding to any such request.

         8.       No Admission; No Further Uses. The parties hereto agree and acknowledge that this Agreement is the result of a compromise and shall never at any time or for any purpose be construed as an admission by either party to this Agreement of any wrongdoing or any liability or responsibility to the other party to this Agreement (or to any other person), and each of the parties to this Agreement specifically and vigorously disclaims any wrongdoing or any liability or responsibility to the other party to this Agreement (or to any other person). This Agreement shall not be used in any legal proceeding or for any purpose except to enforce the provisions hereof. All negotiations, proceedings and statements made in connection herewith shall be made without prejudice to any party hereto and shall not be deemed or construed to be admissions by any party of any act, omission, matter or proposition.

         9.       No Additional Reliance. The parties hereto agree and acknowledge that, in executing this Agreement, they did not rely upon and have not relied upon any representations or statements not expressly a part hereof that have been made by the other party to this Agreement or by the agents, representatives or attorneys of the other party hereto with regard to the subject matter, basis or effect hereof.

         10.      No Assignments. Each of the parties hereto represents that such party has not heretofore assigned or transferred, or purported to assign or transfer, to any person or entity, any claim or any portion thereof or interest therein, and agrees to indemnify, defend and hold the other party hereto harmless from any and all claims based on or arising out of any such assignment or transfer, or purported assignment or transfer, of any Claims or any portion thereof or interest therein.

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         11.      Further Assurances. Each party hereto covenants and agrees, without the necessity of any further consideration, to execute and deliver any and all such further documents and take any and all such other actions as may be necessary to appropriate to carry out the intent and purposes of this Agreement and to consummate the transactions contemplated hereby.

         12.      Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and upon their respective heirs, personal representatives, administrators, successors and assigns, as the case may be.

         13.      Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Georgia, without giving effect to any principles of conflicts of laws.

         14.      Specific Performance; Attorneys’ Fees. This Agreement may be specifically enforced, and injunctive relief may be granted to prevent a breach of this Agreement since there is no adequate remedy at law. Each party hereto shall be entitled to an award of its reasonable costs and expenses, including, without limitation, attorneys’ fees, in any successful proceeding brought hereunder against one or more of the parties hereto.

         15.      Severability. Should any part, term or provision of this Agreement be declared or determined by any court to be illegal, invalid or otherwise unenforceable, the legality, validity and enforceability of the remaining parts, terms or provisions hereof shall be deemed not to be affected, and this Agreement shall be interpreted and enforced as if such illegal, invalid or unenforceable part, term or provision, to the extent possible, is not contained herein.

         16.      Construction. As used in this Agreement, the masculine shall include the feminine or neuter gender, and the singular shall include the plural, whenever the context so indicates or requires.

         17.      No Release from Future Actions or Inactions. Nothing contained herein shall be construed as a release by either of the parties hereto of, or an agreement by either of the parties hereto not to sue on, any claims, manner of actions, causes of action, whether at law or in equity, suits, judgments, debts, liens, contracts, agreements, promises, liabilities, demands, damages, losses, costs, expenses or disputes (including attorneys’ fees and costs) arising out of any act, omission, matter, cause, conduct, claim, event or thing whatsoever which may occur from the date of the execution hereof to the end of time.

         18.      Entire Agreement. This Agreement sets forth the complete and exclusive statement of the terms of the agreement between the parties hereto and fully supersedes any and all prior agreements or understandings between the parties hereto pertaining to the subject matter hereof.

         19.      Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be an original, and all of which together shall be deemed to be one and the same Agreement. Executed counterparts may be delivered via facsimile transmission.

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         20.      Participation in Negotiations. EACH OF THE UNDERSIGNED PARTIES ACKNOWLEDGES AND AGREES THAT SUCH PARTY HAS PARTICIPATED IN THE NEGOTIATION OF AND CAREFULLY READ EACH OF THE TERMS AND PROVISIONS OF THIS TERMINATION AGREEMENT AND UNDERSTANDS ITS CONTENTS, AND THAT SUCH PARTY EXECUTED THIS TERMINATION AGREEMENT AS SUCH PARTY’S OWN FREE ACT AND DEED.

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         IN WITNESS WHEREOF, Thomas has executed and delivered this Agreement, and ABC has caused this Agreement to be executed and delivered by its duly authorized officer, all as of the date and year first written above.

/s/ MARK D. THOMAS

MARK D. THOMAS

ABC BANCORP
By:	/s/ KENNETH J. HUNNICUTT
	Kenneth J. Hunnicutt, Chief Executive Officer

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EX-99.1

Exhibit 99.1

SECTION 906 CERTIFICATION

I, Kenneth J. Hunnicutt, Chief Executive Officer of ABC Bancorp (the “Company”), do hereby certify, in accordance with 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.	The Quarterly Report on Form 10-Q of the Company for the period ending September 30, 2002 (the “Periodic Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and
2.	The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated  November 13th, 2002
	/s/ KENNETH J. HUNNICUTT
	KENNETH J. HUNNICUTT, Chief Executive Officer

EX-99.2

Exhibit 99.2

SECTION 906 CERTIFICATION

I, W. Edwin Lane, Jr., Chief Financial Officer of ABC Bancorp (the “Company”), do hereby certify, in accordance with 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.	The Quarterly Report on Form 10-Q of the Company for the period ending September 30, 2002 (the “Periodic Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and
2.	The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  November 13, 2002
	/s/ W. EDWIN LANE, JR.
	W. EDWIN LANE, JR., Chief Financial Officer