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, 2003

OR

¨ 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	58-1456434
(State of incorporation)	(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  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2) of the Exchange  Act). Yes   x    No  ¨

There were 9,783,854 shares of Common Stock outstanding as of September 30, 2003.

ABC BANCORP

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2003

TABLE OF CONTENTS

Item			Page
PART I - FINANCIAL INFORMATION
1.	Financial Statements
		Consolidated Balance Sheets	3
		Consolidated Statements of Income and Comprehensive Income	4
		Consolidated Statements of Cash Flows	6
		Note to Consolidated Financial Statements	7
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		9
3.	Quantitative and Qualitative Disclosures about Market Risk		13
4.	Controls & Procedures		14
PART II - OTHER INFORMATION
4.	Submission of Matters to a Vote of Securities Holders		14
6.	Exhibits and Reports on Form 8-K		14
	Signature		15
	Exhibit Index		16

2

ABC BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

(Unaudited)

	September 30 2003			December 31 2002
Assets
Cash and due from banks	$	53,073		$	123,077
Securities available for sale, at fair value		179,919			184,081
Loans		852,508			833,447
Less allowance for loan losses		15,433			14,868
Loans, net		837,075			818,579
Premises and equipment, net		25,137			25,327
Intangible assets		3,542			4,309
Goodwill		19,240			19,240
Other assets		19,546			17,864
	$	1,137,532		$	1,192,477
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing demand		122,968			131,749
Interest-bearing demand		255,526			258,111
Savings		67,431			61,557
Time, $100,000 and over		152,859			155,048
Other time		267,028			309,720
Total deposits		865,812			916,185
Federal funds purchased & securities sold under agreements to repurchase		4,251			8,204
Other borrowings		113,084			117,290
Other liabilities		8,551			8,814
Trust preferred securities		34,500			34,500
Total liabilities		1,026,198			1,084,993
Stockholders' equity
Common stock, par value $1; 30,000,000 shares authorized; 10,849,922 and 10,824,257 shares issued respectively		10,850			10,824
Capital surplus		46,340			45,946
Retained earnings		63,929			59,210
Accumulated other comprehensive income		677			1,636
Unearned compensation		(603	)		(443	)
		121,193			117,173
Less cost of 1,066,068 and 1,053,321shares acquired for the treasury		(9,859	)		(9,689	)
Total stockholders' equity		111,334			107,484
	$	1,137,532		$	1,192,477

See Notes to Consolidated Financial Statements.

3

ABC BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

(Dollars in Thousands)

(Unaudited)

	2003			2002
Interest income
Interest and fees on loans	$	14,510		$	15,746
Interest on taxable securities		1,375			2,077
Interest on nontaxable securities		37			47
Interest on deposits in other banks		37			216
Interest on fed funds sold		—			—
		15,959			18,086
Interest expense
Interest on deposits		3,277			4,833
Interest on federal funds purchased and securities sold under agreements to repurchase		12			20
Interest on other borrowings		1,947			1,996
		5,236			6,849
Net interest income		10,723			11,237
Provision for loan losses		1,061			2,224
Net interest income after provision for loan losses		9,662			9,013
Other income
Service charges on deposit accounts		2,709			2,669
Other service charges, commissions and fees		837			746
Other		—			10
Gain on sale of securities		—			1,617
		3,546			5,042
Other expense
Salaries and employee benefits		4,944			5,185
Equipment and occupancy expense		1,187			1,271
Amortization of intangible assets		256			462
Other operating expenses		2,609			3,314
		8,996			10,232
Income before income taxes		4,212			3,823
Applicable income taxes		1,368			1,253
Net income	$	2,844			2,570
Other comprehensive income, net of tax:
Unrealized holding gains(losses) arising during period, net of tax	$	(874	)	$	783
Reclassification adjustment for gains included in net income, net of tax	$	—		$	(1,067	)
Comprehensive income	$	1,970		$	2,286
Income per common share-Basic	$	0.29		$	0.26
Income per common share-Diluted	$	0.29		$	0.26
Average shares outstanding		9,775,317			9,852,046

See Notes to Consolidated Financial Statements.

4

ABC BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

(Dollars in Thousands)

(Unaudited)

	2003			2002
Interest income
Interest and fees on loans	$	43,730		$	46,367
Interest on taxable securities		4,534			6,463
Interest on nontaxable securities		118			144
Interest on deposits in other banks		402			754
Interest on fed funds sold		—			1
		48,784			53,729
Interest expense
Interest on deposits		11,238			15,731
Interest on federal funds purchased and securities sold under agreements to repurchase		47			94
Interest on other borrowings		5,879			5,544
		17,164			21,369
Net interest income		31,620			32,360
Provision for loan losses		3,043			3,957
Net interest income after provision for loan losses		28,577			28,403
Other income
Service charges on deposit accounts		7,919			7,476
Other service charges, commissions and fees		2,504			2,341
Other		262			219
Gain (loss) on sale of securities		(1	)		1,639
		10,684			11,675
Other expense
Salaries and employee benefits		14,700			14,448
Equipment and occupancy expense		3,554			3,695
Amortization of intangible assets		767			1,403
Other operating expenses		7,756			9,166
		26,777			28,712
Income before income taxes		12,484			11,366
Applicable income taxes		4,061			3,741
Net income	$	8,423		$	7,625
Other comprehensive income, net of tax:
Unrealized holding gains (losses) arising during period, net of tax	$	(960	)	$	1,650
Reclassification adjustment for (gains) losses included in net income, net of tax	$	1		$	(1,082	)
Comprehensive income	$	7,464		$	8,193
Income per common share-Basic	$	0.86		$	0.77
Income per common share-Diluted	$	0.86		$	0.77
Average shares outstanding		9,768,227			9,883,491

See Notes to Consolidated Financial Statements.

5

ABC BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

(Dollars in Thousands)

(Unaudited)

	2003			2002
OPERATING ACTIVITIES
Net Income	$	8,423		$	7,625
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,338			1,743
Provision for loan losses		3,043			3,957
Amortization of intangible assets		767			1,403
Other prepaids, deferrals and accruals, net		(1,191	)		3,381
Total adjustments		3,957			10,484
Net cash provided by operating activities		12,380			18,109
INVESTING ACTIVITIES
Proceeds from maturities of securities available for sale		57,875			42,309
Purchase of securities available for sale		(75,789	)		(68,403	)
Proceeds from sales of securities available for sale		20,624			45,538
Decrease in federal funds sold		—			44
Increase in loans		(21,539	)		(46,314	)
Purchase of premises and equipment		(1,148	)		(1,559	)
Net cash used in investing activities		(19,977	)		(28,385	)
FINANCING ACTIVITIES
Net decrease in deposits		(50,373	)		(38,874	)
Net decrease in federal funds purchased and
securities sold under agreements to repurchase		(3,953	)		(566	)
Increase (decrease) in other borrowings		(4,206	)		22,539
Dividends paid		(3,705	)		(3,550	)
Purchase treasury stock		(170	)		(2,283	)
Net cash used in financing activities		(62,407	)		(22,734	)
Net decrease in cash and due from banks	$	(70,004	)	$	(33,010	)
Cash and due from banks at beginning of period		123,077			157,475
Cash and due from banks at end of period	$	53,073		$	124,465

See Notes to Consolidated Financial statements.

6

NOTE 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, 2002. The results of operations for the nine months ended September 30, 2003 are not necessarily indicative of the results to be expected for the full year.

Stock Compensation Plans

At September 30, 2003, the Company has two stock-based employee compensation plans. The Company accounts for those plans under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

	For the Three Months Ended September 30,						For The Nine Months Ended September 30,
	2003			2002			2003			2002
	(Dollars in Thousands)
Net income, as reported	$	2,844		$	2,570		$	8,423		$	7,625
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(17	)		(15	)		(47	)		(38	)
Pro forma net income	$	2,827		$	2,555		$	8,376		$	7,587
Earnings per share:
Basic - as reported	$	.29		$	.26		$	.86		$	.77
Basic - pro forma	$	.29		$	.26		$	.86		$	.77
Diluted - as reported	$	.29		$	.26		$	.86		$	.77
Diluted - pro forma	$	.28		$	.25		$	.85		$	.76

7

Accounting Standards

In November 2002, the Financial Accounting Standards Board issued FASB Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34”. FIN 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. The disclosures required by FIN 45 improve the transparency of the financial statement information about the guarantor’s obligations and liquidity risks related to guarantees issued. This interpretation also incorporates, without change, the guidance in Financial Accounting Standards Board Interpretation No. 34 (“FIN 34”), “Disclosure of Indirect Guarantees of Indebtedness of Others”, which is being superceded. FIN 45 also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the obligations it has undertaken in issuing the guarantee, including its ongoing obligation to stand ready to perform over the term of the guarantee in the event that the specified triggering events or conditions occur. The initial recognition and initial measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor’s fiscal year-end. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of FIN 45 did not have a material impact on the Company’s consolidated financial statements.

In May 2003, the Financial Accounting Standards Board issued Statement No. 150 (“Statement 150”), “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity”. Statement 150 requires certain financial instruments that have characteristics of both liabilities and equity to be classified as a liability on the balance sheet. Prior to the issuance of Statement 150, the Company classified trust preferred securities as a liability on the consolidated balance sheet and its related interest cost as interest expense on the consolidated statement of income, which is consistent with the requirements of Statement 150. Statement 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after September 15, 2003. Statement 150 will be effected by reporting the cumulative effect of a change in accounting principle for contracts created before the issuance date and still existing at the beginning of that interim period. The adoption of Statement 150 did not have an impact on the Company’s consolidated financial statements.

8

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, 2003 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, 2003, total capital increased $3,850,000 to $111,334,000. Of this change, $4,718,000 resulted from the retention of earnings (net of $3,705,000 dividends declared to shareholders), plus $261,000 for the accrual for grants of restricted shares as incentive to certain employees, less a decrease of $959,000 in other comprehensive income, net of taxes and $170,000 for the purchase of treasury stock.

At September 30, 2003, ABC had no binding commitments for capital expenditures. The Company anticipates that approximately $500,000 will be required for capital expenditures during the remainder of 2003. 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.

9

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 3.96% and 4.17% during the nine months ended September 30, 2003 and 2002, respectively, a decrease of 21 basis points. This decrease is mostly attributable to the current interest rate environment. The Federal Reserve Bank has systematically lowered the federal funds rate from 6.50% as of December 31, 2000 to 1.00% as of June 25, 2003. The prime interest rate, which is used by most banks as a guideline for pricing loans, tracks the federal funds rate and has, therefore, also decreased by 550 basis points over the last 30 months to 4.00% as of June 25, 2003 (a 44-year low). The resulting reduction in interest income because of the lower loan rates has outpaced the reduction in interest expense that is realized by lowering rates paid on maturing deposits and borrowings. Thus, the net interest margin has decreased.

Net interest income was $31.6 million as compared to $32.4 million during the nine months ended September 30, 2003 and 2002, respectively, representing a decrease of 2.47%

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 $3,043,000 and $3,957,000 during the nine months ended September 30, 2003 and 2002, respectively. Charge offs, net of recoveries, for the first nine months of 2003 amounted to $2,478,000 as compared to $4,093,000 for the nine months ended September 30, 2002.

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 ongoing reviews of all loans. A particular emphasis is placed on non-accruing, past due and other loans in which management has identified possible weaknesses, and that require special attention and/or action. Other factors used in determining the adequacy of the reserve are management’s judgment about factors affecting loan quality and assumptions about the local and national economy. All of these factors are considered and then grades are assigned to each loan. A calculation is then performed that adds a weighted percentage of the balance in each loan grade to additional specific reserves for certain loans based on management’s judgment. The result of this standard calculation determines the amount of reserve to be recorded. Management considers the amount of reserve determined by this process adequate to cover potential losses in the portfolio.

10

The allowance for loan losses totaled $15.4 million and $14.9 million as of September 30, 2003 and December 31, 2002, respectively. The allowance for loan losses as a percentage of total loans was 1.81% and 1.78% as of September 30, 2003 and December 31, 2002, respectively.

Nonperforming assets were $9.2 million and $9.1 million as of September 30, 2003 and December 31, 2002, respectively. The ratio of nonperforming assets as a percentage of the loan loss reserve was 59.74% and 61.04% as of September 30, 2003 and December 31, 2002, respectively.

Following is a comparison of noninterest income for the nine months ended September 30, 2003 and 2002 (dollars in thousands).

	Nine Months Ended September 30,
	2003			2002
Service charges on deposits	$	7,919		$	7,476
Other service charges, commissions and fees		2,504			2,341
Other income		262			219
Gain (loss) on sale of securities		(1	)		1,639
Total non-interest income	$	10,684		$	11,675

Total noninterest income for the nine months ended September 30, 2003 was $991,000 lower than during the same period in 2002. This decrease is mainly reflected in the sale of securities, a decrease of $1,640,000 from the same period in 2002, offset by an increase of $443,000, which relates to a 5.9% increase in service charges on deposit accounts which is primarily attributable to a new program adopted by the Company that expanded the number of customers allowed to overdraw their deposit accounts and the number of overdrafts each customer could incur. The program also expanded the monitoring and control over overdrafts to ensure that the additional income generated would substantially exceed the anticipated increase in overdrafts charged off. The remaining $206,000 increase in noninterest income relates to normal changes from period to period.

Following is an analysis of noninterest expense for the nine months ended September 30, 2003 and 2002 (dollars in thousands).

	Nine Months Ended September 30,
	2003		2002
Salaries and employee benefits	$	14,700	$	14,448
Occupancy and equipment expense		3,554		3,695
Amortization of intangible assets		767		1,403
Other expense		7,756		9,166
Total noninterest expense	$	26,777	$	28,712

11

Total noninterest expense for the nine months ended September 30, 2003 was $1,935,000 lower than during the same period in 2002.

Salaries and employee benefits for the nine months ended September 30, 2003 were $252,000, or 1.74%, higher than during the same period in 2002. Amortization of intangible assets was $636,000 lower for the nine months ended September 30, 2003 as compared to September 30, 2002. This decrease resulted primarily from the adoption of SFAS 147 during the fourth quarter of 2002. Other expense for the nine months ended September 30, 2003 decreased $1,410,000 as compared to September 30, 2002. This decrease resulted from conversion expense associated with the data processing conversion of the First Bank of Brunswick in 2002 of $636,000 and the remaining $774,000 resulted mainly from controllable cost efficiencies initiated by the Company. Postage expense was reduced $70,000, supplies expense was reduced $99,000 and data processing expense decreased $69,000. Also affecting this variance was record retention expense which decreased $151,000 and the expense associated with disposing of foreclosed loan collateral decreased $200,000.

Following is a condensed summary of net income during the nine months ended September 30, 2003 and 2002 (dollars in thousands).

	Nine Months Ended September 30,
	2003		2002
Net interest income	$	31,620	$	32,360
Provision for loan losses		3,043		3,957
Other income		10,684		11,675
Other expense		26,777		28,712
Income before income taxes		12,484		11,366
Applicable income taxes		4,061		3,741
Net income	$	8,423	$	7,625

Net income increased $798,000, or 10.47%, to $8,423,000 for the nine months ended September 30, 2003 as compared to $7,625,000 for the nine months ended September 30, 2002. Net interest income of ABC and its subsidiaries decreased $740,000, the provision for loan losses decreased by $914,000 and all other noninterest expense decreased by $1,935,000.

12

Comparison of Balance Sheets

Total assets decreased by $54 million, or 4.53%, to $1,138 million at September 30, 2003 from $1,192 million at December 31, 2002.

Total earning assets decreased by $51 million, or 4.65%, to $1,045 million at September 30, 2003 from $1,096 million at December 31, 2002.

Loans, net of the allowance for loan losses, increased by $18 million, or 2.20%, to $837 million at September 30, 2003 from $819 million at December 31, 2002.

Total deposits decreased by $50 million, or 5.46%, to $866 million at September 30, 2003 from $916 million at December 31, 2002. Approximately 14.20% and 14.41% of deposits were noninterest-bearing as of September 30, 2003 and December 31, 2002, respectively.

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 quarterly basis. The most recent simulation model projects net interest income would increase 5.74% if rates rise gradually over the next year. On the other hand, the model projects net interest income to decrease 5.05% if rates decline over the next year.

13

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, 2003.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

  Exhibit 10.1 Executive Employment Agreement between ABC Bancorp and Jon S. Edwards dated as of July 1, 2003.

  Exhibit 31.1 Section 302 Certification

  Exhibit 31.2 Section 302 Certification

  Exhibit 32.1 Section 906 Certification

  Exhibit 32.2 Section 906 Certification

(b)   Reports on Form 8-K

  None

14

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
November 10, 2003		/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)

15

EXHIBIT INDEX

Exhibit No.	Description
10.1	Executive Employment Agreement between ABC Bancorp and Jon S. Edwards dated as of July 1, 2003.
31.1	Section 302 Certification
31.2	Section 302 Certification
32.1	Section 906 Certification
32.2	Section 906 Certification

16

EX-10.1

Exhibit 10.1

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”), is entered into as of the 1st day of July, 2003, by and between ABC BANCORP, a Georgia corporation (“Employer”), and Jon S. Edwards, an individual resident of the State of Georgia (“Executive”).

W I T N E S S E T H:

WHEREAS, Employer wishes to employ Executive as its South Regional Executive, and Executive wishes to continue to serve in such position, on the terms and conditions set forth herein;

WHEREAS, Employer and Executive are parties to that certain Severance Protection and Non-Competition Agreement dated as of March 8, 1999 (the “Severance Protection Agreement”), and Employer and Executive each desire to terminate the Severance Protection Agreement contemporaneous with the execution and delivery hereof;

WHEREAS, Executive desires to be assured of a secure minimum compensation from Employer for his services over a defined term;

WHEREAS, Employer desires to assure the continued services of Executive on behalf of Employer on an objective and impartial basis and without distraction or conflict of interest in the event of an attempt by any person or entity to obtain control of Employer;

WHEREAS, Employer desires to provide fair and reasonable benefits to Executive on the terms and subject to the conditions set forth in this Agreement; and

WHEREAS, Employer desires reasonable protection of its confidential business and customer information which it has developed over the years at substantial expense and assurance that Executive will not compete with Employer for a reasonable period of time after termination of his employment with Employer, except as otherwise provided herein;

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

1. Termination of Severance Protection Agreement. Notwithstanding any of the terms and conditions of the Severance Protection Agreement to the contrary with respect to the termination thereof or otherwise, Employer and Executive hereby terminate the Severance Protection Agreement, effective as of the date hereof. Employer and Executive acknowledge and agree that neither party to the Severance Protection Agreement shall have or possess any rights against or obligations to the other party thereto with respect to any of the representations, warranties, covenants and agreements set forth therein. In addition, Employer and Executive

covenant and agree that the termination of the Severance Protection Agreement and the rights granted therein shall not constitute a breach thereof or default thereunder or create any further or additional duties or obligations of the parties thereto.

2. Employment. Upon the terms and subject to the conditions set forth in this Agreement, Employer employs Executive as its South Regional Executive, and Executive hereby accepts such employment. Notwithstanding the foregoing, during the Initial Term (as hereinafter defined) or any Additional Term (as hereinafter defined) hereof, Employer may, based on reasonable business considerations, modify the responsibilities or duties of the foregoing position, or at its sole discretion, assign Executive to other positions; provided, however, that such duties shall be of the same character as those generally associated with the office held by Executive.

3. Position and Duties. Executive agrees to serve as the South Regional Executive of Employer as set forth in Section 2 hereof and to perform such duties as may reasonably be assigned to him by the Board of Directors (the “Board”) or the Chief Executive Officer of Employer; provided, however, that such duties shall be of the same character as those generally associated with the office held by Executive. Employer shall not, without the written consent of Executive, relocate or transfer Executive to a location other than a location within the geographic boundaries of the State of Georgia. During the Initial Term or any Additional Term of this Agreement, Executive agrees that he will serve Employer faithfully and to the best of his ability and that he will devote his full business time, attention and skills to Employer’s business; provided, however, that the foregoing shall not be deemed to restrict Executive from devoting a reasonable amount of time and attention to the management of his personal affairs and investments, so long as such activities do not interfere with the responsible performance of Executive’s duties hereunder.

4. Term. The term of this Agreement shall begin on the date hereof (the “Effective Date”) and, unless otherwise earlier terminated pursuant to Section 9 hereof, shall end on the date which is one (1) year following the Effective Date (hereinafter referred to as the “Initial Term”). The Initial Term shall be extended automatically for an additional one (1) year term (each, an “Additional Term”) on the last day of the Initial Term or each Additional Term hereof unless either party hereto gives written notice to the other party not to so extend no later than ninety (90) days prior to the expiration of the Initial Term or any subsequent Additional Term, as the case may be, in which case no further extension shall occur and the term of this Agreement shall end at the end of the Initial Term or the Additional Term during which such notice not to so extend was given; provided, however, that, notwithstanding any notice by Employer not to extend, the term of this Agreement shall not expire prior to the expiration of twelve (12) months after the occurrence of a Change of Control (as hereinafter defined); and provided further, however, that this Agreement shall automatically terminate (and the Initial Term or any Additional Term shall thereupon end) without notice when Executive attains 65 years of age.

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5. Compensation.

(A) Executive shall receive an annual salary of One Hundred, Forty-Two Thousand and no/100 Dollars ($142,500.00) (“Base Compensation”) payable at regular intervals in accordance with Employer’s normal payroll practices now or hereafter in effect. Employer may consider and declare from time to time increases in the salary it pays Executive and thereby increase the Base Compensation. Prior to (but not after) a Change of Control, Employer may also declare decreases in the salary it pays Executive if the operating results of Employer are significantly less favorable than those for its immediately preceding fiscal year, and Employer makes similar decreases in the salary it pays to other executive officers of Employer; provided, however, that Employer shall not be permitted to decrease Executive’s annual salary below $142,500.00 during the Initial Term hereof. After a Change of Control, Employer shall consider and declare salary increases based upon the following standards: (1) inflation; (2) adjustments to the salaries of other senior management personnel; and (3) past performance of Executive and the contribution which Executive makes to the business and profits of Employer. Any and all increases or decreases in Executive’s salary pursuant to this Section 5(A) shall cause the level of Base Compensation to be increased or decreased by the amount of each such increase or decrease for purposes of this Agreement. The increased or decreased level of Base Compensation as provided in this Section 5(A) shall become the level of Base Compensation for the remainder of the Initial Term or any Additional Term until there is a further increase or decrease in Base Compensation as provided herein.

(B) In addition to his Base Compensation, Executive shall be awarded, during each calendar year during the Initial Term or any Additional Term hereof, an annual bonus (an “Annual Bonus”) either pursuant to a bonus or incentive plan of Employer or otherwise on terms no less favorable than those awarded to other executive officers of Employer.

6. Other Benefits. So long as Executive is employed by Employer pursuant to this Agreement, he shall be included as a participant in all present and future employee benefit, retirement and compensation plans of Employer generally available to its employees, consistent with his Base Compensation and his position with Employer, including, without limitation, Employer’s 401(k) Profit Sharing Plan, and Executive and his dependents shall be included in Employer’s hospitalization, major medical, disability and group life insurance plans. Executive acknowledges that, notwithstanding any of the provisions of this Agreement, any of Employer’s benefit plans and programs may be modified from time to time and that Employer is not required to continue any plan or program currently in effect or adopted hereafter; provided, however, that each of the above benefits shall continue in effect on terms no less favorable than those for other executive officers of Employer (as permitted by law) during the Initial Term or any Additional Term hereof (A) unless prior to a Change of Control, the operating results of Employer are significantly less favorable than those for its immediately preceding fiscal year, or (B) unless (either before or after a Change of Control) (1) changes in the accounting or tax treatment of such plans would materially adversely affect Employer’s operating results or financial condition, and (2) the Board concludes that modifications to such plans need to be made to avoid such adverse effects.

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7. Expenses. So long as Executive is employed by Employer pursuant to this Agreement, Executive shall receive reimbursement from Employer for all reasonable business expenses incurred in the course of his employment by Employer upon proper submission to Employer of written vouchers and statements for reimbursement. [In addition, Employer shall (A) provide to Executive an automobile and pay for all costs associated therewith during the Initial Term and any Additional Term hereof, and (B) reimburse Executive for all mileage driven by Executive in his personal automobile in connection with his duties hereunder in accordance with Employer’s mileage reimbursement policy as in effect from time to time. Employer shall also use its reasonable best efforts to provide to Executive a country club membership for business and personal use and shall pay for all initiation fees and monthly dues related thereto; provided, however, that, if such membership is not already owned by Executive as of the date hereof, then such membership shall be and remain the sole property of Employer.]

8 Vacation. Executive shall be entitled to four (4) weeks paid vacation during each calendar year of Executive’s employment hereunder.

9. Termination. Subject to the respective continuing obligations of the parties hereto, including, without limitation, those set forth in Subsections 11(A), 11(B), 11(C) and 11(D) hereof, Executive’s employment by Employer hereunder may be terminated prior to the expiration of the Initial Term or any Additional Term hereof as follows:

(A) Employer, by action of the Board [or the Chief Executive Officer of Employer] and upon written notice to Executive, may terminate Executive’s employment with Employer immediately for cause. For purposes of this Subsection 9(A), “cause” for termination of Executive’s employment shall exist (a) if Executive is convicted of (from which no appeal may be taken), or pleads guilty or nolo contendere to, any act of fraud, misappropriation or embezzlement, or any felony, (b) if, in the determination of the Board or the Chief Executive Officer of Employer, Executive has engaged in gross or willful misconduct materially damaging to the business of Employer (it being understood, however, that neither conduct pursuant to Executive’s exercise of his good faith business judgment nor unintentional physical damage to any property of Employer by Executive shall be a ground for such a determination by the Board), or (c) if Executive has failed, without reasonable cause, to follow reasonable written instructions of the Board or the Chief Executive Officer of Employer consistent with Executive’s position with Employer and, after written notice from Employer of such failure, Executive at any time thereafter again so fails.

(B) Executive, by written notice to Employer, may terminate his employment with Employer immediately for good reason. For purposes of this Subsection 9(B), “good reason” for termination shall mean a good faith determination by Executive, in Executive’s sole and absolute judgment, that any one or more of the following events has occurred, without Executive’s express written consent:

(1) after a Change of Control, a change in Executive’s reporting responsibilities, titles or offices as in effect immediately prior to the Change of Control, or any removal of Executive from, or any failure to re-elect Executive to, any of Executive’s positions that he held immediately prior to the Change of Control, which has the effect of diminishing Executive’s responsibility or authority;

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(2) after a Change of Control, a reduction by Employer in Executive’s Base Compensation as in effect immediately prior to the Change of Control or as the same may be increased from time to time or a change in the eligibility requirements or performance criteria under any bonus, incentive or compensation plan, program or arrangement under which Executive is covered immediately prior to the Change of Control which adversely affects Executive;

(3) at the time of a Change of Control, Employer requires Executive to be based anywhere other than a job location within the geographic boundaries of the State of Georgia;

(4) after a Change of Control and without replacement by a plan providing benefits to Executive substantially equal to or greater than those discontinued, the failure by Employer to continue in effect, within its maximum stated term, any pension, bonus, incentive, stock ownership, purchase, option, life insurance, health, accident, disability, or any other employee benefit plan, program or arrangement in which Executive is participating at the time of the Change of Control, or the taking of any action by Employer after a Change of Control that would adversely affect Executive’s participation or materially reduce Executive’s benefits under any of such plans;

(5) after a Change of Control, the taking of any action by Employer that would materially adversely affect the physical conditions existing at the time of the Change of Control in or under which Executive performs his employment duties, provided that Employer may take action with respect to such conditions after a Change of Control so long as such conditions are at least commensurate with the conditions in or under which an officer of Executive’s status would customarily perform his employment duties; or

(6) after a Change of Control, a material change in the fundamental business philosophy, direction and precepts of Employer and its subsidiaries, considered as a whole, as the same existed prior to the Change of Control.

Any event described in Subsection 9(B)(1) through (6) hereof which occurs prior to a Change of Control but which Executive reasonably demonstrates (x) was at the request of a third party who has indicated an intention, or taken steps reasonably calculated, to effect a Change of Control or (y) otherwise arose in connection with, or in anticipation of, a Change of Control which actually occurs, shall constitute good reason for purposes hereof, notwithstanding that it occurred prior to a Change of Control.

(C) Executive, upon ninety (90) days written notice to Employer, may terminate his employment with Employer without good reason.

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

(E) A “Change of Control” shall mean any of the following events:

(1) 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 Employer:

(a) the merger or consolidation of Employer with, or the sale of all or substantially all of the assets of Employer 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 Employer representing twenty percent (20%) or more of the total combined voting power of Employer’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 Employer 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 Employer approve any plan or proposal for the liquidation or dissolution of Employer.

(2) 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.

10. Compensation Upon Termination. In the event of termination of Executive’s employment with Employer pursuant to Section 9 hereof, compensation shall continue to be paid by Employer to Executive as follows:

(A) In the event of a termination pursuant to Subsection 9(A) or Subsection 9(C) hereof, compensation provided for herein (including Base Compensation and an Annual Bonus) shall continue to be paid, and Executive shall continue to participate in the employee benefit,

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retirement, compensation plans and other perquisites as provided in Section 6 hereof, through and including the Date of Termination (as hereinafter defined) specified in the Notice of Termination (as hereinafter defined). Any benefits payable under insurance, health, retirement and bonus plans as a result of Executive’s participation in such plans through the Date of Termination specified in the Notice of Termination shall be paid when due under such plans.

(B) In the event of a termination pursuant to Subsection 9(B) hereof, compensation provided for herein (including Base Compensation and an Annual Bonus) shall continue to be paid, and Executive shall continue to participate in the employee benefit, retirement, compensation plans and other perquisites as provided in Section 6 hereof, through the Date of Termination specified in the Notice of Termination, and any benefits payable under insurance, health, retirement and bonus plans as a result of Executive’s participation in such plans through the Date of Termination specified in the Notice of Termination shall be paid when due under such plans. In addition, if the event of termination pursuant to Subsection 9(B) hereof occurs within twelve (12) months after the date of a Change of Control, then, subject to the terms of Section 13 hereof, (1) Executive shall be entitled to continue to receive from Employer for one (1) additional 12-month period his Base Compensation at the rates in effect at the time of termination plus an Annual Bonus in an amount equal to at least forty percent (40%) of such Base Compensation as of the date of the event of termination, payable in accordance with Employer’s standard payment practices then existing; (2) Executive shall be entitled to continue to participate for one (1) additional 12-month period in each employee welfare benefit plan (as such term is defined in the Employment Retirement Income Security Act of 1974, as amended) in which Executive was entitled to participate immediately prior to the date of his termination, unless an essentially equivalent and no less favorable benefit is provided by a subsequent employer of Executive, provided that if the terms of any such employee welfare benefit plan or applicable laws do not permit continued participation by Executive, Employer will arrange to provide to Executive a benefit substantially similar to, and no less favorable than, the benefit he was entitled to receive under such plan at the end of the period of coverage; (3) Employer shall contribute the maximum contributions allowable under Employer’s 401(k) Profit Sharing Plan, or any successor plans thereto, for the benefit of Executive; and (4) Executive shall be entitled to receive payment from Employer for reasonable relocation expenses if Executive relocates within five hundred (500) miles of Moultrie, Georgia if such relocation occurs within one hundred eighty (180) days after the Date of Termination specified in the Notice of Termination.

(C) In the event of a termination pursuant to Subsection 9(D) hereof, compensation provided for herein (including Base Compensation and an Annual Bonus) shall continue to be paid, and Executive shall continue to participate in the employee benefit, retirement, and compensation plans and other perquisites as provided in Section 6 hereof, (1) in the event of Executive’s death, through the date of death, or (2) in the event of Executive’s disability, through the Date of Termination specified in the Notice of Termination. Any benefits payable under insurance, health, retirement and bonus plans as a result of Executive’s participation in such plans through the date of death or the Date of Termination specified in the Notice of Termination, as the case may be, shall be paid when due under those plans.

(D) Employer will permit Executive or his personal representative(s) or heirs, during a period of ninety (90) days following the Date of Termination of Executive’s employment by

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Employer (as specified in the Notice of Termination) for the reasons set forth in Subsection 9(B) hereof, to purchase all of the stock of Employer that would be issuable under all outstanding stock options, if any, previously granted by Employer to Executive under any Employer stock option plan then in effect, whether or not such options are then exercisable, at a cash purchase price equal to the purchase price as set forth in such outstanding stock options.

11. Restrictive Covenants.

(A) Executive acknowledges that (1) Employer has separately bargained and paid additional consideration for the restrictive covenants herein; and (2) Employer will provide certain benefits to Executive hereunder in reliance on such covenants in view of the unique and essential nature of the services Executive will perform on behalf of Employer and the irreparable injury that would befall Employer should Executive breach such covenants.

(B) Executive further acknowledges that his services are of a special, unique and extraordinary character and that his position with Employer will place him in a position of confidence and trust with employees of Employer and its subsidiaries and affiliates and with Employer’s other constituencies and will allow him access to trade secrets and confidential information concerning Employer and its subsidiaries and affiliates.

(C) Executive further acknowledges that the type and periods of restrictions imposed by the covenants in this Section 11 are fair and reasonable and that such restrictions will not prevent Executive from earning a livelihood.

(D) Having acknowledged the foregoing, Executive covenants and agrees with Employer as follows:

(1) For a period of two (2) years after the date hereof, Executive shall not divulge or furnish any confidential information of Employer acquired by him while employed by Employer to any person, firm or corporation, other than to Employer 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 Employer) directly or indirectly for Executive’ own benefit or for the benefit of any person, firm or corporation other than Employer. For purposes hereof, the term “confidential information” shall mean Employer’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 Executive or furnished to Executive by third parties at the direction of Employer, concerning the policies, plans, procedures or customers of Employer or its subsidiaries or the business, financial condition, operations, assets, liabilities and contingencies of Employer or its subsidiaries.

(2) Executive 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 Employer and its subsidiaries any trade secrets (as defined in §10-1-761 of the Official Code of Georgia Annotated) of Employer or any of its subsidiaries for as long as they remain trade secrets.

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(3) For a period of one (1) year after termination of Executive’s employment (a) by Employer for any of the reasons set forth in Subsection 9(A) of this Agreement, or (b) by Executive pursuant to Section 4 or Subsection 9(C) of this Agreement, Executive shall not directly or indirectly provide Banking Business (as hereinafter defined) to, or solicit the Banking Business of, any customer of Employer or any of its subsidiaries at the time of such provision of services or solicitation which Executive served either alone or with others while employed by Employer in any city, town, borough, township, village or other place in which Executive performed services for Employer while employed by it, or assist any actual or potential competitor of Employer or any of its subsidiaries to provide banking or bank-related services to or solicit any such customer’s banking or bank-related business in any such place. 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 Employer and its subsidiaries during Executive’s employment by Employer.

(4) While Executive is employed by Employer and for a period of two (2) years after termination of Executive’s employment (a) by Employer for any of the reasons set forth in Subsection 9(A) of this Agreement, or (b) by Executive pursuant to Section 4 or Subsection 9(C) of this Agreement, Executive 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 Employer or any of its subsidiaries as of the date hereof.

(5) If Executive’s employment by Employer is terminated for reasons other than those set forth in Subsection 9(B) of this Agreement, and Executive subsequently (a) provides Banking Business to, or solicits the Banking Business of, any customer of Employer or any of its subsidiaries at the time of such provision of services or solicitation which Executive served either alone or with others while employed by Employer in any city, town, borough, township, village or other place in which Executive performed services for Employer while employed by it, or assists any actual or potential competitor of Employer or any of its subsidiaries to provide Banking Business to or solicit any such customer’s Banking Business in any such place, or (b) 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 Employer or any of its subsidiaries as of the date hereof, then Employer may immediately terminate and shall not be required to continue on behalf of the Executive or his dependents and beneficiaries any compensation provided for herein (including Base Compensation and any Annual Bonus) and any employee benefit, retirement and compensation plans and other prerequisites provided in Section 6 hereof other than those benefits that Employer may be required to maintain for Executive under applicable federal or state law.

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(6) If Executive’s employment by Employer is terminated for any of the reasons set forth in Subsection 9(B) of this Agreement, then Executive may thereafter (a) provide Banking Business to, or solicit the Banking Business of, any customer of Employer or any of its subsidiaries at the time of such provision of services or solicitation which Executive served either alone or with others while employed by Employer in any location within a 50-mile radius of any office or branch office location of Employer or any of its subsidiaries as of the date hereof, or assist any actual or potential competitor of Employer or any of its subsidiaries to provide Banking Business to or solicit any such customer’s Banking Business in any such place, or (b) engage, 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 Employer or any of its subsidiaries as of the date hereof; provided, however, that if Executive engages in any such activities after a termination under Subsection 9(B) hereof, then Employer may immediately terminate and shall not be required to continue on behalf of Executive or his dependents and beneficiaries any compensation provided for herein (including, without limitation, Base Compensation, any Annual Bonus and any payments pursuant to Subsection 10(B) hereof) and any employee benefit, retirement and compensation plans and other perquisites provided in Section 6 hereof other than those benefits that Employer may be required to maintain for Executive under applicable federal or state law.

(7) If Executive’s employment by Employer is terminated for any reason or for no reason, Executive will turn over immediately thereafter to Employer all business correspondence, letters, papers, reports, customer lists, financial statements, credit reports or other confidential information or documents of Employer or its affiliates in the possession or control of Executive, all of which writings are and will continue to be the sole and exclusive property of Employer or its affiliates, as the case may be.

(E) Executive acknowledges that irreparable loss and injury would result to Employer upon the breach of any of the covenants contained in this Section 11 and that damages arising out of such breach would be difficult to ascertain. Executive hereby agrees that, in addition to all other remedies provided at law or in equity, Employer 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 Executive of any covenant contained in this Section 11, 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 11 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.

12. Notice of Termination and Date of Termination. Any termination of Executive’s employment with Employer as contemplated by Section 9 hereof, except in the circumstances of Executive’s death, shall be communicated by written notice of termination (the “Notice of Termination”) by the terminating party to the other party hereto. Any Notice of

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Termination given pursuant to Subsections 9(A), 9(B) or 9(D) 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: (A) if Executive’s employment is terminated because of disability, thirty (30) days after Notice of Termination is given (unless Executive shall have returned to the performance of Executive’s duties on a full-time basis during such thirty (30) day period); or (B) if Executive’s employment is terminated for cause, good reason or pursuant to Subsection 9(C) hereof, the date specified in the Notice of Termination; provided, however, that if within thirty (30) days after any such Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally resolved, either by mutual agreement of the parties or by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected).

13. Excess Parachute Payments and One Million Dollar Deduction Limit.

(A) Notwithstanding anything contained herein to the contrary, if any portion of the payments and benefits provided hereunder and benefits provided to, or for the benefit of, Executive under any other plan or agreement of Employer (such payments or benefits are collectively referred to as the “Payments”) would be subject to the excise tax (the “Excise Tax”) imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), or would be nondeductible by Employer pursuant to Section 280G of the Code, the Payments shall be reduced (but not below zero) if and to the extent necessary so that no portion of any Payment to be made or benefit to be provided to Executive shall be subject to the Excise Tax or shall be nondeductible by Employer pursuant to Section 280G of the Code (such reduced amount is hereinafter referred to as the “Limited Payment Amount”). Unless Executive shall have given prior written notice specifying a different order to Employer to effectuate the Limited Payment Amount, Employer shall reduce or eliminate the Payments, by first reducing or eliminating those payments or benefits which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the Determination (as hereinafter defined). Any notice given by Executive pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing Executive’s rights and entitlements to any benefits or compensation.

(B) An initial determination as to whether the Payments shall be reduced to the Limited Payment Amount pursuant to the Code and the amount of such Limited Payment Amount shall be made by an accounting firm at Employer’s expense selected by Employer which is designated as one of the four largest accounting firms in the United States (the “Accounting Firm”). The Accounting Firm shall provide its determination (the “Determination”), together with detailed supporting calculations and documentation to Employer and Executive within thirty (30) days of the Termination Date, if applicable, and if the Accounting Firm determines that no Excise Tax is payable by Executive with respect to a Payment or Payments, it shall furnish Executive with an opinion reasonably acceptable to Executive that no Excise Tax will be imposed with respect to any such Payment or Payments. Within ten (10) days of the delivery of the Determination to Executive, Executive shall have the

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right to dispute the Determination (the “Dispute”). If there is no Dispute, the Determination shall be binding, final and conclusive upon Employer and Executive subject to the application of Subsection 13(C) below.

(C) As a result of the uncertainty in the application of Sections 4999 and 280G of the Code, it is possible that the Payments to be made to, or provided for the benefit of, Executive either have been made or will not be made by Employer which, in either case, will be inconsistent with the limitations provided in Section 13(A) hereof (hereinafter referred to as an “Excess Payment” or “Underpayment”, respectively). If it is established pursuant to a final determination of a court or an Internal Revenue Service (the “IRS”) proceeding which has been finally and conclusively resolved that an Excess Payment has been made, such Excess Payment shall be deemed for all purposes to be a loan to Executive made on the date Executive received the Excess Payment, and Executive shall repay the Excess Payment to Employer on demand (but not less than ten (10) days after written notice is received by Executive), together with interest on the Excess Payment at the “Applicable Federal Rate” (as defined in Section 1274(d) of the Code) from the date of Executive’s receipt of such Excess Payment until the date of such repayment. In the event that it is determined (1) by the Accounting Firm, Employer (which shall include the position taken by Employer, or together with its consolidated group, on its federal income tax return) or the IRS; (2) pursuant to a determination by a court; or (3) upon the resolution of the Dispute to Executive’s satisfaction, that an Underpayment has occurred, Employer shall pay an amount equal to the Underpayment to Executive within ten (10) days of such determination or resolution, together with interest on such amount at the Applicable Federal Rate from the date such amount would have been paid to Executive until the date of payment.

(D) Notwithstanding anything contained herein to the contrary, if any portion of the Payments would be nondeductible by Employer pursuant to Section 162(m) of the Code, the Payments to be made to Executive in any taxable year of Employer shall be reduced (but not below zero) if and to the extent necessary so that no portion of any Payment to be made or benefit to be provided to Executive in such taxable year of Employer shall be nondeductible by Employer pursuant to Section 162(m) of the Code. The amount by which any Payment is reduced pursuant to the immediately preceding sentence, together with interest thereon at the Applicable Federal Rate, shall be paid by Employer to Executive on or before the fifth business day of the immediately succeeding taxable year of Employer, subject to the application of the limitations of the immediately preceding sentence and this Section 13. Unless Executive shall have given prior written notice specifying a different order to Employer to effectuate this Section 13, Employer shall reduce or eliminate the Payments in any one taxable year of Employer by first reducing or eliminating those payments or benefits which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the Section 162(m) Determination (as hereinafter defined). Any notice given by Executive pursuant to the immediately preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing Executive’s rights and entitlements to any benefits or compensation.

(E) The determination as to whether the Payments shall be reduced pursuant to Section 13(D) hereof and the amount of the Payments to be made in each taxable year after the application of Section 13(D) hereof shall be made by the Accounting Firm at Employer’s

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expense. The Accounting Firm shall provide its determination (the “Section 162(m) Determination”), together with detailed supporting calculations and documentation to Employer and Executive within thirty (30) days of the termination date specified in the Notice of Termination. The Section 162(m) Determination shall be binding, final and conclusive upon Employer and Executive.

14. Payments After Death. Should Executive die after termination of his employment with Employer while any amounts are payable to him hereunder, this Agreement shall inure to the benefit of and be enforceable by Executive’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 Executive’s devisee, legatee or other designee or, if there is no such designee, to his estate.

15. Full Settlement and Legal Expenses. The respective obligations of the parties hereto to make payments or otherwise to perform hereunder shall not be affected by any rights of set-off, counterclaim, recoupment, defense or other claim, right or action which one party hereto may have against the other party hereto. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts which may be payable to Executive by Employer hereunder. 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, in addition to any other relief to which such party or parties may be entitled.

16. 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 Executive:	Jon S. Edwards
	2 Ridge Road
	Moultrie, GA 31768
If to Employer:	ABC Bancorp
	24 2nd Avenue, S.E.
	Moultrie, Georgia 31768
	Attention: Chief Executive Officer

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

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17. 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.

18. Successors. Employer shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of Employer, by agreement in form and substance reasonably satisfactory to Executive, to expressly assume and agree to perform this Agreement in the same manner and same extent that Employer would be required to perform it if no such succession had taken place. Failure of Employer to obtain such agreement prior to the effectiveness of any such succession shall be a material, intentional breach of this Agreement and shall entitle Executive to terminate his employment with Employer for good reason pursuant to Subsection 9(B) hereof. As used in this Agreement, “Employer” shall mean Employer as hereinbefore defined and any successor to its business or assets as aforesaid.

19. Modification and Waiver. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by Executive and Employer. 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. No agreements or representation, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement.

20. Severability. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect.

21. Counterparts. This Agreement may be executed (and delivered via facsimile) in one or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same Agreement.

22. Assignment. This Agreement is personal in nature, and neither party hereto shall, without the prior written consent of the other, assign or transfer this Agreement or any rights or obligations hereunder except as provided in Sections 14 and 18 above. Without limiting the foregoing, Executive’s right to receive compensation 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 14 hereof, and in the event of any attempted assignment or transfer contrary to this Section 22, Employer shall have no liability to pay any amounts so attempted to be assigned or transferred.

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

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24. Construction. Whenever the singular number is used in this Agreement and when required by the context, the same shall include the plural and vice versa, and the masculine gender shall include the feminine and neuter genders and vice versa. The headings in this Agreement are for convenience only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any of its provisions.

[Signatures Next Page]

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IN WITNESS WHEREOF, Executive has executed, sealed and delivered this Agreement, and Employer has caused this Agreement to be executed, sealed and delivered, all as of the day and year first above set forth.

		ABC BANCORP
		By:	/s/ Kenneth J. Hunnicutt
[Corporate Seal]			Kenneth J. Hunnicutt, Chairman, President and Chief Executive Officer
Attest:	/s/ Cindi H. Lewis
	Cindi H. Lewis, Corporate Secretary
			/s/ Jon S. Edwards	(SEAL)
			Jon S. Edwards

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EX-31.1

Exhibit 31.1

Section 302 Certification

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 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 10, 2003

/s/ Kenneth J. Hunnicutt

Kenneth J. Hunnicutt,

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Section 302 Certification

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 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 10, 2003

/s/ W. Edwin Lane, Jr.

W. Edwin Lane, Jr., Executive Vice

President and Chief Financial Officer

EX-32.1

Exhibit 32.1

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, 2003 (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 10, 2003

/s/ Kenneth J. Hunnicutt

KENNETH J. HUNNICUTT, Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to ABC Bancorp and will be retained by ABC Bancorp and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

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:

3. The Quarterly Report on Form 10-Q of the Company for the period ending September 30, 2003 (the “Periodic Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

4. 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 10, 2003

/s/ W. Edwin Lane, Jr.

W. EDWIN LANE, JR., Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to ABC Bancorp and will be retained by ABC Bancorp and furnished to the Securities and Exchange Commission or its staff upon request.