<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D. C. 20549

                                   FORM 10-K

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
         For the fiscal year ended December 31, 1999.

              TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
     For the transition period from ____ to _______________

                         Commission file number 0-13153

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

          Georgia                                         58-1563165
----------------------------                             ----------------
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or                                    Identification Number)
organization)

282 Historic Highway 441 North, P. O. Box 1980, Cornelia, Georgia          30531
--------------------------------------------------------------------------------
           (Address of principal executive offices)                   (Zip Code)

Registrant's telephone number, including area code:   (706) 778-1000

Securities registered pursuant to Section 12(b) of the Exchange Act:
                  None
                  ----

Securities registered pursuant to Section 12(g) of the Exchange Act:
                  Common Stock, $1.00 par value
                  -----------------------------

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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]


Indicate the aggregate market value of the voting and non-voting common stock
held by non-affiliates of the registrant computed by reference to the price at
which the common stock was sold, or the average bid and asked prices of such
common stock; as of a specified date within 60 days prior to the date of
filing:

1,762,539 Shares of Common Stock, $1.00 par value--$19,828,564 as of March 3,
2000 (based upon market value of $11.25/share).


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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of December 31, 1999:

Common Stock, $1.00 par value--2,698,746 shares


DOCUMENTS INCORPORATED BY REFERENCE

(1)      Portions of the Company's Annual Report to Shareholders for the year
ended December 31, 1999 (the "Annual Report") are incorporated by reference
into Part II.

(2)      Portions of the Company's Proxy Statement relating to the 2000 Annual
Meeting of Shareholders (the "Proxy Statement") are incorporated by reference
into Part III.

                                     PART I
Item 1.  BUSINESS.

                            BUSINESS OF THE COMPANY

   Habersham Bancorp (the "Company"), a Georgia corporation, was organized on
March 9, 1984. Effective December 31, 1984, the Company acquired all of the
outstanding shares of common stock of Habersham Bank ("Habersham Bank"). As a
result of this transaction, the former shareholders of Habersham Bank became
shareholders of the Company, and the Bank became the wholly-owned subsidiary of
the Company. Effective June 30, 1995, the Company acquired Security Bancorp,
Inc. and its subsidiary bank, Security State Bank. Effective June 30, 1999, the
Company consolidated the charters of Habersham Bank and Security State Bank. As
a result of this consolidation, Security State Bank now functions as a division
of Habersham Bank. Currently, the primary business of the Company is the same
as that of Habersham Bank and BancMortgage Financial Corp ("BancMortgage"), a
subsidiary of Habersham Bank formed in 1996. The Company also has one direct
nonbank subsidiary, The Advantage Group, Inc., and one indirect nonbank
subsidiary, Advantage Insurers, Inc. (a subsidiary of Habersham Bank).


                              BUSINESS OF THE BANK

    Habersham Bank is a financial institution which was organized under the
laws of the State of Georgia in 1904. Habersham Bank operates a full-service
commercial banking business based in Habersham and Cherokee Counties, Georgia,
providing such customary banking services as checking and savings accounts,
various types of time deposits, safe deposit facilities and individual
retirement accounts. It also makes secured and unsecured loans and provides
other financial services to its customers. Habersham Bank has a full-time trust
officer on staff and offers a full spectrum of trust services, including trust
administration, asset management services, estate and will probate and
administration, and other services in the area of personal trusts.


                     BUSINESS OF THE ADVANTAGE GROUP, INC.

    The Advantage Group, Inc. was organized as a wholly-owned nonbank
subsidiary of the Company in 1987. The Advantage Group, Inc. engages in the
business of providing marketing and advertising services.


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                    BUSINESS OF BANCMORTGAGE FINANCIAL CORP.

    BancMortgage Financial Corp. was organized as a wholly-owned nonbank
subsidiary of Habersham Bank in 1996. BancMortgage Financial Corp. is a full
service mortgage and construction lending company located in the northern
Atlanta metropolitan area. BancMortgage Financial Corp. also does business in
the mid-Atlantic states as The Prestwick Mortgage Group and as BancFinancial
Services Corporation. During 1999, BancMortgage formed a wholly owned
subsidiary, BancMortgage Reinsurance LTD., a reinsurance company incorporated
in Turks and Caicos. This subsidiary provides reinsurance to companies offering
private mortgage insurance. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

                  BUSINESS OF APPALACHIAN TRAVEL SERVICE, INC.

    Appalachian Travel Service, Inc. was acquired as a wholly-owned nonbank
subsidiary of Habersham Bank in 1996. Appalachian Travel Service, Inc. is a
full service travel agency located in Cornelia, Georgia. Effective September
30, 1999, the Bank ceased operations of its travel agency subsidiary.

                      BUSINESS OF ADVANTAGE INSURERS, INC.

    Advantage Insurers, Inc. was organized as a wholly-owned nonbank subsidiary
of Habersham Bank in 1997. Advantage Insurers, Inc. is a full service insurance
agency located in Cornelia, Georgia.

                                  COMPETITION

    The banking industry is highly competitive. Recent legislation, together
with other regulatory changes by the primary regulators of the various
financial institutions and competition from unregulated entities, has resulted
in the elimination of many traditional distinctions between commercial banks,
thrift institutions and other providers of financial services. Consequently,
competition among financial institutions of all types is virtually unlimited
with respect to legal ability and authority to provide most financial services.

    Habersham Bank's primary market area consists of Habersham, White, and
Cherokee Counties, Georgia. Habersham Bank competes principally for all types
of loans, deposits and other financial services with other commercial banks
located in Habersham, White, and Cherokee Counties, Georgia.

    Habersham Bank (the "Bank") also competes with other financial institutions
located in Habersham and Cherokee counties and with commercial banks, savings
and loan associations, and other financial institutions located outside of
Habersham and Cherokee counties. To a lesser extent, Habersham Bank competes
for loans with insurance companies, regulated small loan companies, credit
unions, and certain governmental agencies.

    The Company and its non-bank subsidiaries also compete with numerous other
companies and financial institutions engaged in similar lines of business, such
as other bank holding companies, mortgage companies, mortgage servicers,
leasing companies, insurance companies, companies providing data processing
services, and companies providing bank consulting services.

                                   EMPLOYEES

    As of December 31, 1999, the Company had 337 full-time equivalent
employees. Neither the Company nor any of its subsidiaries is a party to any
collective bargaining agreement. In the opinion of management, the Company and
its subsidiaries enjoy satisfactory relations with their respective employees.


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                           SUPERVISION AND REGULATION

    Both the Company and the Bank are subject to extensive state and federal
banking regulations that impose restrictions on and provide for general
regulatory oversight of our operations. These laws are generally intended to
protect depositors and not shareholders. The following discussion describes the
material elements of the regulatory framework that applies to us.

THE COMPANY

    Because the Company owns all of the capital stock of the Bank, it is a bank
holding company under the federal Bank Holding Company Act of 1956. As a
result, the Company is primarily subject to the supervision, examination, and
reporting requirements of the Bank Holding Company Act and the regulations of
the Federal Reserve.

    ACQUISITIONS OF BANKS. The Bank Holding Company Act requires every bank
holding company to obtain the Federal Reserve's prior approval before:

-   Acquiring direct or indirect ownership or control of any voting shares of
    any bank if, after the acquisition, the bank holding company will directly
    or indirectly own or control more than 5% of the bank's voting shares;

-   Acquiring all or substantially all of the assets of any bank; or

-   Merging or consolidating with any other bank holding company.

    Under the Bank Holding Company Act, an adequately capitalized and
adequately managed bank holding company located in Georgia may purchase a bank
located outside of Georgia. Conversely, an adequately capitalized and
adequately managed bank holding company located outside of Georgia may purchase
a bank located inside Georgia. In each case, however, restrictions may be
placed on the acquisition of a bank which has only been in existence for a
limited amount of time or an acquisition which may result in specified
concentrations of deposits.

    CHANGE IN BANK CONTROL. Subject to various exceptions, the Bank Holding
Company Act and the Change in Bank Control Act, together with related
regulations, require Federal Reserve approval prior to any person or company
acquiring "control" of a bank holding company. Control is conclusively presumed
to exist if an individual or company acquires 25% or more of any class of
voting securities of the bank holding company. Control is rebuttably presumed
to exist if a person or a company acquires 10% or more, but less than 25%, of
any class of voting securities and either the bank holding company has
registered securities under Section 12 of the Securities Act of 1934, or no
other person owns a greater percentage of that class of voting securities
immediately after the transaction.

    PERMITTED ACTIVITIES. Under the Bank Holding Company Act, a bank holding
company, which has not qualified or elected to become a financial holding
company is generally prohibited from engaging in or acquiring direct or
indirect control of more than 5% of the voting shares of any company engaged in
nonbanking activities unless prior to the enactment of the Gramm-Leach-Bliley
Act the Federal Reserve found those activities to be so closely related to
banking as to be a proper incident to the business of banking. Activities that
the Federal Reserve has found to be so closely related to banking to be a
proper incident to the business of banking include:


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-   factoring accounts receivable,
-   acquiring or servicing loans,
-   leasing personal property,
-   conducting discount securities brokerage activities,
-   performing selected data processing services,
-   acting as agent or broker in selling credit life insurance and other types
    of insurance in connection with credit transactions, and
-   performing selected insurance underwriting activities.

Despite prior approval, the Federal Reserve may order a bank holding company or
its subsidiaries to terminate any of these activities or to terminate its
ownership or control of any subsidiary when it has reasonable cause to believe
that the bank holding company's continued ownership, activity or control
constitutes a serious risk to the financial safety, soundness, or stability of
any of its bank subsidiaries.

    On November 12, 1999 President Clinton signed the Gramm-Leach-Bliley Act,
which amends the Bank Holding Company Act and greatly expands the activities in
which bank holding companies and affiliates of banks are permitted to engage.
The Gramm-Leach-Bliley Act eliminates many federal and state law barriers to
affiliations among banks and securities firms, insurance companies, and other
financial service providers. The provisions of the Gramm-Leach-Bliley Act
relating to permitted activities of bank holding companies and affiliates of
banks became effective on March 11, 2000.

    Generally, if the Company qualifies and elects to become a financial
holding company, it may engage in activities that are financial in nature or
incidental or complementary to a financial activity. Activities that the
Gramm-Leach-Bliley Act expressly lists as financial in nature include insurance
activities, providing financial, investment and advisory services, underwriting
securities and limited merchant banking activities.

    To qualify to become a financial holding company, the Bank and any other
depository institution subsidiary of the Company must be well capitalized and
well managed and must have a Community Reinvestment Act rating of at least
satisfactory. Additionally, the Company must file an election with the Federal
Reserve to become a financial holding company and must provide the Federal
Reserve with 30 days written notice prior to engaging in a permitted financial
activity. Although we are eligible to elect to become a financial holding
company, we currently have no plans to make such an election.

    SUPPORT OF SUBSIDIARY INSTITUTIONS. Under Federal Reserve policy, bank
holding companies are expected to act as a source of financial strength for,
and to commit resources to support, their depository institution subsidiaries.
This support may be required at times when, without this Federal Reserve
policy, the bank holding company might not be inclined to provide it. In
addition, any capital loans by a bank holding company to a bank will be repaid
only after its deposits and other indebtedness are repaid in full. In the event
of a bank holding company's bankruptcy, any commitment by the bank holding
company to a federal bank regulatory agency to maintain the capital of a
banking subsidiary will be assumed by the bankruptcy trustee and entitled to a
priority of payment.

THE BANK

    The Bank is a commercial bank chartered under the laws of the State of
Georgia. Accordingly, the FDIC and the Georgia Department of Banking and
Finance regularly examine the operations of the Bank and have the authority to
approve or disapprove mergers, the establishment of branches, and similar
corporate actions. Both regulatory agencies also have the power to prevent the
continuance or development of unsafe or unsound banking practices or other
violations of law. Additionally, the Bank's deposits are insured by the FDIC to
the maximum extent provided by law. The Bank is also subject to numerous state
and federal


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statutes and regulations that affect its business, activities and operations,
and it is supervised and examined by one or more state or federal bank
regulatory agencies.

    PROMPT CORRECTIVE ACTION. The Federal Deposit Insurance Corporation
Improvement Act of 1991 establishes a system of prompt corrective action to
resolve the problems of undercapitalized financial institutions. Under this
system, federal banking regulators have established five capital categories,
well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized, in which all institutions are
placed. The federal banking agencies have also specified by regulation the
relevant capital levels for each of the other categories. At December 31, 1999,
we qualified for the adequately capitalized category.

    Federal banking regulators are required to take some mandatory supervisory
actions and are authorized to take other discretionary actions with respect to
institutions in the three undercapitalized categories. The severity of the
action depends upon the capital category in which the institution is placed.
Generally, subject to a narrow exception, the banking regulator must appoint a
receiver or conservator for an institution that is critically undercapitalized.
An institution in any of the undercapitalized categories is required to submit
an acceptable capital restoration plan to its appropriate federal banking
agency. A bank holding company must guarantee that a subsidiary depository
institution meets its capital restoration plan up to the lesser of 5% of an
undercapitalized subsidiary's assets or the amount required to meet regulatory
capital requirements. An undercapitalized institution is also generally
prohibited from increasing its average total assets, making acquisitions,
establishing any branches or engaging in any new line of business, except under
an accepted capital restoration plan or with FDIC approval. The Federal Reserve
regulations also establish procedures for downgrading an institution to a lower
capital category based on supervisory factors other than capital.

    FDIC INSURANCE ASSESSMENTS. The FDIC has adopted a risk-based assessment
system for determining an insured depository institutions' insurance assessment
rate. The system that takes into account the risks attributable to different
categories and concentrations of assets and liabilities. An institution is
placed into one of three capital categories: (1) well capitalized; (2)
adequately capitalized; and (3) undercapitalized. These three categories are
substantially similar to the prompt corrective action categories described
above, with the "undercapitalized" category including institutions that are
undercapitalized, significantly undercapitalized and critically
undercapitalized. The FDIC also assigns an institution to one of three
supervisory subgroups based on a supervisory evaluation that the institution's
primary federal regulator provides to the FDIC and information that the FDIC
determines to be relevant to the institution's financial condition and the risk
posed to the deposit insurance funds. Assessments range from 0 to 27 cents per
$100 of deposits, depending on the institution's capital group and supervisory
subgroup. In addition, the FDIC imposes assessments to help pay off the $780
million in annual interest payments on the $8 billion Financing Corporation
bonds issued in the late 1980s as part of the government rescue of the thrift
industry. This assessment rate is adjusted quarterly and ranged from 1.16 cents
to 1.22 cents per $100 of deposits in 1999.

    The FDIC may terminate its insurance of deposits if it finds that the
institution has engaged in unsafe and unsound practices, is in an unsafe or
unsound condition to continue operations or has violated any applicable law,
regulation, rule, order, or condition imposed by the FDIC.

    COMMUNITY REINVESTMENT ACT. The Community Reinvestment Act requires the
appropriate federal regulator, in connection with their examinations of
financial institutions within their jurisdiction, to evaluate the record of
each financial institution in meeting the credit needs of its local community,
including low and moderate-income neighborhoods. The appropriate federal
regulator considers these factors in evaluating mergers, acquisitions, and
applications to open a branch or facility. Failure to adequately meet these
criteria could impose additional requirements and limitations on the Bank.
Under the Gramm-Leach-Bliley Act, banks with aggregate assets of not more than
$250 million are subject to a Community Reinvestment Act


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examination only once every 60 months if the bank receives an outstanding
rating, once every 48 months if it receives a satisfactory rating and as needed
if the rating is less than satisfactory. Additionally, under the
Gramm-Leach-Bliley Act, banks are required to publicly disclose the terms of
various Community Reinvestment Act-related agreements.

    OTHER REGULATIONS. Interest and other charges collected or contracted for
by the Bank are subject to state usury laws and federal laws concerning
interest rates. The Bank's loan operations are also subject to federal laws
applicable to credit transactions, such as:

-   The federal Truth-In-Lending Act, governing disclosures of credit terms to
    consumer borrowers;

-   The Home Mortgage Disclosure Act of 1975, requiring financial institutions
    to provide information to enable the public and public officials to
    determine whether a financial institution is fulfilling its obligation to
    help meet the housing needs of the community it serves;

-   The Equal Credit Opportunity Act, prohibiting discrimination on the basis
    of race, creed or other prohibited factors in extending credit;

-   The Fair Credit Reporting Act of 1978, governing the use and provision of
    information to credit reporting agencies;

-   The Fair Debt Collection Act, governing the manner in which consumer debts
    may be collected by collection agencies; and

-   The rules and regulations of the various federal agencies charged with the
    responsibility of implementing these federal laws.

The deposit operations of the Bank are subject to:

-   The Right to Financial Privacy Act, which imposes a duty to maintain
    confidentiality of consumer financial records and prescribes procedures for
    complying with administrative subpoenas of financial records; and

-   The Electronic Funds Transfer Act and Regulation E issued by the Federal
    Reserve to implement that act, which governs automatic deposits to and
    withdrawals from deposit accounts and customers' rights and liabilities
    arising from the use of automated teller machines and other electronic
    banking services.

CAPITAL ADEQUACY

    The Company and the Bank are required to comply with the capital adequacy
standards established by the Federal Reserve, in the case of the Company, and
FDIC and Georgia Department of Banking and Finance, in the case of the Bank.
The Federal Reserve has established a risk-based and a leverage measure of
capital adequacy for bank holding companies that is substantially similar to
that adopted by the FDIC for banks under its jurisdiction.

    The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profiles among banks and
bank holding companies, to account for off-balance-sheet exposure, and to
minimize disincentives for holding liquid assets. Assets and off-balance-sheet
items, such as letters of credit and unfunded loan commitments, are assigned to
broad risk categories, each with


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appropriate risk weights. The resulting capital ratios represent capital as a
percentage of total risk-weighted assets and off-balance-sheet items.

    The minimum guideline for the ratio of total capital to risk-weighted
assets is 8%. Total capital consists of two components, Tier 1 Capital and Tier
2 Capital. Tier 1 Capital generally consists of common shareholders' equity,
minority interests in the equity accounts of consolidated subsidiaries,
qualifying noncumulative perpetual preferred stock, and a limited amount of
qualifying cumulative perpetual preferred stock, less goodwill and other
specified intangible assets. Tier 1 Capital must equal at least 4% of
risk-weighted assets. Tier 2 Capital generally consists of subordinated debt,
other preferred stock and hybrid capital and a limited amount of loan loss
reserves. The total amount of Tier 2 Capital is limited to 100% of Tier 1
Capital. At December 31, 1999, our consolidated ratio of total capital to
risk-weighted assets was 10.71% and our consolidated ratio of Tier 1 Capital to
risk-weighted assets was 9.79%.

    In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and other specified
intangible assets, of 3% for bank holding companies that meet certain specified
criteria, including having the highest regulatory rating and implementing the
Federal Reserve's risk-based capital measure for market risk. All other bank
holding companies generally are required to maintain a leverage ratio of at
least 4%. At December 31, 1999, our consolidated leverage ratio was 7.66%. The
guidelines also provide that bank holding companies experiencing internal
growth or making acquisitions will be expected to maintain strong capital
positions substantially above the minimum supervisory levels without
significant reliance on intangible assets. The Federal Reserve considers the
leverage ratio and other indicators of capital strength in evaluating proposals
for expansion or new activities.

    The Bank and the Company are also both subject to other capital guidelines
issued by the Georgia Department of Banking and Finance and the Federal
Reserve, respectively, which provide for minimum ratios of total capital to
total assets.

    Failure to meet capital guidelines could subject a bank or bank holding
company to a variety of enforcement remedies, including issuance of a capital
directive, the termination of deposit insurance by the FDIC, a prohibition on
accepting brokered deposits, and certain other restrictions on its business. As
described above, substantial additional restrictions can be imposed on
FDIC-insured depository institutions that fail to meet applicable capital
requirements. See "--Prompt Corrective Action."

PAYMENT OF DIVIDENDS

    The Company is a legal entity separate and distinct from the Bank. The
principal source of the Company's cash flow, including cash flow to pay
dividends to its shareholders, is dividends that the Bank pays to it. Statutory
and regulatory limitations apply to the Bank's payment of dividends to the
Company as well as to the Company's payment of dividends to its shareholders.

    If, in the opinion of the federal banking regulator, the Bank were engaged
in or about to engage in an unsafe or unsound practice, the federal banking
regulator could require, after notice and a hearing, that it cease and desist
from its practice. The federal banking agencies have indicated that paying
dividends that deplete a depository institution's capital base to an inadequate
level would be an unsafe and unsound banking practice. Under the Federal
Deposit Insurance Corporation Improvement Act of 1991, a depository institution
may not pay any dividend if payment would cause it to become undercapitalized
or if it already is undercapitalized. Moreover, the federal agencies have
issued policy statements that provide that bank holding companies and insured
banks should generally only pay dividends out of current operating earnings.
See "--Prompt Corrective Action" above.


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    The Georgia Department of Banking and Finance also regulates the Bank's
dividend payments and must approve dividend payments that would exceed 50% of
the Bank's net income for the prior year. Our payment of dividends may also be
affected or limited by other factors, such as the requirement to maintain
adequate capital above regulatory guidelines.

    At December 31, 1999, the Bank was able to pay approximately $1,595,000 in
dividends to the Company without prior regulatory approval.


RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES

    The Company and the Bank are subject to the provisions of Section 23A of
the Federal Reserve Act. Section 23A places limits on the amount of:

-   loans or extensions of credit to affiliates;

-   investment in affiliates;

-   the purchase of assets from affiliates, except for real and personal
    property exempted by the Federal Reserve;

-   loans or extensions of credit to third parties collateralized by the
    securities or obligations of affiliates; and

-   any guarantee, acceptance or letter of credit issued on behalf of an
    affiliate.

    The aggregate of all of the above transactions is limited in amount, as to
any one affiliate, to 10% of a bank's capital and surplus and, as to all
affiliates combined, to 20% of a bank's capital and surplus. In addition to the
limitation on the amount of these transactions, each of the above transactions
must also meet specified collateral requirements. The Company must also comply
with certain provisions designed to avoid the taking of low-quality assets.

    The Company and the Bank are also subject to the provisions of Section 23B
of the Federal Reserve Act which, among other things, prohibits an institution
from engaging in the above transactions with affiliates unless the transactions
are on terms substantially the same, or at least as favorable to the
institution or its subsidiaries, as those prevailing at the time for comparable
transactions with nonaffiliated companies.

    The Bank is also subject to restrictions on extensions of credit to its
executive officers, directors, certain principal shareholders and their related
interests. These extensions of credit (1) must be made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with third parties, and (2) must not involve
more than the normal risk of repayment or present other unfavorable features.


PRIVACY

    The Gramm-Leach-Bliley Act also contains provisions regarding consumer
privacy. These provisions require financial institutions to disclose their
policy for collecting and protecting confidential information. Customers
generally may prevent financial institutions from sharing personal financial
information with nonaffiliated third parties except for third parties that
market the institutions' own products and services. Additionally, financial
institutions generally may not disclose consumer account numbers to


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any nonaffiliated third party for use in telemarketing, direct mail marketing
or other marketing through electronic mail to the consumer.


PROPOSED LEGISLATION AND REGULATORY ACTION

    New regulations and statutes are regularly proposed that contain
wide-ranging proposals for altering the structures, regulations and competitive
relationships of the nation's financial institutions. We cannot predict whether
or in what form any proposed regulation or statute will be adopted or the
extent to which our business may be affected by any new regulation or statute.


EFFECT OF GOVERNMENTAL MONETARY POLICES

    Our earnings are affected by domestic economic conditions and the monetary
and fiscal policies of the United States government and its agencies. The
Federal Reserve Bank's monetary policies have had, and are likely to continue
to have, an important impact on the operating results of commercial banks
through its power to implement national monetary policy in order, among other
things, to curb inflation or combat a recession. The monetary policies of the
Federal Reserve Board have major effects upon the levels of bank loans,
investments and deposits through its open market operating in United States
government securities and through its regulation of the discount rate on
borrowings of member banks and the reserve requirements against member bank
deposits. It is not possible to predict the nature or impact of future changes
in monetary and fiscal policies.


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Item 2.  PROPERTIES

    The Company's principal office is located at Habersham Bank's Central
Habersham office, 282 Historic Highway 441, Cornelia, Georgia. The telephone
number of that office is (706) 778-1000.

    Habersham Bank's North Habersham (main) office is located at 1151
Washington Street, Clarkesville, Georgia. The telephone number of that office
is (706) 778-1000. Habersham Bank also has six full-service branch offices. Its
Central Habersham office is located at 282 Historic Highway 441, Cornelia,
Georgia, its South Habersham office is located at 186 441 By-Pass, Baldwin,
Georgia, its Cleveland Office is located at 575 South Main Street, Cleveland,
Georgia, its Canton Office is located at 1925 Marietta Highway, Canton,
Georgia, its Waleska Office is located at 7265 Reinhardt College Parkway,
Waleska, Georgia, and its Warrenton Office is located at 217 East Main Street,
Warrenton, Georgia. Each office has a 24-hour teller machine. Habersham Bank
owns its office properties without encumbrance, with the exception of the
Warrenton Office which is leased on a month to month basis.

    The Advantage Group, Inc.'s principal office is located at 1450 Washington
Street, Clarkesville, Georgia. The telephone number of that office is (706)
778-1790.

    BancMortgage Financial Corp.'s principal office is located at 990 Hammond
Drive, Suite 1020, Atlanta, Georgia 30328, and the telephone number of that
office is (770) 804-7208. This office is leased, with a lease expiration date
of 4-1-2002.

    Advantage Insurers, Inc.'s principal office is located at 282 Historic
Highway 441, Cornelia, Georgia, and the telephone number of that office is
(706) 778-2277.


Item 3.  LEGAL PROCEEDINGS

    The Company is not a party to, nor is any of its property the subject of,
any material pending legal proceedings, other than ordinary routine litigation
incidental to its business, and no such proceedings are known to be
contemplated by governmental authorities.


Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    None.


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                                   PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    The common stock of Habersham Bancorp is traded on the NASDAQ Stock Market
("NASDAQ") under the symbol HABC. At December 31, 1999, Habersham Bancorp had
approximately 601 shareholders of record. The following table sets forth the
high and low sale prices of the Company's common stock on a quarterly basis for
the past two fiscal years.


<TABLE>
<CAPTION>
               1999                 HIGH      LOW
                                    ----      ---

          <S>                       <C>       <C>
          Fourth quarter            14.50     12.75
          Third quarter             16.00     12.625
          Second quarter            18.00     12.625
          First quarter             16.00     13.50


               1998                 HIGH      LOW
                                    ----      ---

          Fourth quarter            17.00     14.00
          Third quarter             18.75     16.00
          Second quarter            20.25     18.13
          First quarter             20.50     18.50
</TABLE>


    Cash dividends were paid quarterly at a rate of $.05 per share of common
stock in 1999. Cash dividends were paid quarterly at a rate of $.04 per share
of common stock in 1998.

OTHER STOCK INVESTMENT

    On May 21, 1999, the Company exercised its previously acquired option to
purchase a 45.91% interest in CB Financial Corp., Warrenton, Georgia, at a
total cost of $2,963,757, including direct costs of acquisition of $115,468. In
connection with this purchase, the Company issued 207,713 shares of its common
stock valued at $2,847,883 and cash of $406 in exchange for 27,574 shares of
common stock of CB Financial Corp. The stock was issued to 21 shareholders of
CB Financial Corp in reliance on the exemption from registration provided under
Section 4(2) of the Securities Act of 1933, as amended.


                                      12
<PAGE>   13


Item 6.  SELECTED FINANCIAL DATA


SELECTED FINANCIAL DATA
(Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                 FOR THE YEARS ENDED DECEMBER 31
                                       1999        1998       1997        1996       1995

<S>                                 <C>         <C>        <C>         <C>        <C>
SUMMARY OF OPERATIONS
Interest income                     $ 32,144    $28,959    $26,962     $23,367    $16,556
Interest expense                      16,517     15,091     13,305      11,044      7,398
Other income                          15,477     15,750      8,056       2,277      1,371
Other expense                         28,417     26,214     18,412      11,762      7,830

Net Income                             1,754      2,058      2,157       1,908      2,021

PER SHARE AMOUNTS
Net income - diluted                $    .67       $.83       $.86        $.79       $.99
Dividends                                .20        .16        .14         .12        .10
Weighted average number of
 common and common equivalent
 shares outstanding                2,609,360  2,481,630  2,497,993   2,411,687  2,032,567

AT DECEMBER 31
Total assets                        $461,976   $384,069   $328,197    $310,011   $229,586
Earning assets                       424,663    359,838    299,301     287,850    213,035
Loans                                365,499    281,898    235,764     230,867    145,434
Deposits                             317,420    280,453    261,665     224,361    195,085
Shareholders' equity                  35,429     32,214     30,144      27,669     25,905

RATIOS
Return on average assets                 .43%       .57%       .69%        .70%      1.01%
Return on average equity                5.10%      6.63%      7.48%       7.16%      9.39%
Dividend payout ratio                  29.85%     16.87%     16.28%      15.19%      9.85%
Average equity to average
 assets ratio                           8.35%      8.52%      9.16%       9.84%     10.74%
</TABLE>


Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

    The following discussion sets forth the major factors that affect the
Company's results of operations and financial condition. These comments should
be read in conjunction with the consolidated financial statements and related
notes.

    This discussion contains forward-looking statements involving risks and
uncertainties. Results may differ significantly from that discussed in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, risks involving the potential adverse effect of changes
in interest rates and the current interest rate environment, loan losses and
the adequacy of the Company's loan loss allowance, changes in regulation and
legislation, and competition.

ORGANIZATION

    Habersham Bancorp (the "Company") owns all of the outstanding stock of
Habersham Bank ("Habersham Bank") and The Advantage Group, Inc. Habersham Bank
owns all of the outstanding stock of BancMortgage Financial Corp
("BancMortgage"), Appalachian Travel Service, Inc. ("Appalachian"), and
Advantage Insurers, Inc. ("Advantage Insurers"). Effective June 30, 1999, the
Company consolidated the charters of Habersham Bank and Security State Bank,
which had until that date been a wholly owned subsidiary of the Company. As a
result of


                                      13
<PAGE>   14


this consolidation, Security State Bank now functions as a division of
Habersham Bank. Effective September 30, 1999, the Bank ceased operations of its
travel agency subsidiary, Appalachian. Net income of such business for all
periods presented is not significant. The Advantage Group, Inc. is a non-bank
subsidiary which engages in the business of providing marketing and advertising
services. Advantage Insurers, which began operations on March 31, 1997, offers
a full line of property, casualty, and life insurance products.

    The Advantage Group, Inc., Appalachian, and Advantage Insurers do not
comprise a significant portion of the financial position, results of
operations, or cash flows of the Company. Management's discussion and analysis,
which follows, relates primarily to Habersham Bank and BancMortgage.

    BancMortgage was organized in 1996 as a full service mortgage and
construction lending company located in the northern Atlanta metropolitan area.
During 1997, BancMortgage acquired for approximately $60,000 the assets and
certain liabilities of The Prestwick Mortgage Group, a national investment
banking and advisory firm specializing in the brokerage and evaluation of
mortgage-related assets. Concurrent to this acquisition of The Prestwick
Mortgage Group, BancMortgage also formed BancFinancial Services Corporation, a
full-service wholesale mortgage lender specializing in sub-prime mortgage
loans. These two latter subsidiaries are based in Virginia.

    During 1999, BancMortgage formed a wholly owned subsidiary, BancMortgage
Reinsurance LTD., a reinsurance company incorporated in Turks and Caicos. The
subsidiary provides insurance to companies offering private mortgage insurance.

RESULTS OF OPERATIONS

    The Company's net income was $1,753,969, $2,057,901, and $2,157,276 for the
years ended December 31, 1999, 1998, and 1997, respectively, with related
diluted earnings per common and common equivalent share of $.67, $.83, and
$.86, respectively, representing a decrease of 19.28% from 1998 to 1999 and a
decrease of 3.49% from 1997 to 1998.

    The decrease in net income for 1999 was primarily due to a net after-tax
unrealized loss of $786,000 due to the Company marking to market the holdings
of 244,960 shares of Flag Financial Corp common stock held as trading
securities which was partially offset by a tax benefit of $409,000 resulting
from a reduction of prior years' overaccrual. The decrease in net income for
1998 was primarily due to a decrease in net yield on interest-earning assets
and increases in other operating expenses. Net income represents a return on
average equity of 5.10%, 6.63%, and 7.48% for 1999, 1998, and 1997,
respectively.

NET INTEREST INCOME

    Net interest income is the largest single source of income for the Company.
Management strives to attain a level of earning asset growth while providing a
net yield on earning assets which will cover overhead and other costs and
provide a reasonable return to our shareholders.

    Net interest income for 1999 was approximately $15.6 million compared to
$13.9 million in 1998 and $13.7 million in 1997. Net interest income for 1999
increased approximately $1,759,000 or 12.68% when compared to 1998, and net
interest income for 1998 increased approximately $211,000 or 1.55% when
compared to 1997.

    Interest income increased approximately $3.2 million or 11.00% when
compared to 1998 and increased approximately $2.0 million or 7.40% in 1998 when
compared to 1997. The increase in interest income for 1999 was primarily due to
increases in the Company's loan portfolio of approximately $35 million, offset
by a reduced average yield on the loan portfolio. The increase in interest
income for 1998


                                      14
<PAGE>   15


resulted primarily from increases in the loan portfolio of the Company, offset
by a reduced average yield on the loan portfolio.

    The Company's loan portfolio, exclusive of loans held for sale, increased
approximately $107.6 million from December 31, 1998 to December 31, 1999 due to
approximately $144 million of new residential mortgage and construction loans
offset by sales of approximately $36.4 million in residential mortgages and
construction loans. BancMortgage's loan portfolio decreased by approximately
$24 million from December 31, 1998 to December 31, 1999, resulting from sales
of approximately $577 million of residential mortgage and construction loans
offset by originations of approximately $553 million.

    Average interest rates on loans were 9.20%, 9.37%, and 10.03% in 1999,
1998, and 1997, respectively. Yields on variable rate residential mortgages
decreased during 1999 in response to movements on various indices.

    Weighted average interest rates on investment securities were 5.36%, 5.52%,
and 5.82% in 1999, 1998, and 1997, respectively. Average interest rates on
federal funds sold were 5.74%, 5.33%, and 5.80% in 1999, 1998, and 1997,
respectively.

    The increase in interest expense for 1999 of $1.4 million over 1998 was
primarily due to additional interest expense on increased average balances on
interest bearing deposits and other borrowings. Average Federal Home Loan Bank
advances, average repurchase agreement advances, and federal funds purchased
for 1999 increased approximately $16,268,000, $4,335,000, and $5,537,000,
respectively, when compared to 1998. The increase in interest expense for 1998
of $1.8 million over 1997 resulted primarily from additional interest expense
on increased average balances of interest bearing deposits of approximately
$33.4 million when compared to 1997 average balances and on increased average
Federal Home Loan Bank advances of approximately $4.6 million when compared to
1997 average advances.

    The weighted average interest rate paid on deposits in 1999 decreased to
4.72% compared to 5.24% in 1998. The average interest rate paid for borrowings
increased to 5.75% compared to 5.30% in 1998.

    The net interest margin of the Company was 4.11% in 1999, 4.08% in 1998,
and 4.65% in 1997. Net interest margin increased primarily due to increases in
interest income arising from the increased volume in the loan portfolio and
decreases in interest paid on certificates of deposit, offset by increases in
interest expense on other borrowings.

CONSOLIDATED AVERAGE BALANCES, INTEREST INCOME AND EXPENSE, AND AVERAGE YIELDS
EARNED AND RATES PAID

    Average assets rose approximately $47.7 million or 13.08% in 1999 over 1998
and $49.3 million or 15.67% in 1998 over 1997. Average loan balances increased
approximately $41.6 million or 15.55% in 1999 over 1998 and approximately $31.2
million or 13.18% in 1998 over 1997. Average balances in investment securities
increased approximately $5.2 million or 8.83% in 1999 over 1998 and increased
approximately $14.8 million or 33.48% in 1998 over 1997. The average balance of
federal funds sold in 1999 decreased approximately $7.3 million or 77.87% when
compared to 1998 and increased approximately $2.4 million or 33.91% in 1998
when compared to 1997.

    The average balance of deposits for 1999 increased by approximately
$19.5 million or 7.10% over 1998 and increased in 1998 by approximately $36.3
million or 15.26% over 1997.


                                      15
<PAGE>   16


    The following table sets forth the consolidated average balance sheets for
the Company, average rates earned on interest earning assets, average rates
paid on deposits and borrowed funds, interest income and interest expense for
each category of interest earning assets and interest bearing liabilities, and
net interest margin. This information is presented for the years ended December
31, 1999, 1998, and 1997.

<TABLE>
<CAPTION>
                                             1999            1998         1999      1998       1999           1998
                                           AVERAGE         AVERAGE       YIELD/    YIELD/     INCOME         INCOME
                                           BALANCE         BALANCE       RATES     RATES     (EXPENSE)      (EXPENSE)
<S>                                     <C>             <C>              <C>       <C>       <C>            <C>
ASSETS

Interest bearing balances
 with other banks                       $     41,250    $     99,000     7.16%     6.60%     $     2,953     $     6,534
Federal funds sold                         2,078,334       9,393,451     5.74%     5.33%         119,229         500,504
Investment securities:(2)
 Taxable                                  32,693,560      32,749,495     5.64%     5.81%       1,844,174       1,903,096
 Tax exempt                               23,857,174      22,633,929     4.97%     5.10%       1,186,506       1,153,956
                                        ------------    ------------
 Total investment securities              56,550,734      55,383,424

Trading Securities                         2,672,682       1,064,899
Other Investments                          5,362,095       2,894,675
Loans, net(1)                            309,502,406     267,857,590     9.20%     9.37%      28,487,996      25,088,953
Cash and due from banks                   13,964,768      10,729,293
Premises & equipment                       8,226,914       8,429,133
Other assets                              13,452,548       8,346,333
                                        ------------    ------------                         -----------     -----------
TOTAL ASSETS                            $411,851,731    $364,197,798                         $31,640,858     $28,653,043
                                        ============    ============                         ===========     ===========

LIABILITIES

Money market & NOW                      $ 60,548,509    $ 53,598,039     2.58%     3.20%      (1,565,048)     (1,717,837)
Savings accounts                           8,355,673       8,254,196     2.26%     2.71%        (188,544)       (224,025)
Certificates of deposit                  197,166,960     184,802,058     5.48%     5.94%     (10,801,196)    (10,970,060)
Short-term and other
 borrowings                               68,914,796      41,073,525     5.75%     5.30%      (3,962,118)     (2,178,631)
Demand deposit accounts                   27,967,073      27,892,056
Other liabilities                         14,507,580      17,541,259

                                                                                             -----------     -----------
                                                                                             (16,516,906)    (15,090,553)
                                                                                             -----------     -----------

Shareholders' equity                      34,391,140      31,036,665
                                        ------------    ------------

TOTAL LIABILITIES & EQUITY              $411,851,731    $364,197,798
                                        ============    ============
NET INTEREST MARGIN                                                      4.11%     4.08%     $15,123,952     $13,562,490
                                                                                             ===========     ===========
</TABLE>


                                      16
<PAGE>   17


CONSOLIDATED AVERAGE BALANCES, INTEREST INCOME AND EXPENSE, AND AVERAGE YIELDS
EARNED AND RATES PAID, CONTINUED

<TABLE>
<CAPTION>
                                                     1997              1997         1997
                                                   AVERAGE            YIELD/       INCOME
                                                   BALANCE            RATES       (EXPENSE)
<S>                                             <C>                   <C>      <C>
ASSETS

Interest bearing balances
 with other banks                              $    168,516           6.66%     $    11,217
Federal funds sold                                7,015,000           5.80%         406,956
Investment securities:(2)
 Taxable                                         21,631,576           6.24%       1,349,570
 Tax exempt                                      19,842,315           5.37%       1,064,947
                                               ------------
 Total investment securities                     41,473,891

Other investments                                 2,985,316
Loans, net(1)                                   236,673,265          10.03%      23,743,448
Cash and due from banks                           8,948,696
Premises & equipment                              7,827,736
Other assets                                      9,776,640
                                               ------------                     -----------
TOTAL ASSETS                                   $314,869,060                     $26,576,138
                                               ============                     ===========

LIABILITIES

Money market & NOW                             $ 44,119,467           3.10%      (1,366,113)
Savings accounts                                  7,790,505           2.78%        (216,384)
Certificates of deposit                         161,251,544           5.86%      (9,454,476)
Short-term and other
 borrowings                                      36,501,152           6.21%      (2,268,193)
Demand deposit accounts                          25,026,047
Other liabilities                                11,331,058

                                                                                -----------
                                                                                (13,305,166)
                                                                                -----------

Shareholders' equity                             28,849,287
                                                -----------

TOTAL LIABILITIES & EQUITY                     $314,869,060
                                               ============


NET INTEREST MARGIN                                                   4.65%     $13,270,972
                                                                                ===========
</TABLE>

(1)  Interest earnings on nonaccrual loans are included in the foregoing
     analysis to the extent that such interest earnings had been recorded
     during 1999, 1998, and 1997.
(2)  Average yields for available for sale securities are computed using the
     historical cost balances. Such yields do not give effect to changes in
     fair value that are reflected as a component of shareholders' equity.


                                      17
<PAGE>   18


The following table sets forth a summary of the changes in interest income and
interest expense resulting from changes in volume and rates for the periods
indicated:

<TABLE>
<CAPTION>
                                              1999 AS COMPARED TO 1998                      1998 AS COMPARED TO 1997
                                             INCREASE (DECREASE) DUE TO                    INCREASE (DECREASE) DUE TO
                                       NET            RATE(1)       VOLUME(1)         NET           RATE(1)         VOLUME(1)
                                  --------------------------------------------   ---------------------------------------------

<S>                               <C>             <C>             <C>             <C>             <C>             <C>
INTEREST BEARING ASSETS
 Interest bearing balances
  with other banks                $    (3,580)    $       232     $    (3,812)    $    (4,683)    $       (53)    $    (4,630)
 Investment securities:
  Taxable                             (58,923)        (55,673)         (3,250)        553,526        (140,232)        693,758
  Tax exempt                           32,550         (29,835)         62,385          89,009         (60,901)        149,910
                                  -----------     -----------     -----------     -----------     -----------     -----------
   Total Investment securities        (26,373)        (85,508)         59,135         642,535        (201,133)        843,668

 Federal funds sold                  (381,275)          8,621        (389,896)         93,548         (44,402)        137,950
 Loans, net                         3,399,043        (503,076)      3,902,119       1,345,505      (1,782,283)      3,127,788
                                  -----------     -----------     -----------     -----------     -----------     -----------

    TOTAL INTEREST INCOME           2,987,815        (579,731)      3,567,546       2,076,905      (2,027,871)      4,104,776
                                  -----------     -----------     -----------     -----------     -----------     -----------

INTEREST BEARING LIABILITIES
 Money market & NOW                  (152,789)       (375,204)        222,415         351,724          57,888         293,836
 Savings accounts                     (35,481)        (38,231)          2,750           7,641          (5,250)         12,891
 Certificates of deposit             (168,864)       (903,339)        734,475       1,515,584         135,524       1,380,060
 Short-term and
  other borrowings                  1,783,487         307,900       1,475,587         (89,562)       (373,506)        283,944
                                  -----------     -----------     -----------     -----------     -----------     -----------

    TOTAL INTEREST EXPENSE          1,426,353      (1,008,874)      2,435,227       1,785,387        (185,344)      1,970,731
                                  -----------     -----------     -----------     -----------     -----------     -----------

NET INTEREST INCOME               $ 1,561,462     $   429,143     $ 1,132,319     $   291,518     $(1,842,527)    $ 2,134,045
                                  ===========     ===========     ===========     ===========     ===========     ===========
</TABLE>

  1) The changes in interest income and/or expense not due solely to rate or
volume have been allocated to the rate component.


OTHER INCOME AND OTHER EXPENSE

    Noninterest income in 1999 decreased $273,000 or 1.73% when compared to
1998 and increased $7.7 million or 95.51% in 1998 when compared to 1997.
Noninterest income in 1999 decreased primarily due to the Company's marking to
market its holding of 244,960 shares of Flag Financial Corp common stock for a
loss of approximately $1.2 million and the Company's decision to cease
operation of its travel agency subsidiary, resulting in a decrease in travel
service income of approximately $493,000. These decreases were offset by
increases in gains on sale of loans, loan fee income, deposit account fees, and
dividend income from trading securities, and earnings from the equity
investment of the Company in CB Financial Corp. of approximately $500,000,
$519,000, $379,000, $84,000, and $211,000, respectively. Noninterest income in
1998 increased primarily due to increases in gains on sale of loans and loan
fee income of approximately $5.8 million and $1 million, respectively. These
increases were attributable to the operations of BancMortgage beginning in
1996. In addition, sales income from Appalachian increased approximately
$135,000 in 1998.

    Other noninterest expense in 1999 increased by approximately $2.2 million
or 8.41% as compared to 1998 and the 1998 amount increased approximately $7.8
million or 42.38% as compared to 1997. The increase for 1999 was primarily due
to increases of $1,522,000, $405,000, and $827,000 in personnel, occupancy, and
other operating expenses, respectively, offset by decreases in travel service
expense and computer services expense of Habersham Bank of approximately
$456,000 and $94,000, respectively. The increase in personnel, occupancy, and
operating expenses resulted from the opening of a loan production office in
Warrenton, GA, as well as BancMortgage expanding operations with the purchase
of selected assets of The Fidelity Group.


                                      18
<PAGE>   19


    The increase for 1998 was primarily due to increases of $6,001,000,
$472,000, and $1,027,000 in personnel, occupancy, and other operating expenses,
respectively. The increase for 1998 was primarily due to increases in
personnel, occupancy, and other operating expenses resulting from a full year
of operations in banking and mortgage banking locations which began mid-year
1997. These expenses were increased further by the opening of new locations in
Hall and Fayette Counties by BancMortgage.


INCOME TAX (BENEFIT) EXPENSE

   The effective tax rate for the Company decreased during 1999 as a result of
a tax benefit $409,000 resulting from a reduction of prior years' overaccrual.
The effective tax rate for the Company decreased during 1998 to 24.43% from
25.08% in 1997 due to an increase in tax exempt security income as a percentage
of income before income taxes.


PROVISION FOR LOAN LOSSES

    The Company's provision for loan losses is intended to create an adequate
allowance for losses in the loan portfolio at the end of each reporting period.
The provision for loan losses was $985,800 in 1999 as compared to $692,500 in
1998 and $422,000 in 1997. The Company's allowance for loan losses was
$3,181,553 at December 31, 1999, which was l.00% of year-end loans and 136.90%
of total nonperforming loans, as compared to $2,709,570 at December 31, 1998,
which was 1.29% of year-end loans and 69.97% of total nonperforming loans.

    At December 31, 1999, loans over 90 days past due and nonaccrual loans
totaled $1,542,148 or .49% of gross outstanding loans as compared to $3,022,267
or 1.44% of gross outstanding loans at December 31, 1998. The decrease in 1999
of approximately $1.5 million was primarily due to decreases in nonaccrual
loans relating to sales and paydowns of approximately $1,058,000, charge-offs
of approximately $346,000, and movement to other real estate of approximately
$348,000 offset by additions in nonaccrual mortgage loans of approximately
$946,000. Loans 90 days past due decreased approximately $674,000 in 1999.

    The increase for 1998 was primarily due to the addition of nonaccrual and
past due real estate mortgages of approximately $980,000 and $234,000,
respectively, from BancMortgage operations offset by decreases in 90 days past
due loans, other real estate, nonaccrual, and restructured loans of
approximately $503,000, $367,000, $225,000, and $64,000, respectively.

    Management is not aware of any loans classified for regulatory purposes as
loss, doubtful, substandard or special mention that have not been disclosed
which 1) represent or result from trends or uncertainties which management
reasonably expects will materially impact future operating results, liquidity
or capital resources, or 2) represent material credits about which management
is aware of any information which causes management to have serious doubts as
to the ability of such borrowers to comply with the loan repayment terms.

    Net charge-offs amounted to $513,817 in 1999 representing .16% of average
loans, as compared to $319,009 in 1998, representing .12% of average loans. Net
charge-offs were $347,327 in 1997, representing .15% of average loans.


                                      19
<PAGE>   20


    The following table summarizes, for each of the years in the five year
period ended December 31, 1999, selected information related to the allowance
for loan losses.

<TABLE>
<CAPTION>
                                                     1999             1998            1997            1996              1995

<S>                                            <C>              <C>              <C>              <C>              <C>
Balance of allowance for loan
 losses at beginning of period                  $  2,709,570    $   2,336,079     $  2,261,406     $  2,335,788     $  1,744,335
                                                ------------    -------------     ------------     ------------     ------------
Balance of allowance of Security
 State Bank at June 30, 1995                                                                                             628,371
Loans charged-off:
 Commercial, financial &
  agricultural                                      (117,133)        (221,048)        (224,976)        (183,218)         (22,252)
 Real estate                                        (350,006)         (77,764)        (142,871)        (256,126)         (47,110)
 Installment loans to individuals                   (141,661)        (140,809)        (145,373)        (108,660)         (44,242)
 Other                                               (32,059)         (22,157)         (34,390)         (23,014)         (62,230)
                                                ------------    -------------     ------------     ------------     ------------
Total charged-off loans                             (640,859)        (461,778)        (547,610)        (571,018)        (175,834)
                                                ------------    -------------     ------------     ------------     ------------
Recoveries:
 Commercial, financial &
  agricultural                                         4,128           59,284           22,454           32,857            5,566
 Real estate                                          59,570           16,850          108,247           65,150            1,610
 Installment loans to individuals                     57,872           55,071           61,324           28,760           17,429
 Other                                                 5,472           11,564            8,258            9,869           16,268
                                                ------------    -------------     ------------     ------------     ------------
Total recoveries                                     127,042          142,769          200,283          136,636           40,873
                                                ------------    -------------     ------------     ------------     ------------
 Net charge-offs                                    (513,817)        (319,009)        (347,327)        (434,382)        (134,961)

 Additions to allowance                              985,800          692,500          422,000          360,000           98,043
                                                ------------    -------------     ------------     ------------     ------------
 Balance of allowance for loan
  losses at end of period                       $  3,181,553    $  2,709,570      $  2,336,079     $  2,261,406     $  2,335,788
                                                ============    ============      ============     ============     ============
 Average amount of loans                        $309,502,406    $267,857,590      $236,673,265     $188,885,803     $122,451,274
                                                ============    ============      ============     ============     ============
Ratio of net charge-offs during
  the period to average loans
  outstanding during the period                          .16%             .12%             .15%             .23%             .11%

 Ratio of allowance to year-end loans                   1.00%            1.29%            1.18%            1.09%            1.61%
</TABLE>


    The risk associated with loans varies with the creditworthiness of the
borrower, the type of loan (consumer, commercial, or real estate) and its
maturity. Cash flows adequate to support a repayment schedule is an element
considered for all types of loans. Real estate loans are impacted by market
conditions regarding the value of the underlying property used as collateral.
Commercial loans are also impacted by the management of the business as well as
economic conditions.

    The Company's provision for loan losses is based upon management's
continuing review and evaluation of the loan portfolio and is intended to
create an allowance adequate to absorb losses on loans outstanding as of the
end of each reporting period. For individually significant amounts,
management's review consists of evaluations of the borrower's strength, value
of the related collateral and other factors. This evaluation is made by
classifying loans based on values assigned to each of the aforementioned
variables. These classifications are assigned by the loan reviewers and are
reviewed by the Board of Directors. Totals by loan classification, along with
related historical loss ratios, regulatory requirements, and specific
collateral evaluations, are used to determine the allowance required to provide
for losses on the classified loans. The review of groups of loans that are
individually insignificant is based upon delinquency status of the group,
lending policies and previous collection experience of each category. The
effects of current conditions on specific industries or classes of borrowers
are also considered in determining the general allowances for loan losses on
this non-classified portion of the loan portfolio. Management believes its
allowance for loan losses is adequate to absorb losses on loans outstanding at
December 31, 1999.


                                      20
<PAGE>   21


    The allowance for loan losses allocation is based on subjective judgment
and estimates, and therefore is not necessarily indicative of the specific
amounts or loan categories in which charge-offs may ultimately occur. The
allocation of the allowance for loan losses by loan category at December 31,
1999, 1998, and 1997 is as follows:

<TABLE>
<CAPTION>
                                      1999                         1998                      1997
                               PERCENT OF LOANS            PERCENT OF LOANS            PERCENT OF LOANS
                               IN EACH CATEGORY            IN EACH CATEGORY            IN EACH CATEGORY
                            AMOUNT  TO TOTAL LOANS      AMOUNT  TO TOTAL LOANS      AMOUNT  TO TOTAL LOANS
<S>                        <C>                <C>      <C>                <C>      <C>                <C>
Commercial, financial
 & agricultural            $  921,585         4.5%     $  775,239         4.9%     $  720,380         6.7%
Real estate                 1,619,563        76.8%      1,471,843        63.4%      1,426,477        70.5%
Installment loans
 to individuals               442,005         5.5%        405,988         6.1%        189,222         6.9%
Loans held for sale           198,400        13.2%         56,500        25.6%             --        15.9%
                           ----------      ------      ----------      ------      ----------      ------
   TOTAL                    3,181,553       100.0%     $2,709,570       100.0%     $2,336,079       100.0%
                           ==========      ======      ==========      ======      ==========      ======
</TABLE>

    Prior to 1997, the Company used an alternative method to determine the
allowance for loan losses. The Company began the allocation of the allowance
for loan losses by categories in 1997.

LOANS

    Loans, exclusive of loans held for sale, increased approximately $107.6
million or 51.29%, in 1999 as compared to 1998 and increased approximately
$11.5 million or 5.82% in 1998 as compared to 1997. The increase in the
Company's loan portfolio in 1999 resulted primarily from approximately $144
million of new loans offset by sales of approximately $36.4 million in
construction loans and residential mortgages. The increase in the Company's
loan portfolio in 1998 resulted primarily from approximately $70.2 million of
new loans offset by sales of approximately $58.7 million in construction loans
and residential mortgages. Loans held for sale decreased approximately $23.9
million or 33.22% in 1999 when compared to 1998 and increased approximately
$34.6 million or 92.38% in 1998 when compared to 1997.

    The composition of the Company's loan portfolio changed during 1999 as a
result of increases in construction, real estate secured mortgage, and
commercial loans of approximately $40.5 million or 61.12%, $6.2 million or
54.49%, and $2.8 million or 20.20%, respectively, when compared to 1998. The
composition of the Company's loan portfolio changed during 1998 as a result of
an increase in real estate secured mortgage loans of approximately $8.7 million
or 8.31%, an increase in construction loans of approximately $4.4 million or
7.09%, and a decrease in commercial loans of approximately $2.0 million or
12.61%, as compared to 1997.

    The amount of loans outstanding at December 31 for each of the last five
years is set forth in the following table according to type of loan and is net
of unamortized loan origination fees and unamortized discounts. The Company had
no foreign loans at December 31 in any each of the last five years.

<TABLE>
<CAPTION>
                                  1999           1998         1997           1996         1995
<S>                           <C>            <C>          <C>           <C>           <C>
Commercial, financial
  and agricultural            $ 16,623,264   $ 13,829,965 $ 15,824,792  $ 18,292,993  $17,945,695
Real estate - construction     106,915,963     66,359,030   61,965,365    50,263,496   16,512,884
Real estate - mortgage         221,857,018    184,418,653  141,857,765   146,197,001   96,361,817
Installment loans to
  individuals                   20,168,672     17,337,632   16,115,903    15,410,015   14,613,500
                              ------------   ------------ ------------  ------------ ------------
    Total                     $365,564,917   $281,945,280 $235,763,825  $230,163,505 $145,433,896
                              ============   ============ ============  ============ ============
</TABLE>


                                      21
<PAGE>   22
         The following table sets forth the maturities and sensitivities to
changes in interest rates of loans at December 31, 1999.

<TABLE>
<CAPTION>

                                                                DUE AFTER
                                             DUE IN            ONE THROUGH         DUE AFTER
                                            ONE YEAR            FIVE YEARS         FIVE YEARS             TOTAL
                                          ------------         -----------         ----------         ------------
<S>                                       <C>                  <C>                 <C>                <C>
LOAN MATURITY:
  Commercial, financial
   and agricultural .............         $ 11,288,850          $4,881,397          $453,017          $ 16,623,264
  Real estate - construction ....          106,341,824             574,139                --           106,915,963
                                          ------------          ----------          --------          ------------
       TOTAL ....................         $117,630,674          $5,455,536          $453,017          $123,539,227
                                          ============          ==========          ========          ============

LOAN INTEREST RATE SENSITIVITY:
Selected loans with:
 Predetermined interest rates ...         $ 34,114,993          $5,312,909          $453,017          $ 39,880,919
 Floating or adjustable
  interest rates ................           83,515,681             142,627                --            83,658,308
                                          ------------          ----------          --------          ------------
    TOTAL .......................         $117,630,674          $5,455,536          $453,017          $123,539,227
                                          ============          ==========          ========          ============
</TABLE>


NONPERFORMING ASSETS AND PAST DUE LOANS

         Nonperforming assets consist of nonaccrual loans, accruing loans 90
days past due, restructured loans, and other real estate owned. Nonperforming
assets decreased $1,417,000 or 26.18% in 1999 compared to 1998 and increased
$57,127 or 1.07% in 1998 compared to 1997. The decrease for 1999 was primarily
due to decreases in nonaccrual loans, accruing loans 90 days past due, and
restructured loans of approximately $806,000, $674,000, and $68,000,
respectively, offset by increases in other real estate of approximately $131,000
from BancMortgage operations. The increase for 1998 was primarily due to the
addition of nonaccrual and past due real estate mortgages of approximately
$980,000 and $234,000, respectively, from BancMortgage operations offset by
decreases in 90 days past due loans, other real estate, nonaccrual, and
restructured loans of approximately $503,000, $367,000, $225,000, and $64,000,
respectively.

         The following table sets forth the totals of nonperforming assets,
selected ratios, and accruing loans past due 90 days or more at December 31 for
each of the last five years.


<TABLE>
<CAPTION>

                                          1999                 1998                 1997                 1996               1995
<S>                                    <C>                  <C>                  <C>                  <C>                <C>
NONPERFORMING ASSETS:
Accruing loans 90 days past due        $  338,677           $1,013,009           $1,282,000           $  377,000         $  258,000
Nonaccrual                              1,203,471            2,009,258            1,251,157              981,801          1,022,683
Restructured loans                        781,803              849,963              913,753              973,559          1,227,411
Other real estate owned                 1,671,083            1,539,900            1,908,094            2,403,397          1,217,860
                                       ----------           ----------           ----------           ----------         ----------
Total nonperforming assets             $3,995,034           $5,412,130           $5,355,004           $4,735,757         $3,725,954
                                       ==========           ==========           ==========           ==========         ==========

RATIOS:
Nonperforming loans (excluding
  restructured loans) to total loans          .49%                1.44%                1.28%                 .66%               .88%
Nonperforming assets to total loans
  plus other real estate owned               1.25%                2.56%                2.68%                2.26%              2.51%
Allowance to nonperforming assets           79.64%               50.06%               43.62%               47.75%             62.69%
</TABLE>

         Accrual of interest is discontinued when either principal or interest
becomes 90 days past due unless the loan is both well secured and in the process
of collection, or in management's opinion, when reasonable doubt exists as to
the full collection of interest or principal. Interest income that would have
been recorded on these nonaccrual and restructured loans in accordance with
their original terms totaled $266,491, $401,099, and $289,782, respectively, in
1999, 1998, and 1997, compared with interest income recognized of $185,053,
$274,557, and $252,930, respectively.


                                       22
<PAGE>   23

         At December 31, 1999, the Company had no significant loans which
management designated as potential problem loans which have not been disclosed
above as nonaccrual or past due loans.

         Habersham Bank held a concentration in mortgages for agribusiness
purposes in the poultry industry which totaled approximately $9 million, or
approximately 2.8% of total net loans at December 31, 1999 and which totaled
approximately $10 million, or approximately 4.7% of total net loans at December
31, 1998.


INVESTMENT SECURITIES

         The Company has classified its investment securities as available for
sale, held to maturity, or trading. The classification of certain investment
securities as available for sale is consistent with the Company's investment
philosophy of maintaining flexibility to manage the securities portfolio. At
December 31, 1999, approximately $38.8 million of investment securities were
classified as available for sale. Approximately $974,000 of net unrealized loss,
net of income taxes, was included in shareholders' equity related to the
available for sale investment securities.

         On September 30, 1998, the Company exercised its previously acquired
option to purchase a 26.5% interest in Empire Bank Corp. ("Empire"), Homerville,
Georgia at a total cost of $3,017,406. Subsequent to the Company acquiring its
option to purchase this interest in Empire, Empire entered into a definitive
agreement to be acquired by FLAG Financial Corp. ("FLAG"). Upon the exchange of
its common stock in Empire for the common stock of FLAG during December 1998,
the Company recorded the investment in the common stock of FLAG as a trading
security and recorded an unrealized gain of $478,134 which is reflected in
earnings. During 1999, the Company recorded an unrealized loss of $1,190,820
related to the trading securities.

         The following table sets forth the carrying amounts of investment
securities at December 31, 1999, 1998, and 1997.

<TABLE>
<CAPTION>

                                                      1999                 1998                 1997
<S>                                                <C>                  <C>                  <C>
Investment securities available for sale:
    U.S. Treasury                                  $        --          $   200,812          $   201,438
    U.S. Government agencies                        23,049,452           31,678,154           20,982,863
    States & political subdivisions                 14,430,944           13,767,110           11,345,182
    Other investments                                1,339,431              693,936              694,940
                                                   -----------          -----------          -----------
      Total                                        $38,819,827          $46,340,012          $33,224,423
                                                   ===========          ===========          ===========

Investment securities held to maturity:
    U.S. Government agencies                       $ 3,535,356          $ 3,911,279          $ 1,351,357
    States & political subdivisions                 10,666,346           11,600,284            9,954,423
    Other investments                                       --               99,000               99,000
                                                   -----------          -----------          -----------
      Total                                        $14,201,702          $15,610,563          $11,404,780
                                                   ===========          ===========          ===========

Trading securities                                 $ 1,714,720          $ 3,495,540                   --
                                                   ===========          ===========
</TABLE>


                                       23
<PAGE>   24

         The following table sets forth the maturities of investment securities
at December 31, 1999 and the related weighted yields of such securities on a tax
equivalent basis (assuming a 34% tax rate).


<TABLE>
<CAPTION>


                                                                              MATURING IN
                                                    ONE YEAR             1-5                5-10                 AFTER 10
                                                     OR LESS            YEARS               YEARS                  YEARS

<S>                                                <C>               <C>                  <C>                  <C>
Investment securities available for sale:
Carrying Value:

 U.S. Government agencies                          $  624,983        $  675,131           $2,701,346           $19,047,992
 States & political subdivisions                      872,574         3,936,830            2,765,408             6,856,132
 Other investments                                  1,339,431

Weighted average yields:

 U.S. Government agencies                                4.04%             6.05%                6.33%                 6.34%
 States & political subdivisions                         7.15%             7.20%                7.86%                 7.85%

Investment securities held to maturity:
Carrying Value:
 U.S. Government agencies                          $       --        $  105,622           $  779,977           $ 2,649,757
 States & political subdivisions                      721,049         3,997,521            2,530,992             3,416,784


Weighted average yields:
 U.S. Government agencies                                  --              6.29%                6.00%                 7.43%
 States & political subdivisions                         7.53%             7.16%                7.68%                 6.96%

</TABLE>

         No securities were held which represent a combined total for one issuer
which is in excess of 10% of the Company's shareholders' equity at December 31,
1999.


OTHER STOCK INVESTMENT

         In May 1999, the Company exercised its previously acquired option to
purchase a 45.91% interest in CB Financial Corp., Warrenton, Georgia, at a total
cost of $2,963,757, including direct costs of acquisition of $115,468. In
connection with this purchase, the Company issued 207,713 shares of its common
stock valued at $2,847,883 and cash of $406 in exchange for 27,574 shares of
common stock of CB Financial Corp. The investment in CB Financial Corp. is
accounted for using the equity method. Included in the initial investment in CB
Financial Corp. common stock was approximately $1,278,000 in excess cost over
the Company's underlying equity in the net assets of this investee. For the year
ended December 31, 1999, the Company recorded $211,279 as equity in earnings of
CB Financial Corp. Amortization of related excess cost over basis in CB
Financial Corp. common stock for 1999 totaled $49,707. The assets of CB
Financial Corp. as of December 31, 1999 totaled approximately $41,889,000 and
net income for the year ended December 31, 1999 totaled approximately $83,000.


DEPOSITS

         Average deposits increased approximately $19.5 million and $36.3
million during 1999 and 1998, respectively.

         The following table sets forth the average amount of deposits and
average rate paid on such deposits for each category which exceeds 10% of
average total deposits for the years ended December 31, 1999, 1998, and 1997.

<TABLE>
<CAPTION>

                                               1999                          1998                       1997
                                             AVG. AMT        AVG           AVG. AMT      AVG          AVG. AMT         AVG
                                           OUTSTANDING      RATE         OUTSTANDING    RATE         OUTSTANDING      RATE

<S>                                       <C>               <C>         <C>             <C>         <C>               <C>
Interest bearing demand deposits          $ 60,548,509      2.58%       $ 53,598,039    3.20%       $ 44,119,467      3.10%
Nonininterest bearing demand deposits       27,967,073       n/a          27,892,056     n/a          25,026,047       n/a
Time certificates of deposit               197,166,960      5.48%        184,802,058    5.94%        161,251,544      5.86%
</TABLE>


                                       24
<PAGE>   25

         At December 31, 1999, time certificates of deposit of $100,000 or more
totaled $78,399,152. The maturities of all time certificates of deposit over
$100,000 are as follows:


<TABLE>
         <S>                                          <C>
         3 months or less                             $19,079,280
         Over 3 but less than 6 months                 20,333,174
         Over 6 but not more than 12 months            26,182,545
         Over 1 year but not more than 5 years         12,804,153
                                                      -----------
       TOTAL                                          $78,399,152
                                                      ===========
</TABLE>

BORROWINGS

         Borrowings increased approximately $42.5 million during 1999 as
compared to 1998 as a result of borrowings of approximately $23.4 million from
the Federal Home Loan Bank, approximately $11.2 million in repurchase agreement
advances drawn at Compass Bank, and federal funds purchased of approximately
$8.1 million, offset by repayments of $750,000 to the National Bank of Commerce
of Birmingham. Borrowings increased approximately $28.6 million during 1998 as
compared with 1997 as a result of borrowings of approximately $28.4 million from
the Federal Home Loan Bank and a $2.7 million note payable to the National Bank
of Commerce of Birmingham in connection with the purchase of Empire common stock
offset by repayments of approximately $2.5 million.


CAPITAL RESOURCES

         The Company is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimal capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Company's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Company must meet specific capital guidelines that involve quantitative measures
of the Company's assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The Company's capital amounts
and classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.

         Quantitative measures established by regulations to ensure capital
adequacy require the Company to maintain minimum amounts and ratios (set forth
below in the table) of total and Tier I capital (as defined in the regulations)
to risk-weighted assets (as defined), and of Tier I capital (as defined) to
average assets (as defined). Management believes, as of December 31, 1999, that
the Company meets all capital adequacy requirements to which it is subject.

         As of December 31, 1999, the most recent notifications from both the
Federal Deposit Insurance Corporation and the Federal Reserve Bank of Atlanta
categorized the Bank as adequately under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the Bank must maintain
minimum total risk-based, Tier I risk-based and Tier I leverage ratios as set
forth in the table. There are no conditions or events since that notification
that management believes have changed the Bank's categories.


                                       25
<PAGE>   26


         The Company's actual capital amounts and ratios as of December 31, 1999
follows (in thousands):


<TABLE>
<CAPTION>

                                                                                                           TO BE WELL
                                                                                                          CAPITALIZED
                                                                                                          UNDER PROMPT
                                                                                                           CORRECTIVE
                                                                                FOR CAPITAL                  ACTION
                                                          ACTUAL             ADEQUACY PURPOSES             PROVISIONS
                                                   AMOUNT       RATIO         AMOUNT    RATIO         AMOUNT         RATIO
<S>                                                <C>          <C>          <C>        <C>           <C>            <C>
As of December 31, 1999
Total Capital (to risk-weighted assets):
  The Company                                      $36,726      10.71%       $27,422      8%              N/A         N/A
  Habersham Bank                                    31,990       9.46%        27,043      8%          $33,804          10%


Tier I Capital (to risk-weighted assets):
  The Company                                      $33,544       9.79%       $13,711      4%              N/A         N/A
  Habersham Bank                                    28,808       8.52%        13,521      4%          $20,282           6%

Tier I Capital (to average assets):
  The Company                                      $33,544       7.66%       $17,506      4%              N/A         N/A
  Habersham Bank                                    28,808       6.58%        17,504      4%          $21,880           5%
</TABLE>

         While management believes that the current level of capital is
sufficient for the current and foreseeable needs of the Company, capital needs
are continually evaluated by management.

         Cash dividends were paid at a rate of $.05 per share in March, June,
September, and December 1999. Cash dividends were paid at a rate of $.04 per
share in March, June, September, and December of 1998. Cash dividends were paid
at a rate of $.035 per share in March, June, September, and December 1997.

         Management is not aware of any required regulatory changes or any
recommendation by any regulatory authority which will have a material effect on
the Company's liquidity, capital or results of operations.


INTEREST RATE SENSITIVITY

         The objective of asset and liability management is to manage and
measure the level and volatility of earnings and capital by controlling interest
rate risk. To accomplish this objective, management makes use of interest rate
and income simulation models to perform current and dynamic projections of
interest income and equity, as well as more traditional asset and liability
management methods.

         The Company's historical performance in various economic climates is
considered by management in making long-term asset and liability decisions for
the Company.

         The relative interest rate sensitivity of the Company's assets and
liabilities indicates the extent to which the Company's net interest income may
be affected by interest rate movements. The Company's ability to reprice assets
and liabilities in the same dollar amounts and at the same time minimizes
interest rate risks. One method of measuring the impact of interest rate changes
on net interest income is to measure, in a number of time frames, the interest
sensitivity gap by subtracting interest sensitive liabilities from interest
sensitive assets, as reflected in the following table. Such an interest
sensitivity gap represents the risk, or opportunity, in repricing. If more
assets than liabilities are repriced at a given time in a rising rate
environment, net interest income improves; in a declining rate environment, net
interest income deteriorates. Conversely, if more liabilities than assets are


                                       26
<PAGE>   27

repriced while interest rates are rising, net interest income deteriorates; if
interest rates are falling, net interest income improves.

<TABLE>
<CAPTION>
INTEREST RATE SENSITIVITY ANALYSIS
                                             DUE IN        DUE AFTER       DUE AFTER       DUE AFTER      DUE AFTER        TOTAL
                                  YIELD/     THREE       THREE THROUGH    SIX THROUGH     ONE THROUGH       FIVE
INTEREST EARNING ASSETS:          RATE       MONTHS       SIX MONTHS     TWELVE MONTHS     FIVE YEARS       YEARS

<S>                               <C>     <C>            <C>             <C>              <C>            <C>           <C>
 Investment securities            5.36%   $  1,051,593   $     621,983   $     867,406    $ 11,919,230   $38,561,317   $ 53,021,529
 Loans                            9.20%    145,919,537      26,040,131      36,604,555     101,449,823    55,484,640    365,498,686
                                  ----    ------------   -------------   -------------    ------------   -----------   ------------
 Total earning assets             8.59%    146,971,130      26,662,114      37,471,961     113,369,053    94,045,957    418,520,215
                                  ----    ------------   -------------   -------------    ------------   -----------   ------------

INTEREST BEARING LIABILITIES:

Deposits:
  Money Market and NOW            2.58%     55,337,836              --              --              --            --     55,337,836
  Savings                         2.26%      7,871,532              --              --              --            --      7,871,532
  Certificates of
    deposit                       5.48%     48,767,995      65,693,804      65,972,034      48,637,912            --    229,071,745
  Short-term
    borrowings                    5.75%     97,233,020              --       1,950,000              --            --     99,183,020
                                  ----    ------------   -------------   -------------    ------------   -----------   ------------
Total interest bearing
  liabilities                     4.93%    209,210,383      65,693,804      67,922,034      48,637,912            --    391,464,133
                                  ----    ------------   -------------   -------------    ------------   -----------   ------------

INTEREST RATE MARGIN              4.11%
                                  ====

Excess (deficiency) of interest earning
 assets over (to) interest
 bearing liabilities                      $(62,239,253)  $ (39,031,690)  $ (30,450,073)   $ 64,731,141   $94,045,957   $ 27,056,082
                                          ============   =============   =============    ============   ===========   ============

Cumulative gap                            $(62,239,253)  $(101,270,943)  $(131,721,016)   $(66,989,875)  $27,056,082

Ratio of cumulative gap to
 total cumulative earning assets                (42.35)%        (58.32)%        (62.40)%        (20.65)%        6.46%
Ratio of interest earning assets to
 interest bearing liabilities                    70.25%          63.16%          61.58%          82.89%       106.91%
</TABLE>


         The Company's strategy is to maintain a ratio of interest sensitive
assets to interest sensitive liabilities in the range of 60% to 140% at the
less-than one-year-time frame. At December 31, 1999, the Company was able to
meet such objective. The interest rate sensitivity analysis has a negative one
year gap of approximately $131.7 million (excess of interest bearing liabilities
to interest earning assets repricing within one year). However, the Company's
experience has shown that NOW, IMMA, and Savings deposits of approximately $63.2
million are less sensitive to short term rate movements.


MARKET RISK

         Market risk reflects the risk of economic loss resulting from adverse
changes in market prices and interest rates. The risk of loss can be reflected
in either diminished current market values or reduced potential net interest
income in future periods.

         Market risk arises primarily from interest rate risk inherent in the
Company's lending and deposit taking activities. The structure of the Company's
loan and deposit portfolios is such that a significant decline in the prime rate
may adversely impact net market values and interest income. Management seeks to
manage this risk through the use of its investment securities portfolio. The
composition and size of the investment portfolio is managed so as to reduce the
interest rate risk in the deposit and loan portfolios while at the same time
maximizing the yield generated from the portfolio. The Company is also subject
to equity risk as a result of changes in market values on the trading
securities.

         The table below presents in tabular form the contractual balances and
the estimated fair value of the Company's balance sheet financial instruments
and their expected maturity dates as of December 31, 1999. The expected maturity
categories take into consideration historical prepayments experience as well as


                                       27
<PAGE>   28

management's expectations based on the interest rate environment as of December
31, 1999.

MARKET RISK INFORMATION
(IN THOUSANDS)

<TABLE>
<CAPTION>

                                                               PRINCIPAL/NOTIONAL AMOUNT MATURING IN:                        FAIR
                                     2000          2001        2002       2003      2004     THEREAFTER      TOTAL          VALUE
<S>                               <C>           <C>          <C>        <C>       <C>        <C>           <C>            <C>
RATE-SENSITIVE ASSETS:
Fixed interest rate
 loans                            $  59,523     $ 15,200     $12,202    $ 5,269   $ 8,030      $55,850     $156,074       $156,529
Average interest rate                  7.95%        9.17%       9.18%      8.83%     8.71%        9.12%        8.65%

Variable interest rate
 loans                              149,043       10,247       4,245     14,485    31,405           --      209,425        204,334
Average interest rate                  9.37%        7.49%       7.49%      6.63%     6.63%          --%        8.64%

Fixed interest rate
 securities                           1,754        2,067       2,127      2,653     1,585       40,977       51,163         50,653
Average interest rate                  6.25%        5.04%       4.58%      4.79%     5.28%        5.95%        5.78%

Variable interest rate
 securities                             595           --          --        180        --        1,084        1,859          1,831
Average interest rate                  4.25%          --%         --%      4.08%       --         5.96%          --%

RATE-SENSITIVE LIABILITIES:
Savings and interest
  bearing checking                   63,209           --          --         --        --           --       63,209         63,209
Average interest rate                  2.55%          --%         --%        --%       --%          --%        2.55%

Fixed interest rate
  time deposits                     180,230       25,806      13,298      8,855       664           --      228,853        234,809
Average interest rate                  5.63%        5.84%       6.09%      5.75%     5.52%          --%        5.68%

Variable interest rate
  time deposits                         183           35          --         --        --           --          218            223
Average interest rate                  5.44%        5.31%         --%        --%       --%          --%        5.42%

Variable interest rate
  borrowings                         99,183           --          --         --        --           --       99,183         99,183
Average interest rate                  5.75%          --%         --%        --%       --%          --%        5.75%
</TABLE>


The trading securities of $1,714,720 are subject to changes in market values.


INFLATION

         The Company's assets and liabilities are generally monetary in nature.
Therefore, interest rates have a greater impact on the Company's performance
than the effects of general levels of inflation. Interest rates do not
necessarily move in the same direction or magnitude as the prices of goods and
services. See "Interest Rate Sensitivity" above.


LIQUIDITY

         Liquidity management involves the matching of the cash flow
requirements of customers, either depositors withdrawing funds or borrowers
needing loans, and the ability of the Company to meet those requirements.

         The Company's liquidity program is designed and intended to provide
guidance in funding the credit and investment activities of the Company while at
the same time ensuring that the deposit obligations of the Company are met on a
timely basis. In order to permit active and timely management of assets and
liabilities, these accounts are monitored regularly in regard to volume, mix,
and maturity.

         The Company's liquidity position depends primarily upon the liquidity
of its assets relative to its need to respond to short-term demand for funds
caused by


                                       28
<PAGE>   29

withdrawals from deposit accounts and loan funding commitments. Primary sources
of liquidity are scheduled repayments on the Company's loans and interest on and
maturities of its investments. Sales of investment securities available for sale
represent another source of liquidity to the Company. The Company may also
utilize its cash and due from banks and federal funds sold to meet liquidity
requirements as needed.

         The Company also has the ability, on a short-term basis, to purchase
federal funds from other financial institutions up to $20,000,000. Presently,
the Company has made arrangements with commercial banks for short-term advances
up to $12,000,000 under a repurchase agreement line of credit, in addition to a
total available line of $133,000,000 which is available to the Company, subject
to available collateral, from the Federal Home Loan Bank.

         Habersham Bank's liquidity policy requires a minimum ratio of 20% of
cash and certain short-term investments to net withdrawable deposit accounts.
The Bank's liquidity ratios at December 31, 1999 and 1998 were 23.72% and
23.97%, respectively.


RECENT ACCOUNTING PRONOUNCEMENTS

         In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 is effective for financial
statements for all fiscal quarters of all fiscal years beginning after June 15,
1999. In June 1999, the FASB issued SFAS No. 137 "Accounting for Derivative
Instruments and Hedging Activities -- Deferral of the Effective Date of FASB
Statement No, 133", an amendment of FASB Statement No. 133. SFAS No. 133, as
amended, is now effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000. The Company does not believe the provisions of SFAS No. 133
will have a significant impact on the financial statements upon adoption.


YEAR 2000

         The Company's Year 2000 Committee, the Year 2000 Contingency Committee,
and the Customer Awareness Committee were responsible for the implementation of
various phases of the Year 2000 Action Plan.

         Habersham Bank opened for business January 1, 2000, completing a
successful Year 2000 transition. No disruption in services was noted; however,
monitoring of all systems will continue well into 2000. No problems relating to
borrowers or vendors have been noted.

         Costs incurred related to Year 2000 readiness of approximately $108,000
were incurred during 1999. These costs consisted primarily of capital
expenditures to upgrade computer systems. For the year ended December 31, 1998,
costs incurred for Year 2000 related upgrades of computer equipment and software
totaled approximately $15,000 and were included in other operating expenses.


                                       29
<PAGE>   30


<TABLE>
<CAPTION>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)     QUARTER ENDED

                                   MARCH 30   JUNE 30   SEPT. 30   DEC. 31
                           (Dollars in thousands, except per share amounts)
   <S>                               <C>       <C>        <C>      <C>
   1999:
      Interest income                $7,157    $7,609     $8,303   $9,075
      Net interest income             3,511     3,807      4,138    4,171
      Net income                        204       548        495      507
      Per share - basic                 .08       .21        .18      .19
      Per share - diluted               .08       .21        .18      .19

   1998:
      Interest income                $6,910    $7,226     $7,366   $7,457
      Net interest income             3,420     3,446      3,513    3,489
      Net income                        443       419        604      592
      Per share - basic                 .18       .17        .25      .24
      Per share - diluted               .18       .17        .24      .24
</TABLE>


         Cash dividends were paid on a quarterly basis at a rate of $.05 per
share of common stock in 1999 and $.04 per share of common stock in 1998.

         The common stock of the Company is traded on the Nasdaq Stock Market
("NASDAQ") under the symbol HABC. At December 31, 1999 the Company had
approximately 601 shareholders of record. The following table sets forth the
high and low sales prices of the Company's common stock on a quarterly basis for
the last two fiscal years.

<TABLE>
<CAPTION>
     1999:                   HIGH        LOW
     <S>                    <C>         <C>
     Fourth Quarter         14.50       12.75
     Third Quarter          16.00       12.625
     Second Quarter         18.00       12.625
     First Quarter          16.00       13.50


     1998:                   HIGH        LOW
     Fourth Quarter         17.00       14.00
     Third Quarter          18.75       16.00
     Second Quarter         20.25       18.13
     First Quarter          20.50       18.50
</TABLE>


Item 7a.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         See "Market Risk" under Item 7, "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included in the Company's
annual report to shareholders and incorporated herein by reference.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The consolidated balance sheets of the Company and subsidiaries as
of December 31, 1999 and 1998, and the related consolidated statements of
income, shareholders' equity and comprehensive income, and cash flows and
notes to the consolidated financial statements for each of the years in the
three-year period ended December 31, 1999, and the reports issued thereon by
the Company's independent public accountants are attached hereto as Exhibit 13
and are incorporated herein by reference.


                                       30
<PAGE>   31

Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

         None

                           PART III

Item 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Information concerning the Company's directors and executive officers
appears in the Proxy Statement under the headings "Election of
Directors-Nominees" and "--Compliance with Section 16(a) of the Exchange Act"
and "Executive Officers" and is incorporated by reference herein.


Item 11.  EXECUTIVE COMPENSATION

         Information concerning the compensation of the Company's management
appears in the Proxy Statement under the headings "Executive Compensation" and
"Election of Directors--Compensation of Directors" and is incorporated by
reference herein.


Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Information concerning beneficial owners of more than 5% of the
Company's Stock and information concerning the stock owned by the Company's
management appears in the Proxy Statement under the heading "Ownership of Stock"
and is incorporated by reference herein.


Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Information concerning certain relationships and related transactions
appears in the Proxy Statement under the heading "Certain Transactions" and is
incorporated by reference herein.

                                   PART IV
Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)      See Item 8 for a list of the financial statements as filed as a part of
         this report.

(b)      No financial statement schedules are applicable as the required
         information is included in the financial statements in Item 8.

(c)      The registrant submits herewith as exhibits to this report on Form 10-K
         the exhibits required by Item 601 of Regulation S-K, subject to Rule
         12b-32 under the Securities Exchange Act of 1934.

<TABLE>
<CAPTION>
Exhibit No.                  Document
-----------                  --------
<S>      <C>
3.1      Amended and restated Articles of Incorporation of Habersham Bancorp, as
         amended. (1)

3.2      By-laws of Habersham Bancorp, as amended as of November 20, 1989 (2)
         and as of March 16, 1991. (3)

10.1*    Habersham Bancorp Savings Investment Plan, as amended and restated
         March 17, 1990, and the related Trust Agreements, as amended March 17,
         1990. (2)

10.2*    Habersham Bancorp Incentive Stock Option Plan, as amended February 26,
         1994. (4)
</TABLE>


                                       31
<PAGE>   32

<TABLE>
<S>      <C>
10.3*    Habersham Bancorp Outside Directors Stock Option Plan. (5)

10.4*    Habersham Bancorp 1996 Incentive Stock Option Plan, as amended by the
         First Amendment thereto dated January 29, 2000. (6)

10.5*    Mortgage Banking Agreement Dated as of January 2, 1996 among Habersham
         Bancorp, Habersham Bank, BancMortgage Financial Corp. and Robert S.
         Cannon and Anthony L. Watts. (7)

13.0     Financial statements and notes thereto contained in the Habersham
         Bancorp 1999 Annual Report.

21.0     Subsidiaries of Habersham Bancorp.

23.1     Independent Accountants' Consent

27.0     Financial Data Schedule (for SEC use only).
</TABLE>


(1)   Incorporated herein by reference to exhibit 3(a) in Amendment No. 1 to
Registrant's Registration Statement on Form S-4 (Regis. No. 33-57915).

(2)   Incorporated herein by reference to exhibit of same number in the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1989
(File No. 0-13153).

(3)   Incorporated herein by reference to exhibit of same number in the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1991
(File No. 0-13153).

(4)   Incorporated herein by reference to exhibit of same number in the
Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1993
(File No. 0-13153).

(5)   Incorporated herein by reference to exhibit of same number in the
Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1994
(File No. 0-13153).

(6)   Incorporated herein by reference to exhibit of same number in the
Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1995
(File No. 0-13153).

(7)   Incorporated herein by reference to exhibit of same number in the
Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1997
(File No. 0-13153).

* Indicates the Registrant's plans, management contracts and compensatory
arrangements.

    (b)  Reports on Form 8-K:

    No reports on Form 8-K were filed during the last quarter of the year ended
December 31, 1999.


                                       32
<PAGE>   33

                                  SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                              HABERSHAM BANCORP (Registrant)

    /s/ David D. Stovall             Date:   March 29, 2000
    --------------------                   -----------------
By: Director, President and
    Chief Executive Officer


    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.

<TABLE>
<CAPTION>

     Signature                        Title                          Date
                                      -----                          ----
<S>                              <C>                          <C>
/s/ Thomas A. Arrendale, Jr.     Chairman of the Board        March 29, 2000
----------------------------     and Director

/s/ Thomas A. Arrendale, III     Vice Chairman of the Board   March 29, 2000
----------------------------     and Director


/s/ David D. Stovall             Director, President and      March 29, 2000
----------------------------     Chief Executive Officer *


/s/ James Holcomb                Director                     March 29, 2000
----------------------------

/s/ James A. Stapleton, Jr.      Director                     March 29, 2000
----------------------------

/s/ Calvin R. Wilbanks           Director                     March 29, 2000
----------------------------
</TABLE>

* Principal financial officer, principal executive officer, controller and
principal accounting officer.


                                       33
<PAGE>   34
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
  No.                     Document
-------                   --------
<S>      <C>
3.1      Amended and restated Articles of Incorporation of Habersham Bancorp, as
         amended. (1)

3.2      By-laws of Habersham Bancorp, as amended as of November 20, 1989 (2)
         and as of March 16, 1991. (3)

10.1*    Habersham Bancorp Savings Investment Plan, as amended and restated
         March 17, 1990, and the related Trust Agreements, as amended March 17,
         1990. (2)

10.2*    Habersham Bancorp Incentive Stock Option Plan, as amended February 26,
         1994. (4)

10.3*    Habersham Bancorp Outside Directors Stock Option Plan. (5)

10.4*    Habersham Bancorp 1996 Incentive Stock Option Plan, as amended by the
         First Amendment thereto dated January 29, 2000. (6)

10.5*    Mortgage Banking Agreement Dated as of January 2, 1996 among Habersham
         Bancorp, Habersham Bank, BancMortgage Financial Corp. and Robert S.
         Cannon and Anthony L. Watts. (7)

13.0     Financial statements and notes thereto contained in the Habersham
         Bancorp 1999 Annual Report.

21.0     Subsidiaries of Habersham Bancorp.

23.1     Independent Accountants' Consent

27.0     Financial Data Schedule (for SEC use only).
</TABLE>


(1) Incorporated herein by reference to exhibit 3(a) in Amendment No. 1 to
Registrant's Registration Statement on Form S-4 (Regis. No. 33-57915).

(2) Incorporated herein by reference to exhibit of same number in the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1989
(File No. 0-13153).

(3) Incorporated herein by reference to exhibit of same number in the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1991
(File No. 0-13153).


                                       34
<PAGE>   35

(4) Incorporated herein by reference to exhibit of same number in the
Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1993
(File No. 0-13153).

(5) Incorporated herein by reference to exhibit of same number in the
Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1994
(File No. 0-13153).

(6) Incorporated herein by reference to exhibit of same number in the
Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1995
(File No. 0-13153).

(7) Incorporated herein by reference to exhibit of same number in the
Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1997
(File No. 0-13153).

* Indicates the Registrant's plans, management contracts and compensatory
arrangements.


                                       36