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                       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, 2001.

[ ]      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
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             (Exact name of registrant as specified in its charter)

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

282 Historic Highway 441 North, P. O. Box 1980, Cornelia, Georgia       30531
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          (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:

1,650,820 Shares of Common Stock, $1.00 par value--$26,825,825 as of
March 8, 2002 (based upon market value of $16.25/share as of that date).


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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of December 31, 2001:

                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, 2001 (the "Annual Report") are incorporated by reference into
Part II.

(2)      Portions of the Company's Proxy Statement relating to the 2002 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., which ceased operations on
September 30, 2001, 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, White, Cherokee, and Warren
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., which provided
marketing and advertising services, ceased operation September 30, 2001.


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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.

                  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., was a
full service travel agency located in Cornelia, Georgia. Effective September 30,
1999, the Bank ceased operations of this 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,
Cherokee, and Warren Counties, Georgia. Habersham Bank competes principally for
all types of loans, deposits and other financial services with other commercial
banks located in Habersham, White, Cherokee, and Warren Counties, Georgia.

         Habersham 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 nonbank 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, 2001, the Company had 323 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


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and its subsidiaries enjoy satisfactory relations with their respective
employees.

                           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 their 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

         Since 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.

         Additionally, the Bank Holding Company Act provides that the Federal
Reserve may not approve any of these transactions if it would result in or tend
to create a monopoly, or substantially lessen competition or otherwise function
as a restraint of trade, unless the anticompetitive effects of the proposed
transaction are clearly outweighed by the public interest in meeting the
convenience and needs of the community to be served. The Federal Reserve is also
required to consider the financial and managerial resources and future prospects
of the bank holding companies and banks concerned and the convenience and needs
of the community to be served. The Federal Reserve's consideration of financial
resources generally focuses on capital adequacy, which is discussed below.

         Under the Bank Holding Company Act, if adequately capitalized and
adequately managed, the Company or any other 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 that has only
been in existence for a limited amount of time or will 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 company acquires 10% or more, but less than 25%, of any class of
voting securities and either:


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         -        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.

Our common stock is registered under the Securities Exchange Act of 1934. The
regulations provide a procedure for challenge of the rebuttable control
presumption.

         PERMITTED ACTIVITIES. Generally, bank holding companies are prohibited
under the Bank Holding Company Act from engaging in or acquiring direct or
indirect control of more than 5% of the voting shares of any company engaged in
any activity other than:

         -        banking or managing or controlling banks; and

         -        an activity that the Federal Reserve determines 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 as to be a proper incident to the business of banking include:

         -        factoring accounts receivable;

         -        making, acquiring, brokering or servicing loans and usual
                  related activities;

         -        leasing personal or real property;

         -        operating a nonbank depository institution, such as a savings
                  association;

         -        trust company functions;

         -        financial and investment advisory activities;

         -        conducting discount securities brokerage activities;

         -        underwriting and dealing in government obligations and money
                  market instruments;

         -        providing specified management consulting and counseling
                  activities;

         -        performing selected data processing services and support
                  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 it or any of its bank subsidiaries.


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         A bank holding company that qualifies and elects to become a financial
holding company is permitted to engage in activities that are financial in
nature or incidental or complementary to financial activity. The Bank Holding
Company Act expressly lists the following activities as financial in nature:

         -        lending, trust, and other banking activities;

         -        insuring, guaranteeing, or indemnifying against loss or harm,
                  or providing and issuing annuities, and acting as principal,
                  agent, or broker for these purposes, in any state;

         -        providing financial, investment, or advisory services;

         -        issuing or selling instruments representing interests in pools
                  of assets permissible for a bank to hold directly;

         -        underwriting, dealing in or making a market in securities;

         -        other activities that the Federal Reserve may determine to be
                  so closely related to banking or managing or controlling banks
                  as to be a proper incident to managing or controlling banks;

         -        foreign activities permitted outside of the United States if
                  the Federal Reserve has determined them to be usual in
                  connection with banking operations abroad;

         -        merchant banking through securities or insurance affiliates;
                  and

         -        insurance company portfolio investments.

         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, the
Company is expected to act as a source of financial strength for the Bank and to
commit resources to support the Bank. This support may be required at times
when, without this Federal Reserve policy, the Company might not be inclined to
provide it. In addition, any capital loans made by the Company to the Bank will
be repaid only after its deposits and various other obligations are repaid in
full. In the unlikely event of the Company's bankruptcy, any commitment by it to
a federal bank regulatory agency to maintain the capital of the Bank will be
assumed by the bankruptcy trustee and entitled to a priority of payment.

THE BANK

         Since the Bank is a commercial bank chartered under the laws of the
State of Georgia, it is primarily subject to the supervision, examination and
reporting requirements of the FDIC and the Georgia Department of Banking and
Finance. The FDIC and Georgia Department of Banking and Finance regularly
examine the Bank's operations and have the authority to approve or disapprove
mergers, the establishment of branches, and similar corporate actions. Both
regulatory agencies have the power to prevent the continuance or development of
unsafe or unsound banking practices or other violations of law.


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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 statutes
and regulations that affect its business, activities, and operations.

         BRANCHING. Under current Georgia law, the Bank may open branch offices
throughout Georgia with the prior approval of the Georgia Department of Banking
and Finance. In addition, with prior regulatory approval, the Bank may acquire
branches of existing banks located in Georgia. The Bank and any other national
or state-chartered bank generally may branch across state lines by merging with
banks in other states if allowed by the applicable states' laws. Georgia law,
with limited exceptions, currently permits branching across state lines through
interstate mergers.

         Under the Federal Deposit Insurance Act, states may "opt-in" and allow
out-of-state banks to branch into their state by establishing a new start-up
branch in the state. Currently, Georgia has not opted-in to this provision.
Therefore, interstate merger is the only method through which a bank located
outside of Georgia may branch into Georgia. This provides a limited barrier of
entry into the Georgia banking market, which protects us from an important
segment of potential competition. However, because Georgia has elected not to
opt-in, our ability to establish a new start-up branch in another state may be
limited. Many states that have elected to opt-in have done so on a reciprocal
basis, meaning that an out-of-state bank may establish a new start-up branch
only if their home state has also elected to opt-in. Consequently, until Georgia
changes its election, the only way we will be able to branch into states that
have elected to opt-in on a reciprocal basis will be through interstate merger.

         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, the 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 categories. At December 31, 2001, we
qualified for the well-capitalized category.

         Federal banking regulators are required to take various 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, subject to various limitations.
The controlling holding company's obligation to fund a capital restoration plan
is limited to the lesser of 5% of an undercapitalized subsidiary's assets at the
time it became undercapitalized 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 regulations also
establish procedures for downgrading an institution to a lower capital category
based on supervisory factors other than capital.


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         FDIC INSURANCE ASSESSMENTS. The FDIC has adopted a risk-based
assessment system for insured depository institutions that takes into account
the risks attributable to different categories and concentrations of assets and
liabilities. The system assigns an institution to 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 for prompt corrective action
purposes. 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 is set at 1.82 cents per $100 of
deposits for the first quarter of 2002.

         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
that, in connection with examinations of financial institutions within their
respective jurisdictions, the Federal Reserve or the FDIC shall evaluate the
record of each financial institution in meeting the credit needs of its local
community, including low and moderate-income neighborhoods. These factors are
also considered 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 and the Company.
Additionally, we must 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. For example, under the Soldiers' and Sailors' Civil Relief Act
of 1940, a lender is generally prohibited from charging an annual interest rate
in excess of 6% on any obligation for which the borrower is a person on active
duty with the United States military.

         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;


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

         -        Soldiers' and Sailors' Civil Relief Act of 1940, governing the
                  repayment terms of, and property rights underlying, secured
                  obligations of persons in military service; 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 govern
                  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 the 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. The Bank is also subject
to risk-based and leverage capital requirements adopted by the FDIC, which are
substantially similar to those adopted by the Federal Reserve for bank holding
companies.

         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 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 and trust preferred securities,
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, 2001 our ratio of total capital to
risk-weighted assets was 11.12% and our ratio of Tier 1 Capital to risk-weighted
assets was 10.11%.

         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


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intangible assets, of 3% for bank holding companies that meet 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, 2001, our leverage ratio was 7.67%. 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 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 leverage capital
guidelines issued by the Georgia Department of Banking and Finance, which
provide for minimum ratios of Tier 1 capital to total assets. These guidelines
are substantially similar to those adopted by the Federal Reserve in the case of
the Company and those adopted by the FDIC in the case of the Bank.

         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, significant 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.

         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 January 1, 2002, the Bank was able to pay approximately $2,920,000
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:


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         -        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 total amount 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 other 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, prohibit 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, 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

         Financial institutions are required to disclose their policies for
collecting and protecting confidential information. Customers generally may
prevent financial institutions from sharing nonpublic personal financial
information with nonaffiliated third parties except under narrow circumstances,
such as the processing of transactions requested by the consumer. Additionally,
financial institutions generally may not disclose consumer account numbers to
any nonaffiliated third party for use in telemarketing, direct mail marketing,
or other marketing to consumers.

ANTI-TERRORISM LEGISLATION

         In the wake of the tragic events of September 11th, on October 26,
2001, the President signed the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act
of 2001. Under the USA PATRIOT Act, financial institutions are subject to
prohibitions against specified financial transactions and account relationships
as well as enhanced due diligence and "know your customer" standards in their
dealings with foreign financial institutions and foreign customers. For example,
the enhanced due diligence policies, procedures, and controls generally require
financial institutions to take reasonable steps-


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         -        to conduct enhanced scrutiny of account relationships to guard
                  against money laundering and report any suspicious
                  transaction;

         -        to ascertain the identity of the nominal and beneficial owners
                  of, and the source of funds deposited into, each account as
                  needed to guard against money laundering and report any
                  suspicious transactions;

         -        to ascertain for any foreign bank, the shares of which are not
                  publicly traded, the identity of the owners of the foreign
                  bank, and the nature and extent of the ownership interest of
                  each such owner; and

         -        to ascertain whether any foreign bank provides correspondent
                  accounts to other foreign banks and, if so, the identity of
                  those foreign banks and related due diligence information.

         Under the USA PATRIOT Act, financial institutions have 180 days from
enactment (or until April 25, 2002) to establish anti-money laundering programs.
The USA PATRIOT Act sets forth minimum standards for these programs, including:

         -        the development of internal policies, procedures, and
                  controls;

         -        the designation of a compliance officer;

         -        an ongoing employee training program; and

         -        an independent audit function to test the programs.

Before the 180-day grace period expires, the Secretary of the Treasury will
prescribe regulations that consider the extent to which these new requirements
are commensurate with the size, location, and activities of financial
institutions subject to the Act.

         In addition, the USA PATRIOT Act authorizes the Secretary of the
Treasury to adopt rules increasing the cooperation and information sharing
between financial institutions, regulators, and law enforcement authorities
regarding individuals, entities, and organizations engaged in, or reasonably
suspected based on credible evidence of engaging in, terrorist acts or money
laundering activities. Any financial institution complying with these rules will
not be deemed to have violated the privacy provisions of the Gramm-Leach-Bliley
Act, as discussed above.

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 operating in the United
States. 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


<PAGE>

of the Federal Reserve affect the levels of bank loans, investments and deposits
through its control over the issuance of United States government securities,
its regulation of the discount rate applicable to member banks, and its
influence over reserve requirements to which member banks are subject. We cannot
predict the nature or impact of future changes in monetary and fiscal policies.

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.

         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. We plan to extend the term of the lease to 4-30-06.

         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.


<PAGE>

                                     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, 2001, Habersham Bancorp
had approximately 553 shareholders of record. The following table sets forth the
high and low sale prices, and the cash dividends paid on the Company's common
stock on a quarterly basis for the past two fiscal years and the first quarter
of 2002 to date.

<TABLE>
<CAPTION>
                2002                             HIGH           LOW       DIVIDENDS
                ----                             ----           ---       ---------
         <S>                                    <C>            <C>        <C>
         First quarter
         (through March 14,2002)                $16.72        $15.75         $0.06


<CAPTION>
                2001                             HIGH           LOW       DIVIDENDS
                ----                             ----           ---       ---------
         <S>                                    <C>            <C>        <C>
         Fourth quarter                         $16.58        $13.50         $0.06
         Third quarter                           16.55         12.25          0.06
         Second quarter                          13.00         11.44          0.06
         First quarter                           12.75          9.88          0.06


<CAPTION>
                2000                             HIGH           LOW       DIVIDENDS
                ----                             ----           ---       ---------
         <S>                                    <C>            <C>        <C>
         Fourth quarter                         $10.38         $9.63         $0.06
         Third quarter                           10.50          9.75          0.06
         Second quarter                          10.63          9.75          0.06
         First quarter                           13.00          9.81          0.06
</TABLE>

         The approval of the Georgia Department of Banking and Finance is
required if dividends declared by the Bank to the Company in any year will
exceed 50% of the net income of the Bank for the previous calendar year. As of
December 31, 2001, the Bank could declare dividends to the Company up to
approximately $2,920,000 without regulatory approval. See "Item 1 - Business -
Supervision and Regulation - Payment of Dividends" for additional information
regarding regulatory restrictions on our ability to pay dividends.


<PAGE>

Item 6.  SELECTED FINANCIAL DATA

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

<TABLE>
<CAPTION>
                                                                         FOR THE YEARS ENDED DECEMBER 31
                                              --------------------------------------------------------------------------------
                                                  2001              2000             1999            1998              1997
                                              -----------        ----------       ----------       ----------       ----------
<S>                                           <C>                <C>              <C>              <C>              <C>
SUMMARY OF OPERATIONS
Interest income                               $    41,277        $   41,826       $   32,144       $   28,959       $   26,962
Interest expense                                   23,167            24,921           16,517           15,091           13,305
Other income                                       31,232            19,098           15,477           15,750            8,056
Other expense                                      39,758            30,431           28,417           26,214           18,412

Income before cumulative effect of
 change in accounting principle                     5,505             3,027            1,754            2,058            2,157
Cumulative effect of change in
  accounting principle, net of tax                   (162)               --               --               --               --
                                              -----------        ----------       ----------       ----------       ----------
Net income                                          5,343             3,027            1,754            2,058            2,157


PER SHARE AMOUNTS
Income before cumulative effect of
  change in accounting principle
  - diluted                                   $      2.02        $     1.12       $      .67       $      .83       $      .86
Cumulative effect of change in
  accounting principle - diluted                     (.06)               --               --               --               --
                                              -----------        ----------       ----------       ----------       ----------
Net income per common share - diluted         $      1.96        $     1.12       $      .67       $      .83       $      .86

Dividends                                             .24               .24              .20              .16              .14
Weighted average number of
 common and common equivalent
  shares outstanding                            2,729,291         2,699,949        2,609,360        2,481,630        2,497,993

AT DECEMBER 31
Total assets                                  $   546,503        $  543,108       $  461,976       $  384,069       $  328,197
Earning assets                                    503,562           504,640          424,663          359,838          299,301
Loans                                             440,527           441,850          365,499          281,898          235,764
Deposits                                          336,360           341,032          317,420          280,453          261,665
Long-term debt                                     35,775            21,950            1,950            2,700               --
Shareholders' equity                               43,982            38,751           35,429           32,214           30,144

RATIOS
Return on average assets                              .98%              .60%             .43%             .57%             .69%
Return on average equity                            12.80%             8.21%            5.10%            6.63%            7.48%
Dividend payout ratio                               12.24%            21.43%           29.85%           16.87%           16.28%
Average equity to average
 assets ratio                                        7.64%             7.36%            8.35%            8.52%            9.16%
</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.


<PAGE>

ORGANIZATION

         Habersham Bancorp (the "Company") owns all of the outstanding stock of
Habersham Bank ("Habersham Bank"). Habersham Bank owns all of the outstanding
stock of BancMortgage Financial Corp. ("BancMortgage") 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 this
consolidation, Security State Bank now functions as a division of Habersham
Bank. Advantage Insurers, which began operations on March 31, 1997, offers a
full line of property, casualty, and life insurance products.

         The Company also has a direct subsidiary, The Advantage Group, Inc.,
that has ceased operation. This subsidiary, together with Advantage Insurers,
Inc. has not comprised a significant portion of the financial position, results
of operations, or cash flows of the Company. As a result, 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 with 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.

CRITICAL ACCOUNTING POLICIES

         In reviewing and understanding financial information for the Company,
you are encouraged to read and understand the significant accounting policies
which are used in preparing the consolidated financial statements of the
Company. These policies are described in Note 1 to the consolidated financial
statements which are presented elsewhere in this annual report. Of these
policies, management believes that the accounting for the allowance for loan
losses is the most critical. Please see "Allowance for Loan Losses" for a
further discussion of the Company's methodology in determining the allowance.
Losses on loans result from a broad range of causes, from borrower-specific
problems to industry issues to the impact of the economic environment. The
identification of the factors that lead to default or non-performance under a
loan agreement and the estimation of loss in these situations is very
subjective. In addition, a dramatic change in the performance of one or a small
number of borrowers can have a significant impact in the estimate of losses. As
described further below, management has implemented a process that has been
applied consistently to systematically consider the many variables that impact
the estimation of the allowance for loan losses.

RESULTS OF OPERATIONS

         The Company's net income was $5,342,791, $3,027,308, and $1,753,969,
for the years ended December 31, 2001, 2000, and 1999, respectively, with
related diluted earnings per common and common equivalent share of $1.96, $1.12,
and $.67, respectively, representing an increase of 75% from 2000 to 2001 and an
increase of 67.16% from 1999 to 2000.


<PAGE>

         The increase in net income for the year ended December 31, 2001 when
compared to the year ended December 31, 2000 was primarily due to increases in
noninterest income due to the increase in gains on sale of loans offset by
related increases in salary and benefits. The increase in net income for the
year ended December 31, 2000 compared to the year ended December 31, 1999 was
primarily due to increases in noninterest income and a reduction in the net
after-tax unrealized loss resulting from the Company marking to market the
holdings of 244,960 shares of Flag Financial Corp ("FLAG") common stock. The
Company transferred its holdings of FLAG common stock from trading securities to
its available for sale portfolio at market value as of September 30, 2000. Net
income represents a return on average equity of 12.80%, 8.21%, and 5.10% for
2001, 2000, and 1999, 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 2001 was approximately $18.1 million compared
to $16.9 million in 2000 and $15.6 million in 1999. Net interest income for 2001
increased approximately $1,204,000 or 7.12% when compared to 2000, and net
interest income for 2000 increased approximately $1,278,000 or 8.18% when
compared to 1999.

         Interest income decreased approximately $.5 million or 1.31% when
compared to 2000 and interest income for 2000 increased approximately $9.7
million or 30.12% when compared to 1999. The decrease in interest income for
2001 was primarily due to decreases in the Company's loan portfolio of
approximately $1.3 million and a declining interest rate environment. The
increase in interest income for 2000 was primarily due to increases in the
Company's loan portfolio of approximately $76.3 million and an increase in the
average loan yields.

         The Company's loan portfolio, exclusive of loans held for sale,
decreased approximately $57.1 million from December 31, 2000 to December 31,
2001 due to sales of residential mortgages and construction loans of
approximately $110 million offset by new residential mortgage and construction
loans of approximately $52.9 million. The Company's loan portfolio, exclusive of
loans held for sale, increased approximately $64.8 million from December 31,
1999 to December 31, 2000 due to approximately $83.6 million of new residential
mortgage loans, construction loans, and commercial loans offset by sales of
approximately $16.8 million in residential mortgages and construction loans and
foreclosure of approximately $2 million of residential mortgages. BancMortgage's
held for sale loan portfolio increased by approximately $55.7 million from
December 31, 2000 to December 31, 2001, resulting from sales of approximately
$1.166 million of residential mortgage and construction loans offset by
originations of approximately $1.222 million.

         Average interest rates on loans were 8.55%, 9.45%, and 9.20%, in 2001,
2000, and 1999, respectively.

         The weighted average interest rate on investment securities was 5.29%,
5.77%, and 5.36%, for the years ended December 31, 2001, 2000, and 1999,
respectively. Average interest rates on federal funds sold were 3.22%, 6.14%,
and 5.74%, for the years ended December 31, 2001, 2000, and 1999, respectively.

         The decrease in interest expense for 2001 of $1.8 million over 2000 was
primarily due to a declining interest rate environment offset by increases in


<PAGE>

average balances in other borrowings. Average Federal Home Loan Bank advances
increased approximately $11,291,000, average other borrowings increased
approximately $2,011,000, offset by a decrease in average federal funds
purchased of approximately $5,768,000 when compared to 2000. Average
certificates of deposit increased approximately $17,845,000 when compared to
2000.

         The increase in interest expense for 2000 of $8.4 million over 1999 was
primarily due to increased average balances on interest-bearing deposits and
other borrowings in addition to an increasing interest rate environment. Average
Federal Home Loan Bank advances, average securities sold under repurchase
agreements, and federal funds purchased for 2000 increased approximately
$36,385,000, $2,735,000, and $8,411,000, respectively, when compared to 1999.
Average certificates of deposit increased approximately $46,249,000 when
compared to 1999.

         The weighted average interest rate paid on deposits in 2001 decreased
to 5.39% compared to 5.65% in 2000 and 4.72% in 1999. The average interest rate
paid for borrowings in 2001 decreased to 4.87% compared to 6.73% in 2000 and
5.75% in 1999.

         The net interest margin of the Company was 3.51% in 2001, 3.55% in
2000, and 4.11% in 1999. The Company's net interest margin decreased for the
year ended December 31, 2001 primarily due to decreases in the yields on
interest-earning assets from 2000 due to the declining interest rate
environment.

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

         Average assets rose approximately $45.6 million or 9.11% in 2001 over
2000 and $88.8 million or 21.57% in 2000 over 1999. Average loan balances
increased approximately $38.2 million or 9.51% in 2001 over 2000 and $92.3
million or 29.82% in 2000 over 1999. Average balances in investment securities
increased approximately $970,000 or 1.79% in 2001 over 2000 and $622,000 or .96%
in 2000 over 1999. The average balance of federal funds sold in 2001 increased
approximately $1.3 million or 414.97% when compared to 2000 and decreased
approximately $1.9 million or 89.7% when compared to 1999.

         The average balance of deposits, excluding noninterest-bearing
deposits, for 2001 increased by approximately $18.5 million or 6.10% over 2000
and increased by approximately $36.4 million or 13.69% over 1999.


<PAGE>

         The following table sets forth the consolidated average balance sheets
for the Company, average rates earned on interest-earning assets, average rates
paid on interest-bearing liabilities, 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, 2001, 2000, and 1999.

<TABLE>
<CAPTION>
                                            ---------------------------------------------------------------------------------------
                                                               2001                                       2000
                                            -------------------------------------     ---------------------------------------------
                                              Average           Income/     Average     Average          Income/          Average
                                              Balance          (Expense)   Yield/Cost   Balance         (Expense)        Yield/Cost
                                            ------------     ------------  ---------- ------------     -------------     ----------
<S>                                         <C>              <C>           <C>        <C>              <C>               <C>
Interest-earning assets:
   Loans, net(1)                            $440,025,709     $ 37,617,280    8.55%    $401,799,681     $  37,982,792        9.45%
   Investment securities (2)
     Taxable                                  34,133,332        1,902,153    5.57%      30,149,707         1,943,371        6.45%
     Tax exempt                               20,916,246        1,012,499    4.84%      23,930,179         1,174,087        4.91%
   Federal funds sold                          1,708,000           55,009    3.22%         213,744            13,119        6.14%
   Interest-bearing deposits
     in other banks                                   --               --      --               --                --          --
                                            ------------     ------------             ------------     -------------
     Total interest-earning assets           496,783,287       40,586,941              456,093,311        41,113,369
                                            ------------     ------------             ------------     -------------
Noninterest-earning assets                     49,521,596                                44,601,194
                                            ------------                              ------------
     Total assets                           $546,304,883                              $500,694,505
                                            ============                              ============
Interest-bearing liabilities:
   Money market and NOW                     $ 52,263,513         (996,734)   1.91%    $ 51,456,529        (1,528,005)       2.97%
   Savings accounts                            7,431,483         (124,870)   1.68%       7,630,427          (178,541)       2.34%
   Certificates of deposit                   261,260,988      (15,937,259)   6.10%     243,416,390       (15,374,355)       6.32%
                                            ------------     ------------             ------------     -------------
     Total deposits                          320,955,984      (17,058,863)   5.39%     302,503,346       (17,080,901)       5.65%
   Short-term and other borrowings           120,558,564       (6,108,391)   5.07%     116,452,878        (7,839,750)       6.73%
                                            ------------     ------------             ------------     -------------
     Total interest-bearing liabilities      441,514,548      (23,167,254)             418,956,224       (24,920,651)
                                            ------------     ------------             ------------     -------------
Noninterest-bearing liabilities               63,057,268                                44,871,760
                                            ------------                              ------------
     Total liabilities                       504,571,816                               463,827,984
Shareholders' equity                          41,733,067                                36,866,521

     Total liabilities and                  ------------                              ------------
       Shareholders' equity                 $546,304,883                              $500,694,505
                                            ============                              ============
Net interest income                                          $ 17,419,687                              $  16,192,718
                                                             ============                              =============
       Net interest margin                                                   3.51%                                          3.55%
                                                                             ====                                           ====
</TABLE>


<PAGE>

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

<TABLE>
<CAPTION>
                                            -----------------------------------------
                                                                 1999
                                            -------------------------------------
                                              Average           Income/     Average
                                              Balance          (Expense)   Yield/Cost
                                            ------------     ------------  ----------
<S>                                         <C>              <C>
Interest-earning assets:
   Loans, net(1)                            $309,502,406     $ 28,487,996    9.20%
   Investment securities (2)
     Taxable                                  32,693,560        1,844,174    5.64%
     Tax exempt                               23,857,174        1,186,506    4.97%
   Federal funds sold                          2,078,334          119,229    5.74%
   Interest-bearing deposits
     in other banks                               41,250            2,953    7.16%
                                            ------------     ------------
     Total interest-earning assets           368,172,724       31,640,858
                                            ------------     ------------
Noninterest-earning assets                    43,679,007
                                            ------------
     Total assets                           $411,851,731
                                            ============
Interest-bearing liabilities:
   Money market and NOW                     $ 60,548,509       (1,565,048)   2.58%
   Savings accounts                            8,355,673         (188,544)   2.26%
   Certificates of deposit                   197,166,960      (10,801,196)   5.48%
                                            ------------     ------------
     Total deposits                          266,071,142      (12,554,788)   4.72%
   Short-term and other borrowings            68,914,796       (3,962,118)   5.75%
                                            ------------     ------------
     Total interest-bearing liabilities      334,985,938      (16,516,906)
                                            ------------     ------------
Noninterest-bearing liabilities               42,474,653
                                            ------------
     Total liabilities                       377,460,591
Shareholders' equity                          34,391,140

     Total liabilities and                  ------------
       Shareholders' equity                 $411,851,731
                                            ============
Net interest income                                          $ 15,123,952
                                                             ============
       Net interest margin                                                   4.11%
                                                                             ====
</TABLE>

(1)      Interest earnings on nonaccrual loans are included in the foregoing
         analysis to the extent that such Interest earnings had been recorded
         during 2001, 2000, and 1999.

(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.


<PAGE>

         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>
                                                       2001 vs. 2000                                  2000 vs. 1999
                                                          Increase                                       Increase
                                                         (Decrease)                                     (Decrease)
                                                           Due to                                         Due to
                                          ------------------------------------------     -----------------------------------------
                                            Average        Average                        Average         Average
                                           Volume(1)       Rate(1)            Net        Volume(1)        Rate(1)          Net
                                          ----------     -----------     -----------     ----------     -----------     ----------
<S>                                       <C>            <C>             <C>             <C>            <C>             <C>
Interest Income:
  Loans                                   $3,612,360     $(3,977,872)    $  (365,512)    $8,491,349     $ 1,003,447     $9,494,796
  Investment securities:
    Taxable                                  256,944        (298,162)        (41,218)      (143,473)        242,670         99,197
    Tax exempt                              (147,984)        (13,604)       (161,588)         3,628         (16,047)       (12,419)
  Federal funds Sold                          91,747         (49,857)         41,890       (107,027)            917       (106,110)
  Interest-bearing deposits
    in other banks                                --              --              --         (2,953)             --         (2,953)
                                          ----------     -----------     -----------     ----------     -----------     ----------
     Total interest-earning assets         3,813,067      (4,339,495)       (526,428)     8,241,524       1,230,987      9,472,511
                                          ==========     ===========     ===========     ==========     ===========     ==========

Interest Expense:
  Money market and NOW                        23,967        (555,238)       (531,271)      (234,573)        197,530        (37,043)
  Savings accounts                            (4,655)        (49,016)        (53,671)       (16,391)          6,388        (10,003)
  Certificates of deposit                  1,127,779        (564,875)        562,904      2,534,469       2,038,690      4,573,159
  Short-term and other borrowings            276,313      (2,007,672)     (1,731,359)     2,733,440       1,144,192      3,877,632
                                          ----------     -----------     -----------     ----------     -----------     ----------
    Total interest-bearing liabilities     1,423,404      (3,176,801)     (1,753,397)     5,016,945       3,386,800      8,403,745
                                          ==========     ===========     ===========     ==========     ===========     ==========

  Change in net interest income           $2,389,663     $(1,162,694)    $ 1,226,969     $3,224,579     $(2,155,813)    $1,068,766
                                          ==========     ===========     ===========     ==========     ===========     ==========
</TABLE>


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

NONINTEREST INCOME AND NONINTEREST EXPENSE

         Noninterest income in 2001 increased $12.1 million or 63.54% when
compared to 2000 and increased $3.6 million or 23.39% in 2000 when compared to
1999. Noninterest income in 2001 when compared to 2000 increased primarily due
to increases in gains on sale of loans, loan fee income, and other income of
approximately $10.9 million, $1.2 million and $354,000, respectively. The
increase in other income during 2001 over 2000 is primarily due to a gain to
record the Company's forward commitments to sell mortgage-backed securities at
fair value as required by SFAS No. 133 in the amount of $235,000. Increases in
service fee income and conversion fee income of approximately $46,000 and
$39,000, respectively, was the result of increased activity at BancMortgage.

         Noninterest income in 2000 when compared to 1999 increased primarily
due to increases in gains on sale of loans of approximately $2.9 million and
reduced unrealized loss in the Company's marking to market its holding of
244,960 shares of FLAG common stock. During 1999, the Company recorded an
unrealized loss of $1.2 million on the FLAG common stock, whereas the loss for


<PAGE>

2000 was approximately $306,000. The increase in other income during 2000 over
1999 is primarily due to increased activity of Prestwick Mortgage Group and The
Advantage Group, Inc. and increased earnings from the investment of
company-owned life insurance. The closing of Appalachian in 1999 also resulted
in a $768,000 decrease in other noninterest income in 2000 compared to 1999.

         Other noninterest expense in 2001 increased by approximately $9.3
million or 30.65% as compared to 2000 and the 2000 amount increased by
approximately $2.0 million or 7.08% as compared to 1999. The increase for 2001
was primarily due to increases of $8,020,000, $934,000, and $124,000, in
personnel and employee benefits, operating expenses, and computer expenses,
respectively, offset by a decrease in occupancy expense of approximately
$151,000. Salary and employee benefits increased primarily due to the production
volume generated by BancMortgage, which compensates staff by commissions that
are directly related to production volume, and increased bonuses to executive
management of BancMortgage in accordance with the Mortgage Banking Agreement to
which they are a party, as well as annual salary adjustments. Advantage Insurers
also expanded into other locations during 2001 resulting in increases to salary
and employee benefits. General and administrative expenses for 2001 increased
$934,000 or 14.92%, when compared to 2000. The increase consisted primarily of
increases in outside services expense and other expenses of approximately
$353,000 and $409,000, respectively. Outside services expenses consists of FDIC
insurance, legal & professional services, insurance, director fees, and Georgia
Department of Banking & Finance Fees. Increases related to other real estate
expenses, Fidelity Group expenses, and losses related to demand deposit accounts
of approximately $511,000, $211,000, and $156,000, respectively, were offset by
decreases in telephone and leased equipment expenses of approximately $87,000
and $45,000, respectively.

         The increase for 2000 was primarily due to increases of $2,034,000,
$305,000, $278,000, and $81,000 in personnel and employee benefits, occupancy,
operating expenses, and computer expenses, respectively, offset by decreases in
travel service expense of approximately $685,000 resulting from the Company's
decision to cease operation of its travel agency subsidiary. The increase in
personnel, occupancy and operating expenses resulted from a full year of
operations of the branch office of Habersham Bank in Warrenton, GA. and normal
growth of other existing banking and mortgage banking operations.

INCOME TAX EXPENSE (BENEFIT)

         The effective tax rate for the Company increased during 2001 to 31.00%
as compared to the effective tax rate during 2000 of 29.22%. Income taxes during
1999 were significantly impacted by a tax benefit of $409,477 resulting from a
reduction of prior years' overaccrual.

ALLOWANCE FOR LOAN LOSSES

         The allowance for loan losses represents a reserve for probable losses
in the loan portfolio. The adequacy of the allowance for loan losses is
evaluated periodically based on a review of all significant loans, with
particular emphasis on impaired, non-accruing, past due, and other loans that
management believes require special attention. The determination of the
allowance for loan losses is subjective and based on consideration of a number
of factors and assumptions. As such, the accounting policy followed in the
determination of the allowance is considered a critical accounting policy.

         The allowance for loan losses methodology is based on a loan
classification system. For purposes of determining the required allowance for
loan losses and resulting periodic provisions, the Company identifies the


<PAGE>

problem loans in its portfolio and segregates the remainder of the loan
portfolio into broad segments, such as commercial, commercial real estate,
residential mortgage, and consumer. The Company provides for a general allowance
for losses inherent in the portfolio for each of the above categories. The
general allowance is calculated based on estimates of inherent losses which
probably exist as of the evaluation date. Loss percentages used for non-problem
loans in the portfolio are based on historical loss factors. The general
allowance for losses on problem loans is based on a review and evaluation of
these loans, taking into consideration financial condition and strengths of the
borrower, related collateral, cash flows available for debt repayment, and known
and expected economic conditions. General loss percentages for the problem loans
are determined based upon historical loss experience and regulatory
requirements. For loans considered impaired, specific allowances are provided in
the event that the specific collateral analysis on each problem loan indicates
that the liquidation of the collateral would not result in repayment of these
loans if the loan is collateral dependent or if the present value of expected
future cash flows on the loan are less than the balance. In addition to these
allocated reserves, the Company has established an unallocated reserve of
approximately $175,000 at December 31, 2001. The basis for the unallocated
reserve is due to a number of qualitative factors, such as concentrations of
credit and changes in the outlook for local and regional economic conditions.
Management believes its allowance for loan losses is adequate to absorb losses
on loans outstanding at December 31, 2001.

         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,
2001, 2000, 1999, 1998, and 1997 is as follows:

<TABLE>
<CAPTION>
                                                2001                          2000                           1999
                                     --------------------------     -------------------------      ---------------------------
                                                    Percent of                    Percent of                       Percent of
                                                    Loans to                        Loans to                        Loans to
                                        Amount     Total loans         Amount     Total loans        Amount        Total loans
                                     -----------   ------------     -----------   -----------      -----------     -----------
<S>                                  <C>           <C>              <C>           <C>              <C>             <C>
Commercial, financial
  & agricultural                     $   859,875       5.4%         $   775,783        5.8%        $   921,585          4.5%
Real Estate                            1,914,707      62.6%           2,027,587       75.0%          1,619,563         76.8%
Installment loans
  to individuals                         598,657       5.8%             386,883        5.7%            442,005          5.5%
Loans held for sale                      287,972      26.2%             263,754       13.5%            198,400         13.2%
Unallocated                              174,600        --                   --         --                  --           --
                                     -----------      -----         -----------      -----         -----------        -----
  Total                              $ 3,835,811      100.0%        $ 3,454,007      100.0%        $ 3,181,553        100.0%
                                     ===========      =====         ===========      =====         ===========        =====


<CAPTION>
                                                1998                          1997
                                     --------------------------     ------------------------
                                                    Percent of                    Percent of
                                                    Loans to                        Loans to
                                        Amount     Total loans        Amount      Total loans
                                     -----------   ------------     -----------   -----------
<S>                                  <C>           <C>              <C>           <C>
Commercial, financial
  & agricultural                     $   775,239        4.9%        $   720,380        6.7%
Real Estate                            1,471,843       63.4%          1,426,477       70.5%
Installment loans
  to individuals                         405,988        6.1%            189,222        6.9%
Loans held for sale                       56,500       25.6%                 --       15.9%
Unallocated                                   --         --                  --         --
                                     -----------      -----         -----------      -----
  Total                              $ 2,709,507      100.0%        $ 2,336,079      100.0%
                                     ===========      =====         ===========      =====
</TABLE>

         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 $1,605,258 in 2001 as compared to
$1,295,445 in 2000 and $985,800 in 1999. The Company's allowance for loan losses
was $3,835,811 at December 31, 2001, which was 1.18% of year-end loans and
56.14% of total nonperforming loans, compared to $3,454,007 at December 31,
2000, which was .90% of year-end loans and 78.15% of total nonperforming loans.

         At December 31, 2001, loans over 90 days past due and nonaccrual loans
totaled $6,143,534 or 1.89% of gross outstanding loans as compared to $3,709,787
or .97% of gross outstanding loans at December 31, 2000.

         The increase in loans over 90 days past due of $1,182,000 is related to
the addition of a commercial note secured by commercial property. Nonaccrual
loans increased $1,262,000 primarily due to increases in real estate secured
loans of approximately $2,360,000 offset by paydowns of approximately $813,000


<PAGE>

and foreclosures of approximately $827,000. In addition, nonaccrual loans
increased due to increases in commercial and consumer loans of approximately
$587,000 and $64,000, offset by paydowns on commercial and consumer loans of
approximately $65,000 and $44,000, 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 $1,223,454 in 2001 representing .28% of
average loans, as compared to $1,022,991 in 2000 representing .25% of average
loans, as compared to $513,817 in 1999 representing .16% of average loans.

         The following table summarizes, for each of the years in the five year
period ended December 31, 2001, selected information related to the allowance
for loan losses.

<TABLE>
<CAPTION>
                                             2001                2000              1999                1998               1997
                                         -------------      -------------      -------------      -------------      -------------
<S>                                      <C>                <C>                <C>                <C>                <C>
Balance of allowance for loan
 losses at beginning of period           $   3,454,007      $   3,181,553      $   2,709,570      $   2,336,079      $   2,261,406
                                         -------------      -------------      -------------      -------------      -------------

Charge-offs:
 Commercial, financial, and
  agricultural                                (481,978)          (266,960)          (117,133)          (221,048)          (224,976)
 Real estate                                  (456,307)          (425,542)          (350,006)           (77,764)          (142,871)
 Installment loans to individuals             (444,584)          (324,084)          (141,661)          (140,809)          (145,373)
 Other                                         (47,415)           (43,377)           (32,059)           (22,157)           (34,390)
                                         -------------      -------------      -------------      -------------      -------------
Total charge-offs                           (1,430,284)        (1,059,963)          (640,859)          (461,778)          (547,610)
                                         -------------      -------------      -------------      -------------      -------------
Recoveries:
 Commercial, financial, and
  agricultural                                  63,451                 --              4,128             59,284             22,454
 Real estate                                    24,720                965             59,570             16,850            108,247
 Installment loans to individuals              105,671             32,052             57,872             55,071             61,324
 Other                                          12,988              3,955              5,472             11,564              8,258
                                         -------------      -------------      -------------      -------------      -------------
Total recoveries                               206,830             36,972            127,042            142,769            200,283
                                         -------------      -------------      -------------      -------------      -------------
 Net charge-offs                            (1,223,454)        (1,022,991)          (513,817)          (319,009)          (347,327)

 Provision for loan losses                   1,605,258          1,295,445            985,800            692,500            422,000
                                         -------------      -------------      -------------      -------------      -------------
 Balance of allowance for loan
  losses at end of period                $   3,835,811      $   3,454,007      $   3,181,553      $   2,709,570      $   2,336,079
                                         =============      =============      =============      =============      =============
 Average amount of loans                 $ 440,025,709      $ 401,799,681      $ 309,502,406      $ 267,857,590      $ 236,673,265
                                         =============      =============      =============      =============      =============
 Ratio of net charge-offs during
  the period to average loans
  outstanding during the period                    .28%               .25%               .16%               .12%               .15%

 Ratio of allowance to year-end loans             1.18%               .90%              1.00%              1.29%              1.18%
</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.

LOANS

         Loans, exclusive of loans held for sale, decreased approximately $57.1
million or 14.99% in 2001 as compared to 2000. The decrease in loans, exclusive
of loans held for sale, in 2001 resulted primarily from the sale of residential
mortgages and construction loans of approximately $110 million


<PAGE>

offset by new residential mortgage and construction loans of approximately $52.9
million.

         Loans held for sale increased approximately $55.7 million or 93.36% in
2001 when compared to 2000 due to an increase in refinances resulting from the
lower interest rate environment at the end of 2001.

         The composition of the Company's loan portfolio changed during 2001 as
a result of decreases in real estate secured mortgages and commercial loans of
approximately $6.4 million and $1.6 million, respectively, offset by increases
in real estate construction and in consumer loans of approximately $6.5 million
and $244,000, respectively.

         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 discount on SBA loans
sold. The Company had no foreign loans at December 31 in any of the last five
years.

<TABLE>
<CAPTION>
                                             2001               2000               1999               1998                1997
                                         -------------      -------------      -------------      -------------      -------------
<S>                                      <C>                <C>                <C>                <C>                <C>
Commercial, financial,
  and agricultural                       $  23,921,875      $  25,566,931      $  16,623,264      $  13,829,965      $  15,824,792
Real estate - construction                 119,663,535        113,201,531        106,915,963         66,359,030         61,965,365
Real estate - mortgage                     271,485,961        277,877,922        221,857,018        184,418,653        141,857,765
Installment loans to
  individuals                               25,531,911         25,287,734         20,168,672         17,337,632         16,115,903
                                         -------------      -------------      -------------      -------------      -------------
    Total                                $ 440,603,282      $ 441,934,118      $ 365,564,917      $ 281,945,280      $ 235,763,825
                                         =============      =============      =============      =============      =============
</TABLE>

         The following table sets forth the maturities and sensitivities to
changes in interest rates of loans at December 31, 2001.

<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                          $  16,165,892          $   7,706,003          $      49,980          $  23,921,875
  Real estate - construction                   119,039,379                624,156                     --            119,663,535
  Real estate - mortgage                       113,051,423             57,326,600            101,107,938            271,485,961
  Installment loans to
    Individuals                                  6,864,420             15,865,218              2,802,273             25,531,911
                                             -------------          -------------          -------------          -------------
       TOTAL                                 $ 255,121,114          $  81,521,977          $ 103,960,191          $ 440,603,282
                                             =============          =============          =============          =============

LOAN INTEREST RATE SENSITIVITY:
Loans with:
 Predetermined interest rates                $  68,882,526          $  78,346,818          $ 103,960,191          $ 251,189,535
 Floating or adjustable
  interest rates                               186,238,588              3,175,159                     --            189,413,747
                                             -------------          -------------          -------------          -------------
    TOTAL                                    $ 255,121,114          $  81,521,977          $ 103,960,191          $ 440,603,282
                                             =============          =============          =============          =============
</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 increased $5,300,000 or 78.08% in 2001 compared to 2000 and increased
$2,793,000 or 69.91% in 2000 compared to 1999. The increase in 2001 was
primarily due to increases in other real estate, nonaccrual loans, and accruing
loans 90 days past due of approximately $2,736,000, $1,262,000, and $1,172,000,
respectively, offset by decreases in restructured loans of approximately
$20,000.





<PAGE>
         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>
NONPERFORMING ASSETS:                     2001               2000              1999              1998               1997

<S>                                    <C>                <C>               <C>               <C>               <C>
Accruing loans 90 days past due        $ 3,031,122        $1,858,944        $  338,677        $1,013,009        $1,282,000
Nonaccrual                               3,112,412         1,850,843         1,203,471         2,009,258         1,251,157
Restructured loans                         689,510           709,787           781,803           849,963           913,753
Other real estate owned                  5,104,658         2,368,559         1,671,083         1,539,900         1,908,094
                                       -----------        ----------        ----------        ----------        ----------
Total nonperforming assets             $11,937,702        $6,788,133        $3,995,034        $5,412,130        $5,355,004
                                       ===========        ==========        ==========        ==========        ==========

RATIOS:
Nonperforming loans (excluding
  restructured loans) to total loans          1.98%              .97%              .49%             1.44%             1.28%
Nonperforming assets to total loans
  plus other real estate owned                3.61%             1.77%             1.25%             2.56%             2.68%
Allowance to nonperforming assets            22.42%            50.88%            79.64%            50.06%            43.62%
</TABLE>

         The increase in accruing loans over 90 days past due in 2001 compared
to 2000 is due to the addition of a single commercial note secured by
commercial property totaling approximately $1.4 million. Management believed
that a contract to sell a portion of this property would be finalized within 30
days with repayments to bring current. Circumstances changed and this note was
subsequently placed on nonaccrual.

         The increase in other real estate owned during 2001 was due to the
foreclosure of a commercial property totaling approximately $2.1 million in the
fourth quarter of 2001, as well as, the addition of approximately $2.1 million
in foreclosures of residential properties offset by reductions of approximately
$1 million due to sales of foreclosed properties and write-downs of
approximately $500,000.

         The increase in accruing loans over 90 days past due in 2000 compared
to 1999 consisted primarily of two construction lines of credit secured by
residential properties totaling approximately $1,008,000 and $425,000 which
were paid off subsequent to December 31, 2000.

         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 $527,220, $377,154, and $266,491 in 2001,
2000, and 1999, respectively, compared with interest income recognized of
$252,862, $213,793, and $185,054, respectively.

         At December 31, 2001, 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 at
December 31, 2001 and 2000, or approximately 2.8% and 2.4% of total net loans
at December 31, 2001 and 2000, respectively. These mortgages for agribusiness
purposes are primarily secured by real estate consisting of residences, poultry
houses, and equipment. None of the mortgages are considered individually
significant.


<PAGE>


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, 2001 approximately $47.6 million of investment securities were
classified as available for sale. Approximately $505,000 of net unrealized
gain, net of income taxes, was included in shareholders' equity related to the
available for sale investment securities.

         The following table sets forth the carrying amounts of investment
securities at December 31, 2001, 2000, and 1999.

<TABLE>
<CAPTION>
                                                      2001                 2000                 1999

<S>                                                <C>                  <C>                  <C>
Investment securities available for sale:
    U.S. Treasury                                  $ 1,544,065          $ 2,528,975          $        --
    U.S. Government agencies                        31,131,435           23,296,280           23,049,452
    States & political subdivisions                 12,176,829           14,391,722           14,430,944
    Other investments                                2,768,062            2,769,297            1,339,431
                                                   -----------          -----------          -----------
      Total                                        $47,620,391          $42,986,274          $38,819,827
                                                   ===========          ===========          ===========
 Investment securities held to maturity:
    U.S. Government agencies                       $ 2,100,963          $ 3,466,302          $ 3,535,356
    States & political subdivisions                  7,545,175            9,658,100           10,666,346
                                                   -----------          -----------          -----------
      Total                                        $ 9,646,138          $13,124,402          $14,201,702
                                                   ===========          ===========          ===========

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

         The following table sets forth the maturities of debt investment
securities at carrying value at December 31, 2001 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. Treasury                                   $1,020,940            $  523,125            $       --            $       --
 U.S. Government agencies                                --             2,068,519             3,368,025            25,694,891
 States & political subdivisions                  1,370,864             1,697,090             3,202,646             5,906,229
 Other investments                                       --                    --                    --                    --

Weighted average yields:

 U.S. Treasury                                         5.92%                 5.87%                   --                    --
 U.S. Government agencies                                --%                 4.72%                 5.57%                 4.56%
 States & political subdivisions                       6.30%                 6.75%                 7.17%                 7.57%
 Other investments                                       --                    --                    --                    --

Investment securities held to maturity:

Carrying value:
 U.S. Government agencies                        $       --            $       --            $  264,053            $1,836,910
 States & political subdivisions                    560,000             3,044,228             1,908,824             2,032,123


Weighted average yields:
 U.S. Government agencies                                --                    --                  7.38%                 7.19%
 States & political subdivisions                       6.94%                 7.23%                 7.21%                 7.41%
</TABLE>


<PAGE>


         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, 2001.

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
years ended December 31, 2001, 2000, and 1999, the Company recorded $120,336,
$153,348, and $211,279, respectively, as equity in earnings of CB Financial
Corp. Amortization of related excess cost over basis in CB Financial Corp.
common stock for the years ended December 31, 2001, 2000, and 1999, totaled
$85,212, $85,212, and $49,707, respectively. The assets of CB Financial Corp.
as of December 31, 2001 and 2000 totaled approximately $44,901,000 and
$40,816,000, respectively, and net income for the years ended December 31, 2001
and 2000 totaled approximately $267,000 and $334,000, respectively.

DERIVATIVE INSTRUMENTS

         The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 133, "Accounting for Derivative Instruments and Hedging Activities", as
amended, on January 1, 2001. In accordance with the transition provisions of
SFAS No. 133, the Company recorded a net-of-tax cumulative effect loss of
$162,000 on January 1, 2001 to reflect the fair value of its forward
commitments to sell mortgage-backed securities. The provisions of SFAS No. 133
allow for a one time transfer of investment securities previously classified as
held to maturity to available for sale upon adoption. As a result, the Company
transferred approximately $999,000 of investment securities previously
classified as held to maturity to its available for sale portfolio on January
1, 2001.

         In the normal course of business, the Company extends interest rate
lock commitments to borrowers who apply for loan funding and meet certain
credit and underwriting criteria. Such commitments are typically for short
terms. With the exception of such commitments to originate fixed-rate mortgage
loans for resale and forward commitments to sell mortgage-backed securities,
the Company does not hold any derivative instruments.

         The Company's objective in entering into forward commitments to sell
mortgage-backed securities is to mitigate the interest rate risk associated
with mortgage loans held for sale and commitments to originate fixed-rate
mortgage loans for resale. If the fair value of the Company's commitments to
originate fixed-rate mortgage loans for resale results in an asset, such asset
is recorded only to the extent of losses in the forward commitments to sell
mortgage-backed securities. Losses are recorded on the Company's commitments to
originate fixed rate mortgage loans for resale when fair values are less than
the carrying values. The Company records its forward commitments to sell
mortgage-backed securities at fair value and does not account for these as
hedges. During the year ended December 31, 2001, a gain in the amount of
$235,000 relating to the change in fair value of forward commitments to sell
mortgage-backed securities has been recorded in other income.


<PAGE>


         At December 31, 2001, the fair value of the Company's commitments to
sell mortgage-backed securities was not significant and the fair value of the
Company's commitments to originate mortgage loans for resale was approximately
$150,000.

DEPOSITS

         Average deposits increased approximately $21.4 million and $34.1
million during 2001 and 2000, 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, 2001, 2000, and 1999.

<TABLE>
<CAPTION>
                                                2001                         2000                         1999
                                              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           $ 52,263,513      1.91%      $ 51,456,529      2.97%      $ 60,548,509      2.58%
Noninterest bearing demand deposits          28,669,906       n/a         25,683,053       n/a         27,967,076       n/a
Time certificates of deposit                261,260,988      6.10%       243,416,390      6.32%       197,166,960      5.48%
</TABLE>

         At December 31, 2001, time certificates of deposit of $100,000 or more
totaled $79,832,236. The maturities of all time certificates of deposit over
$100,000 are as follows:

<TABLE>
<CAPTION>
     <S>                                        <C>
     3 months or less                           $25,567,185
     Over 3 but less than 6 months               18,161,570
     Over 6 but not more than 12 months          25,050,287
     Over 1 year but not more than 5 years       11,053,194
                                                -----------
       TOTAL                                    $79,832,236
                                                ===========
</TABLE>

BORROWINGS

         Borrowings decreased approximately $10 million during 2001 compared to
2000 primarily due to net repayments of Federal Home Loan Bank (FHLB) advances
and decreases in Federal funds purchased and securities sold under repurchase
agreements of approximately $7.7 million and $5.5 million, respectively. In
addition, Habersham Bancorp borrowed funds of $4 million to inject into
Habersham Bank to increase its capital position.

         At December 31, 2001, the Company has a Daily Rate Credit line and a
Warehouse line of credit with the Federal Home Loan Bank. Both of these lines
of credit are specific collateral agreements. The Daily Rate Credit line is
backed by qualifying first mortgage loans, commercial loans, and pledged
securities. The Warehouse line of credit is backed by qualifying first mortgage
loans.

         The Company converted one $10 million advance from the Daily Rate
Credit line to a long-term fixed-rate loan during 2001. The term is for 10
years (callable each year) with a fixed rate of 4.93%.

         At December 31, 2001, the Company had available repurchase agreement
line of credit commitments with Compass Bank totaling $6.7 million, of which
none was advanced. The Company also had available repurchase agreement line of
credit commitments with National Bank of Commerce totaling $850,000, of which
none was advanced.

CAPITAL RESOURCES

         The Company is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimal capital



<PAGE>


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, 2001, that
the Company meets all capital adequacy requirements to which it is subject.

         As of December 31, 2001, the most recent notifications from both the
Federal Deposit Insurance Corporation and the Federal Reserve Bank of Atlanta
categorized the Bank as well capitalized 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.

         The Company's and the Bank's actual capital amounts and ratios as of
December 31, 2001 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, 2001
Total Capital
  (to risk-weighted assets):
  Company                               $45,159          11.12%          $32,696          8%              N/A          N/A
  Habersham Bank                         43,594          10.84%           32,164          8%          $40,205           10%

Tier I Capital
  (to risk-weighted assets):
  Company                               $41,323          10.11%          $16,348          4%              N/A          N/A
  Habersham Bank                         39,758           9.89%           16,082          4%          $24,123            6%

Tier I Capital
  (to average assets):
  Company                               $41,323           7.67%          $21,554          4%              N/A          N/A
  Habersham Bank                         39,758           7.48%           21,262          4%          $26,578            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 $.06 per share in March, June,
September, and December 2001 and 2000.

         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.


<PAGE>


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

INTEREST RATE SENSITIVITY ANALYSIS

<TABLE>
<CAPTION>
                                      DUE IN         DUE AFTER         DUE AFTER       DUE AFTER        DUE AFTER
                                      THREE        THREE THROUGH      SIX THROUGH     ONE THROUGH         FIVE
                                      MONTHS         SIX MONTHS      TWELVE MONTHS     FIVE YEARS         YEARS           TOTAL

<S>                              <C>               <C>              <C>               <C>              <C>             <C>
INTEREST-EARNING
  ASSETS:

 Investment securities           $     351,537     $  1,175,940     $   1,424,327     $  7,332,962     $ 44,213,701    $ 54,498,467
 Loans                             197,641,241       56,767,624           712,249       81,521,977      103,960,191     440,603,282
                                 -------------     ------------     -------------     ------------     ------------    ------------
 Total interest-earning assets     197,992,778       57,943,564         2,136,576       88,854,939      148,173,892     495,101,749
                                 -------------     ------------     -------------     ------------     ------------    ------------

INTEREST-BEARING
  LIABILITIES:

Deposits:
  Money market and NOW              61,122,544               --                --               --               --      61,122,544
  Savings                            7,380,280               --                --               --               --       7,380,280
  Certificates of
    deposit                         74,666,861       65,575,800        54,958,830       41,519,559               --     236,721,050
  Borrowings                       101,224,256           88,500         2,139,600       11,758,600       21,697,800     136,908,756
                                 -------------     ------------     -------------     ------------     ------------    ------------
Total interest-bearing
  liabilities                      244,393,941       65,664,300        57,098,430       53,278,159       21,697,800     442,132,630
                                 -------------     ------------     -------------     ------------     ------------    ------------

Excess (deficiency) of
  interest-earning assets
  over (to) interest-
  bearing liabilities            $ (46,401,163)    $ (7,720,736)    $ (54,961,854)    $ 35,576,780     $126,476,092    $ 52,969,119
                                 =============     ============     =============     ============     ============    ============

Cumulative gap                   $ (46,401,163)    $(54,121,899)    $(109,083,753)    $(73,506,973)    $ 52,969,119

Ratio of cumulative gap to
 total cumulative earning-
 assets                                 (23.44)%         (21.15)%          (42.27%)         (21.19)%          10.70%
Ratio of interest-earning
 assets to interest-bearing
 liabilities                             81.01%           82.54%            70.29%           82.52%          111.98%
</TABLE>


<PAGE>


         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, 2001, the Company was able to
meet such objective. The interest rate sensitivity analysis has a negative one
year gap of approximately $109 million (excess of interest-bearing liabilities
to interest-earning assets repricing within one year). However, the Company's
experience has shown that NOW, money market, and savings deposits of
approximately $68.5 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 of its
equity 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, 2001. The expected
maturity categories take into consideration historical prepayments experience
as well as management's expectations based on the interest rate environment as
of December 31, 2001.


<PAGE>


MARKET RISK INFORMATION (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                        PRINCIPAL/NOTIONAL AMOUNT MATURING IN:                            FAIR
                                  2002          2003         2004         2005         2006    THEREAFTER      TOTAL      VALUE

<S>                             <C>           <C>          <C>          <C>          <C>        <C>           <C>        <C>
RATE-SENSITIVE ASSETS:
Fixed interest rate
 loans                          $ 68,883      $19,697      $33,045      $14,480      $11,125    $103,960      $251,190   $263,137
Average interest rate               7.53%        8.84%        8.11%        9.10%        8.31%       7.16%         8.05%

Variable interest rate
 loans                           186,239        1,247          535        1,191          202          --       189,414    189,414
Average interest rate               5.51%        7.38%        7.08%        8.24%        6.38%         --%         5.54%

Fixed interest rate
 securities                        2,952        2,961        2,216          833        1,323      41,079        51,364     51,484
Average interest rate               4.85%        4.84%        4.61%        4.59%        4.95%       5.70%         5.51%
Variable interest rate
 securities                           --           --           --           --           --       3,134         3,134      3,136
Average interest rate                 --%          --%          --%          --%          --%       5.46%         5.46%

RATE-SENSITIVE LIABILITIES:
Savings and interest-
  bearing deposits                68,503           --           --           --           --          --        68,503     68,503
Average interest rate               1.88%          --%          --%          --%          --%         --%         1.88%

Fixed interest rate
  time deposits                  195,156       23,344       11,277        5,788        1,111          --       236,676    242,726
Average interest rate               4.28%        5.90%        6.74%        5.17%        5.10          --%         4.58%

Variable interest rate
  time deposits                       45           --           --           --           --          --            45         45
Average interest rate               2.69%          --%          --%          --%          --%         --%         2.69%

Fixed interest rate
  borrowings                          --           --           --           --       10,000      20,000        30,000     30,000
Average interest rate                 --%          --%          --%          --%        6.72%       5.48%         5.89%

Variable interest rate
  borrowings                     103,452          393          423          454          488       1,698       106,908    106,908
Average interest rate               2.43%        3.95%        3.95%        3.95%        3.95%       3.95%         2.48%
</TABLE>

Equity investments of $2,768,062 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.

         Scheduled amortization and prepayments of loans, maturities and calls
of investment securities, and funds from operations provide a daily source of


<PAGE>


liquidity. In addition, the Company may and does seek outside sources of funds.

         The Company has the ability, on a short-term basis, to purchase
federal funds from other financial institutions up to $20,000,000. At December
31, 2001, the Company had purchased federal funds from other financial
institutions of approximately $22,764,000. The Company can borrow funds from
the FHLB, subject to eligible collateral of loans. At December 31, 2001, our
maximum borrowing capacity from the FHLB was $230,833,000. At December 31,
2001, the Company had outstanding borrowings of $100,415,644 with unused
borrowing capacity of $130,417,356. In addition, the Company has made
arrangements with commercial banks for short-term advances up to $7,550,000
under repurchase agreement lines of credit of which none was advanced at
December 31, 2001.

         Loan repayments and maturing investment securities are a relatively
predictable source of funds. However, deposit flows, calls of investment
securities, and prepayment of loans are strongly influenced by interest rates,
general and local economic conditions, and competition in the marketplace. These
factors reduce the predictability of the timing of these sources of funds.

         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, 2001 and 2000 were 18.02% and
20.90%, respectively. Prompt action was taken in January to bring the liquidity
ratio up to the minimum required resulting in a liquidity ratio of 21.11% at
January 31, 2002.

COMMITMENTS AND CONTRACTUAL OBLIGATIONS

         The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of its lending activities to meet the financing needs
of its customers. These financial instruments include commitments to extend
credit and standby letters of credit. The Company's exposure to credit losses
in the event of nonperformance by the other party to the financial instrument
for commitments to extend credit and standby letters of credit is represented
by the contractual amounts of those instruments. The Company uses the same
credit policies in making these commitments as it does for on-balance-sheet
instruments and evaluates each customer's creditworthiness on a case by case
basis. At December 31, 2001, the Company had outstanding loan commitments
exclusive of mortgage loan commitments of BancMortgage approximating
$86,135,000 and standby letters of credit approximating $5,050,000. The amount
of collateral obtained, if deemed necessary, for these financial instruments by
the Company, upon extension of credit, is based on management's credit
evaluation of the customer. Collateral held, if any, varies but may include
inventory, equipment, real estate, or other property. The accounting loss the
Company would incur if any party of the financial instrument failed completely
to perform according to the term of the contract and the collateral proved to
be of no value is equal to the face amount of the financial instrument.

         At December 31, 2001, the Company has commitments, primarily at a
fixed rate, to originate mortgage loans in the amount of approximately
$24,767,000.

         The Company's commitments are funded through internal funding sources
of scheduled repayments of loans and sales and maturities of investment
securities available for sale or external funding sources through acceptance of
deposits from customers or borrowing from other financial institutions.


<PAGE>


         The following table is a summary of the Company's commitments to
extend credit, commitments under contractual leases as well as the Company's
contractual obligations, consisting of deposits, FHLB advances and borrowed
funds by contractual maturity date.

<TABLE>
<CAPTION>
                                                       2002               2003            2004             2005             2006

<S>                                                 <C>               <C>              <C>              <C>              <C>
Commitments to originate mortgage loans             $ 24,767,000      $        --      $        --      $        --      $       --
   Commitments on lines of credit                     86,135,000               --               --               --              --
   Standby letters of credit                           5,050,000               --               --               --              --
   Commitments under lease agreements                  1,021,998        1,020,038          767,191          551,882         196,841
   Deposits                                          294,840,727       23,344,316       11,276,419        5,788,206       1,110,618
   FHLB advances                                      70,415,644               --               --       10,000,000              --
   Other borrowings                                    2,316,600          393,600          423,000          454,200         487,800
   Short-term borrowings                                 269,446               --               --               --              --
   Federal funds purchased                            22,764,000               --               --               --              --
   Securities sold under repurchase agreements         7,686,666               --               --               --              --
                                                    ------------      -----------      -----------      -----------      ----------
             Total commitments and
                contractual obligations             $515,267,081      $24,757,954      $12,466,610      $16,794,288      $1,795,259
                                                    ============      ===========      ===========      ===========      ==========
</TABLE>

         Although management regularly monitors the balance of outstanding
commitments to fund loans to ensure funding availability should the need arise,
management believes that the risk of all customers fully drawing on all these
lines of credit at the same time is remote.

ACCOUNTING PRONOUNCEMENTS

         In September 2000, SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," was issued.
SFAS No. 140 is effective for all transfers and servicing of financial assets
and extinguishments of liabilities after March 31, 2001. SFAS No. 140 is
effective for recognition and reclassification of collateral and disclosures
relating to securitization of transactions and collateral for fiscal years
ending after December 15, 2000. The adoption of SFAS No. 140 did not have a
material impact to the Company's consolidated financial statements.

         In July 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No.141, "Business Combinations," and SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 141 requires companies to account for all business
combinations using the purchase method of accounting and recognize intangible
assets if certain criteria are met, as well as provide detail disclosures
regarding business combinations and allocation of purchase price. Since the
Company has not initiated any business combinations during 2001, this
pronouncement has not impacted the Company's consolidated financial statements.

         SFAS No. 142 will require that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually in accordance with the provisions of SFAS No. 142.
SFAS No. 142 will also require that intangible assets with definite useful
lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance with SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of."

         In addition, to the extent an intangible asset is identified as having
an indefinite useful life, the Company will be required to test the intangible
asset for impairment in accordance with the provisions of SFAS No. 142 within
the first interim period. Any impairment loss will be measured as of the date


<PAGE>


of adoption and recognized as the cumulative effect of a change in accounting
principle in the first interim period.

         To accomplish this, the Company must identify its reporting units and
determine the carrying value of each reporting unit by assigning the assets and
liabilities, including the existing goodwill and intangible assets, to those
reporting units as of the date of adoption. The Company will then have up to
six months from the date of adoption to determine the fair value of each
reporting unit and compare it to the reporting unit's carrying amount. To the
extent a reporting unit's carrying amount exceeds its fair value, an indication
exists that the reporting unit's goodwill may be impaired and the Company must
perform the second step of the transitional impairment test. In the second
step, the Company must compare the implied fair value of the reporting unit's
goodwill, determined by allocating the reporting unit's fair value to all of its
assets (recognized and unrecognized) and liabilities in a manner similar to a
purchase price allocation in accordance with SFAS No. 141, to its carrying
amount, both of which would be measured as of the date of adoption. This second
step is required to be completed as soon as possible, but no later than the end
of the year of adoption. Any transitional impairment loss will be recognized as
the cumulative effect of a change in accounting principle in the Company's
statement of earnings.

         At December 31, 2001, the Company had net unamortized goodwill of
approximately $2,508,000 and net unamortized equity-method goodwill of
approximately $1,058,000. The Company recorded total amortization expense of
approximately $257,000 and $256,000, related to these goodwill amounts for the
years December 31, 2001 and 2000, respectively.

         Because of the extensive effort needed to comply with adopting SFAS
No. 142, it is not practicable to reasonably estimate the impact of adopting
this statement on the Company's consolidated financial statements at the date
of this report, including whether any transitional impairment losses will be
required to be recognized as the cumulative effect of a change in accounting
principle.

         In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 requires that entities record the fair
value of a liability for an asset retirement obligation in the period in which
it is incurred. When the liability is initially recorded, the entity is to
capitalize the cost by increasing the carrying amount of the related long-lived
asset. SFAS No. 143 requires that the liability be accreted to its present
value at each subsequent reporting period-end, and the capitalized cost be
depreciated over the useful life of the related asset. Upon settlement of the
liability, an entity either settles the obligations for its recorded amount or
incurs a gain or loss upon settlement. SFAS No. 143 is effective for fiscal
years beginning after June 15, 2002, with earlier application encouraged. The
adoption of SFAS No. 143 is not expected to have a material impact on the
consolidated financial statements of the Company.

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses financial
accounting and reporting for the impairment of long-lived assets and for
long-lived assets to be disposed of. The provisions of SFAS No. 144 are
effective for financial statements issued for fiscal years beginning after
December 15, 2001. The adoption is not expected to have a material effect on
the Company's consolidated results of operations, financial position, or cash
flows.


<PAGE>


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".

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The consolidated balance sheets of the Company and subsidiaries as of
December 31, 2001 and 2000, 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, 2001, the report issued thereon by the Company's
independent auditors and quarterly financial data (unaudited) are attached
hereto as Exhibit 13 and are incorporated herein by reference.

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 l1. 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.


<PAGE>


<TABLE>
<CAPTION>
Exhibit No.                  Document
-----------                  --------

<S>               <C>
3.1               Amended and restated Articles of Incorporation of Habersham Bancorp, as amended by amendment dated
                  April 16, 1988 (1) and further amended by amendment dated April 15, 2000 (2)

3.2               By-laws of Habersham Bancorp, as amended as of November 20, 1989 (3) and as of March 16, 1991. (4)

10.1*             Habersham Bancorp Savings Investment Plan, as amended and restated March 17, 1990, and the related
                  Trust Agreements, as amended March 17, 1990. (3)

10.2*             Habersham Bancorp Incentive Stock Option Plan, as amended February 26, 1994. (5)

10.3*             Habersham Bancorp Outside Directors Stock Option Plan. (6)

10.4*             Habersham Bancorp 1996 Incentive Stock Option Plan, as amended by the First Amendment thereto dated
                  January 29, 2000. (7)

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. (8)

13.0              Financial statements and notes thereto contained in the Habersham Bancorp 2001 Annual Report and
                  quarterly financial data (unaudited).

21.0              Subsidiaries of Habersham Bancorp.

23.1              Independent Accountants' Consent
</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 3.1 to Registrant's
         Quarterly Report on Form 10-Q for the quarter ended March 31, 2000
         (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, 1989 (File No. 0-13153).

(4)      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).

(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, 1993 (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, 1994 (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, 1995 (File No. 0-13153).

(8)      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, 2001.


<PAGE>


                                   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 27, 2002
    -----------------------              --------------------------------------
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 27, 2002
----------------------------        and Director

/s/ Thomas A. Arrendale, III        Vice Chairman of the Board          March 27, 2002
----------------------------        and Director

/s/ David D. Stovall                Director, President and             March 27, 2002
----------------------------        Chief Executive Officer*

/s/ Edward D. Ariail                Director, Vice President and        March 27, 2002
----------------------------        Corporate Secretary

/s/ James E. McCollum               Director, Executive Vice            March 27, 2002
----------------------------        President and Chief
                                    Operating Officer

/s/  Michael C. Martin              Director                            March 27, 2002
----------------------------


/s/ James A. Stapleton, Jr.         Director                            March 27, 2002
----------------------------


/s/ Calvin R. Wilbanks              Director                            March 27, 2002
----------------------------
</TABLE>

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


<PAGE>


                                EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit No.                  Document
-----------                  --------

<S>               <C>
3.1               Amended and restated Articles of Incorporation of Habersham Bancorp, as amended by amendment dated
                  April 16, 1988 (1) and further amended by amendment dated April 15, 2000 (2)

3.2               By-laws of Habersham Bancorp, as amended as of November 20, 1989 (3) and as of March 16, 1991. (4)

10.1*             Habersham Bancorp Savings Investment Plan, as amended and restated March 17, 1990, and the related
                  Trust Agreements, as amended March 17, 1990. (3)

10.2*             Habersham Bancorp Incentive Stock Option Plan, as amended February 26, 1994. (5)

10.3*             Habersham Bancorp Outside Directors Stock Option Plan. (6)

10.4*             Habersham Bancorp 1996 Incentive Stock Option Plan, as amended by the First Amendment thereto dated
                  January 29, 2000. (7)

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. (8)

13.0              Financial statements and notes thereto contained in the Habersham Bancorp 2001 Annual Report and
                  quarterly financial data (unaudited).

21.0              Subsidiaries of Habersham Bancorp.

23.1              Independent Accountants' Consent
</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 3.1 to Registrant's
         Quarterly Report on Form 10-Q for the quarter ended March 31, 2000
         (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, 1989 (File No. 0-13153).

(4)      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).

(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, 1993 (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, 1994 (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, 1995 (File No. 0-13153).

(8)      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.