U.S.
      SECURITIES AND EXCHANGE COMMISSION





WASHINGTON,
      D. C. 20549





FORM
      10-Q





x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE


SECURITIES
      EXCHANGE ACT OF 1934


For
      the
      quarterly period ended March 31, 2007








o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE


SECURITIES
      EXCHANGE ACT OF 1934


For
      the
      transition period from _____ to _____





Commission
      file number 0-13153








HABERSHAM
      BANCORP


(Exact
      name of registrant as specified in its charter)





Georgia
            58-1563165(State
                or other jurisdiction of incorporation or organization)
            (I.R.S.
                Employer Identification No.)




Highway
                441 N. P.O. Box 1980, Cornelia, Georgia
            30531(Address
                of principal executive offices)
            (Zip
                code)





(706)
      778-1000


(Issuer’s
      telephone number, including area code)





(Former
      name, former address and former fiscal year, if changed since last
      report)





Check
      whether the issuer: (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 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.


YesxNoo


Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer or a non-accelerated filer. See definition of “accelerated
      filer and non-accelerated filer”, in Rule 12b-2 of the Exchange
      Act.





Large
                accelerated filero
            Accelerated
                filero
            Non-accelerated
                filerx





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


YesoNox




State
      the
      number of shares outstanding of each of the issuer’s classes of common stock, as
      of the latest practicable date:





2,968,593
      shares, common stock, $1.00 par value, as of April 20, 2007










Item.
                  1
              Financial
                  Statements





HABERSHAM
      BANCORP AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED BALANCE SHEETS (unaudited)


(dollars
      in thousands)





ASSETS
            
            MARCH31,
                2007
            
            DECEMBER31, 2006Cash
                and due from banks
            
            $
            11,665
            
            $
            26,119Federal
                funds sold
            
            
            8,084
            
            
            64,399Total
                cash and cash equivalents
            
            
            19,749
            
            
            90,518Investment
                securities available for sale (cost of $88,015 at March 31, 2007
                and
                $86,178 at December 31, 2006)
            
            
            87,118
            
            
            84,982Investment
                securities held to maturity (estimated fair value of $3,062 at March
                31,
                2007 and $3,368 at December 31, 2006)
            
            
            2,990
            
            
            3,289Other
                investments
            
            
            3,409
            
            
            3,365Loans
                held for sale
            
            
            653
            
            
            3,183Loans
            
            
            353,536
            
            
            346,261Less
                allowance for loan losses
            
            
            (3,377
            )
            
            (3,445
            )Loans,
                net
            
            
            350,159
            
            
            342,816Goodwill
            
            
            3,550
            
            
            3,550Other
                assets
            
            
            24,409
            
            
            24,035TOTAL
                ASSETS
            
            $
            492,037
            
            $
            555,738LIABILITIESNoninterest-bearing
                deposits
            
            $
            45,407
            
            $
            47,286Interest-bearing
                deposits
            
            
            334,183
            
            
            403,343Total
                deposits
            
            
            379,590
            
            
            450,629Short-term
                borrowings
            
            
            793
            
            
            779Federal
                funds purchased and securities sold under repurchase
                agreements
            
            
            11,553
            
            
            5,874Federal
                Home Loan Bank Advances
            
            
            38,000
            
            
            38,000Other
                liabilities
            
            
            5,685
            
            
            4,892TOTAL
                LIABILITIES
            
            
            435,621
            
            
            500,174STOCKOLDERS’
                EQUITYCommon
                Stock, $1.00 par value, 10,000,000 shares authorized; 2,968,593 shares
                issued at March 31, 2007 and 2,968,593 shares issued at December
                31,
                2006
            
            
            2,969
            
            
            2,969Additional
                paid-in capital
            
            
            15,531
            
            
            15,531Retained
                earnings
            
            
            38,464
            
            
            37,777Accumulated
                other comprehensive(loss)income
            
            
            (548
            )
            
            (713
            )TOTAL
                STOCKHOLDERS’ EQUITY
            
            
            56,416
            
            
            55,564TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY
            
            $
            492,037
            
            $
            555,738





See
      notes
      to unaudited condensed consolidated financial statements.


2


HABERSHAM
      BANCORP AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF EARNINGS


(Uaudited)
      For the Three-Month Periods Ended March 31, 2007 and 2006


(dollars
      in thousands, except per share amounts)




Three
                  Months ended2007
              
              2006INTEREST
                  INCOMELoan
                  interest and fees on loans
              
              $
              7,863
              
              $
              6,885Taxable
                  investment securities
              
              
              748
              
              
              649Tax
                  exempt securities
              
              
              269
              
              
              212Federal
                  funds sold
              
              
              99
              
              
              161Other
              
              
              59
              
              
              57TOTAL
                  INTEREST INCOME
              
              
              9,038
              
              
              7,964INTEREST
                  EXPENSETime
                  deposits, $100,000 and over
              
              
              1,291
              
              
              769Other
                  deposits
              
              
              2,046
              
              
              1,596Short-term
                  and other borrowings, primarily FHLB advances
              
              
              643
              
              
              519TOTAL
                  INTEREST EXPENSE
              
              
              3,980
              
              
              2,884NET
                  INTEREST INCOME
              
              
              5,058
              
              
              5,080Provision
                  for loan losses
              
              
              -
              
              
              -NET
                  INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
              
              
              5,058
              
              
              5,080NONINTEREST
                  INCOMEMortgage
                  origination income
              
              
              161
              
              
              186Service
                  charges on deposits
              
              
              232
              
              
              174Other
                  service charges and commissions
              
              
              61
              
              
              67Investment
                  securities (losses) gains, net
              
              
              5
              
              
              (5
              )Other
                  income
              
              
              461
              
              
              421Total
                  noninterest income
              
              
              920
              
              
              843NONINTEREST
                  EXPENSESalary
                  and employee benefits
              
              
              2,643
              
              
              2,294Occupancy
              
              
              587
              
              
              557Computer
                  services
              
              
              158
              
              
              154General
                  and administrative expense
              
              
              1,198
              
              
              1,074Total
                  noninterest expense
              
              
              4,586
              
              
              4,079EARNINGS
                  BEFORE INCOME TAXES
              
              
              1,392
              
              
              1,844Income
                  tax expense
              
              
              408
              
              
              573NET
                  EARNINGS
              
              $
              984
              
              $
              1,271Net
                  earnings per common share - Basic
              
              $
              .33
              
              $
              .43Net
                  earnings per common share - Diluted
              
              $
              .33
              
              $
              .43Weighted
                  average number of common shares outstanding
              
              
              2,968,593
              
              
              2,926,446Weighted
                  average number of common and common equivalent shares
                  outstanding
              
              
              2,995,405
              
              
              2,963,888Dividends
                  per share
              
              $
              .10
              
              $
              .09





See
      notes
      to unaudited condensed consolidated financial statements.


3


HABERSHAM
      BANCORP AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


(Unaudited)
      For the Three-Month Periods Ended March 31, 2007 and 2006


(dollars
      in thousands)




Three
                Months ended2007
            
            2006NET
                EARNINGS
            
            $
            984
            
            $
            1,271OTHER
                COMPREHENSIVE INCOME (LOSS):Unrealized
                holding (losses) gains on investment securities available for sale
                arising
                during the period
            
            
            304
            
            
            (229
            )Unrealized
                holding gains (losses) on derivative financial instruments classified
                as
                cash flow hedges, arising during the period
            
            
            (50
            )
            
            59Reclassification
                adjustment for (gains) losses on investment securities available
                for
                sale
            
            
            (5
            )
            
            5Total
                other comprehensive income (loss), before tax
            
            
            249
            
            
            (165
            )INCOME
                TAXES RELATED TO OTHER COMPREHENSIVE INCOME:Unrealized
                holding (losses) gains on investment securities available for sale
                arising
                during the period
            
            
            (103
            )
            
            78Unrealized
                holding gains (losses) on derivative financial instruments classified
                as
                cash flow hedges, arising during the period
            
            
            17
            
            
            (20
            )Reclassification
                adjustment for (gains) losses on investment securities available
                for
                sale
            
            
            2
            
            
            (2
            )Total
                income taxes related to other comprehensive income (loss)
            
            
            (84
            )
            
            56Total
                other comprehensive (loss) income, net of tax
            
            
            165
            
            
            (109
            )Total
                comprehensive (loss) income
            
            $
            1,149
            
            $
            1,162





See
      notes
      to unaudited condensed consolidated financial statements.


4


HABERSHAM
      BANCORP AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)
      For the Three-Month Periods Ended March 31, 2007 and 2006


(dollars
      in thousands)




Three
                Months ended2007
            
            2006CASH
                FLOWS PROVIDED BY OPERATING ACTIVITIES:
            
            $
            4,437
            
            $
            2,522CASH
                FLOWS FROM INVESTING ACTIVITIES:Investment
                securities available for sale:Proceeds
                from maturity
            
            
            1,282
            
            
            1,505Proceeds
                from sale and call
            
            
            1,241
            
            
            815Purchases
            
            
            (4,383
            )
            
            (7,802
            )Investment
                securities held to maturity:Proceeds
                from maturity
            
            
            299
            
            
            7Other
                investments:Proceeds
                from sale
            
            
            -
            
            
            194Purchases
            
            
            (44
            )
            
            (183
            )Net
                (increase) decrease in loans
            
            
            (7,647
            )
            
            2,099Purchases
                of premises and equipment
            
            
            (350
            )
            
            (1,236
            )Proceeds
                from sale of other real estate
            
            
            39
            
            
            24Net
                cash (used by) provided by investing activities
            
            
            (9,563
            )
            
            (4,577
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Net
                increase (decrease) in deposits
            
            
            (71,039
            )
            
            (5,223
            )Net
                increase (decrease) in short-term borrowings
            
            
            14
            
            
            (689
            )Net
                (decrease) increase in federal funds purchased and securities sold
                under
                repurchase agreements
            
            
            5,679
            
            
            (911
            )Repayment
                of FHLB advances
            
            
            -
            
            
            (4,300
            )Issuance
                of common stock
            
            
            -
            
            
            172Cash
                dividends paid
            
            
            (297
            )
            
            (264
            )Net
                cash (used by) provided by financing activities
            
            
            (65,643
            )
            
            (11,215
            )Decrease
                (increase) in cash and cash equivalents
            
            
            (70,769
            )
            
            (13,270
            )CASH
                AND CASH EQUIVALENTS: BEGINNING OF PERIOD
            
            
            90,518
            
            
            52,866CASH
                AND CASH EQUIVALENTS: END OF PERIOD
            
            $
            19,749
            
            $
            39,596SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATION:Other
                real estate acquired through loan foreclosures
            
            $
            305
            
            $
            140Change
                in components of other comprehensive income
            
            
            165
            
            
            (109
            )





See
      notes
      to unaudited condensed consolidated financial statements.


5


HABERSHAM
      BANCORP AND SUBSIDIARIES


Notes
      to
      Unaudited Condensed Consolidated Financial Statements








1.
            Basis
                of Presentation





The
      condensed consolidated financial statements contained in this report are
      unaudited but reflect all adjustments, consisting only of normal recurring
      accruals, which are, in the opinion of management, necessary for a fair
      presentation of the results of the interim periods reflected. Certain
      information and note disclosures normally included in financial statements
      prepared in accordance with accounting principles generally accepted in the
      United States of America have been condensed or omitted pursuant to applicable
      rules and regulations of the Securities and Exchange Commission. The results
      of
      operations for the interim periods reported herein are not necessarily
      indicative of results to be expected for the full year.





The
      condensed consolidated financial statements included herein should be read
      in
      conjunction with the Company's 2006 consolidated financial statements and notes
      thereto, included in the Company's Annual Report on Form 10-K for the fiscal
      year ended December 31, 2006.








2.
            Accounting
                Policies





Reference
      is made to the accounting policies of the Company described in the notes to
      the
      consolidated financial statements contained in the Company's Annual Report
      on
      Form 10-K for the fiscal year ended December 31, 2006. The Company has
      consistently followed those policies in preparing this report.





In
      February 2007, the Financial Accounting Standard Board issued SFAS No. 159, *The
      Fair Value Option for Financial Assets and Financial
      Liabilities* (SFAS
      159), which permits entities to choose to measure financial instruments and
      certain other instruments at fair value. SFAS 159 is effective as of the
      beginning of fiscal years that begin after November 15, 2007; however, it
      includes an early adoption provision allowing entities to adopt within 120
      days
      of their most recent fiscal year-end. The Company has decided not to implement
      SFAS 159 until January of 2008.








3.
            Other
                Comprehensive Income





Other
      comprehensive income for the Company consists of items recorded directly in
      equity under Statement of Financial Accounting Standards (“SFAS”) No. 115,
*Accounting for Certain Investments in Debt and Equity Securities* in
      addition to the net of tax fair value of cash flow hedges. Investment securities
      classified as available for sale are carried at fair value with the related
      unrealized gain or loss, net of deferred income taxes included as a separate
      component of stockholders’ equity. At March 31, 2007, fair value of the
      available for sale investment securities increased approximately $299,000 when
      compared to the fair value at December 31, 2006. The corresponding equity
      component of unrealized gain and loss on available for sale securities, net
      of
      tax, also increased approximately $198,000. These changes were the results
      of
      movements in the bond market as it responds to interest rate changes in the
      market. At March 31, 2007, fair value of the cash flow hedges decreased
      approximately $50,000 when compared to the fair value at December 31, 2006.
      The
      corresponding equity component of unrealized holding gains on derivative
      financial instruments classified as cash flow hedges, net of tax, also decreased
      approximately $33,000.


6


4.
            Net
                Earnings Per Share





Basic
      net
      earnings per share is based on the weighted average number of common shares
      outstanding during the period. Diluted net earnings per share includes the
      effect of potential common shares outstanding during the period. The average
      market price during the period is used to compute equivalent shares.





The
      reconciliation of the amounts used in the computation of both basic net earnings
      per share and diluted net earnings per share for the three-month periods ended
      March 31, 2007 and 2006, is as follows:








Three
                Months endedMarch2007
            
            2006Net
                earnings
            
            $
            984,455
            
            $
            1,271,224Weighted
                average common shares outstanding
            
            
            2,968,593
            
            
            2,926,446Shares
                issued from assumed exercise of common stock equivalents
            
            
            26,812
            
            
            37,442Weighted
                average number of common and common equivalent shares
                outstanding
            
            
            2,995,405
            
            
            2,963,888Earnings
                per share:Basic
            
            $
            .33
            
            $
            .43Diluted
            
            $
            .33
            
            $
            .43








Item.
                2
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations.





HABERSHAM
      BANCORP AND SUBSIDIARIES





Organization





Habersham
      Bancorp (the “Company”) owns all of the outstanding stock of Habersham Bank
      ("Habersham Bank") and The Advantage Group, Inc. Habersham Bank owns all of
      the
      outstanding stock of Advantage Insurers, Inc. (“Advantage Insurers”). Advantage
      Insurers offers a full line of property, casualty, and life insurance products.
      The Advantage Group, Inc. and Advantage Insurers do not comprise a significant
      portion of the financial position, results of operations, or cash flows of
      the
      Company and as a result, management’s discussion and analysis, which follows
      relates primarily to Habersham Bank.




The
      Company’s continuing primary business is the operations of banks in rural and
      suburban communities in Habersham, White, Cherokee, Warren, Gwinnett, Stephens
      and Forsyth counties in Georgia. The Company’s primary source of revenue is
      providing loans to businesses and individuals in its market area.


7


Executive
      Summary





Habersham
      Bancorp reported first quarter earnings of $984,455 or $.33 per diluted share,
      a
      decrease of 22.56% when compared to first quarter earnings or $1,272,224 or
      $.43
      per diluted share in 2006. The Company’s primary source of income is interest
      income from loans and investment securities. Its profitability depends largely
      on net interest income, which is the difference between the interest received
      on
      interest-earning assets and the interest paid on deposits, borrowings, and
      other
      interest-bearing liabilities. Net interest income for the first quarter of
      2007
      and 2006 was approximately $5.1 million.





Total
      net
      income consists of net interest income plus other noninterest income less
      noninterest expense. Increases in non-interest income of approximately $77,000
      and increases in non-interest expense of approximately $507,000 contributed
      to
      net income, when comparing first quarter 2007 to first quarter 2006. The
      increase in other non-interest expense consisted primarily of additional
      expenses in salary and employee benefits and occupancy costs.





The
      net
      interest margin for the first quarter of 2007 was 4.65% when compared to 4.97%
      for the first quarter of 2006. Two factors which impact the net interest margin
      are average interest bearing assets and average interest-bearing liabilities
      which increased approximately $30.6 million and $43.3 million, respectively,
      when comparing first quarter of 2007 to first quarter of 2006.




During
      the first quarter of 2007, total assets decreased approximately $63.7 million
      or
      11.46% from $555.7 million at December 31, 2006 to $492.0 million at March
      31,
      2007. At December 31, 2006, Habersham Bank had excess cash received from a
      short-term deposit invested in cash and due from banks and in federal funds
      sold. The excess cash was drawn down with the pay out of the deposited funds
      during the first quarter of 2007. Excluding the reduction of these funds of
      approximately $70.7 million, the loan, investment portfolios and other assets
      increased approximately $7.3 million, $1.8 million and $374,000, respectively,
      offset by a decrease of approximately $2.5 million in loans held for
      sale.





Deposit
      balances at December 31, 2006 included approximately $78.5 million in an
      interest bearing deposit account from a single depositor which remained in
      Habersham Bank’s deposit portfolio for several days after year-end. The total
      deposit portfolio at March 31, 2007 reflected an increase of approximately
      $7.5
      million net of the movement of this $78.5 million.





Habersham
      Bank’s expansion into Cumming, Georgia located in Forsyth County was completed
      with the opening of a new branch facility on January 9, 2007. Increases in
      personnel and employee costs and other operating expenses for the first quarter
      of 2007 over the first quarter of 2006 were the result of annual salary
      adjustments and the additional staffing of the new branch in Cumming. Occupancy
      expenses also increased approximately $30,000 for the first quarter of 2007
      over
      the same period in 2006 due to the new branch.





Forward
      Looking Statements





Certain
      statements contained in this Quarterly Report on Form 10-Q and the exhibits
      hereto which are not statements of historical fact constitute forward-looking
      statements within the meaning of the Private Securities Litigation Reform Act
      (the “Act”). In addition, certain statements in future filings by the Company
      with the Securities and Exchange Commission, in press releases, and in oral
      and
      written statements made by or with the approval of the Company which are not
      statements of historical fact constitute forward-looking statements within
      the
      meaning of the Act. Examples of forward-looking statements include, but are
      not
      limited to: (1) projections of revenues, income or loss, earnings or loss
      per share, the payment or non-payment of dividends, capital structure and other
      financial items; (2) statements of plans and objectives of the Company or
      its management or Board of Directors, including those relating to products
      or
      services; (3) statements of future economic performance; and
      (4) statements of assumptions underlying such statements. Words such as
“believes,” “anticipates,” “expects,” “intends,” “targeted,” and similar
      expressions are intended to identify forward-looking statements but are not
      the
      exclusive means of identifying such statements.


8


Forward-looking
      statements involve risks and uncertainties which may cause actual results to
      differ materially from those in such statements. Factors that could cause actual
      results to differ from those discussed in the forward-looking statements
      include, but are not limited to: (1) the strength of the U.S. economy in
      general and the strength of the local economies in which operations are
      conducted; (2) the effects of and changes in trade, monetary and fiscal
      policies and laws, including interest rate policies of the Board of Governors
      of
      the Federal Reserve System; (3) inflation, interest rate, market and
      monetary fluctuations; (4) the timely development of and acceptance of new
      products and services and perceived overall value of these products and services
      by users; (5) changes in consumer spending, borrowing and saving habits;
      (6) risks involved in making and integrating acquisitions and expanding
      into new geographic markets; (7) the ability to increase market share and
      control expenses; (8) the effect of changes in laws and regulations
      (including laws and regulations concerning taxes, banking, securities and
      insurance) with which the Company and its subsidiaries must comply; (9) the
      effect of changes in accounting policies and practices, as may be adopted by
      the
      regulatory agencies as well as the Financial Accounting Standards Board;
      (10) changes in the Company’s organization, compensation and benefit plans;
      (11) the costs and effects of litigation and of unexpected or adverse
      outcomes in such litigation; and (12) the success of the Company at
      managing the risks involved in the foregoing.





Such
      forward-looking statements speak only as of the date on which such statements
      are made, and the Company undertakes no obligation to update any forward-looking
      statement to reflect events or circumstances after the date on which such
      statement is made or to reflect the occurrence of unanticipated events. losses.
      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.




Material
      Changes in Financial Condition




Total
      assets of $492 million at March 31, 2007 reflect a decrease of $63.7 million
      or
      11.46% from $556 million at December 31, 2006. At December 31, 2006, Habersham
      Bank had excess cash received from short-term deposit invested in cash and
      due
      from banks and in federal funds sold. The excess cash was drawn down with the
      pay out of the deposited funds during the first quarter of 2007. Excluding
      the
      reduction of these funds of approximately $70.7 million, the loan, investment
      portfolios and other assets increased approximately $7.3 million, $1.8 million
      and $374,000, respectively, offset by a decrease of approximately $2.5 million
      in loans held for sale. Total deposits decreased approximately $71.0 million
      when comparing balances at March 31, 2007 to December 31, 2006 balances, with
      approximately $69.2 million of the decrease occurring in interest bearing
      deposits and approximately $1.8 million of the decrease occurring in
      non-interest bearing demand deposits. Borrowings increased when comparing March
      31, 2007 balances to December 31, approximately $6.5 million 2006 as a result
      of
      increased activity in repurchase sweep accounts.


9


Loan
      balances increased approximately $7.3 million during the first quarter of 2007
      when compared to loan balances at December 31, 2006. Increases in the real
      estate construction portfolio and the commercial loan portfolio of approximately
      $10.3 million and $2.1 million, respectively, were offset by decreases in the
      real estate mortgage portfolio and in the consumer portfolio of approximately
      $4.1 million and $1 million, respectively.





Purchases
      of investment securities available for sale during the first quarter of 2007
      totaled approximately $4.4 million, offset by maturities and calls of
      approximately $2.8 million. The purchases consisted of $1.8 million in U.S.
      government-sponsored enterprises, $.6 million in Mortgage Backed Securities
      and
      $2.0 million in municipal bonds.





Other
      real estate increased approximately $271,000 as a result of the foreclosure
      of
      two rental residential properties of approximately $305,000 during the first
      quarter of 2007 offset by sales of approximately $34,000.





The
      decrease in total deposits of approximately $71.0 million resulted from the
      following; the loss of a large temporary deposit of $78.5 million present at
      December 31, 2006, decreases in the noninterest bearing deposit portfolio of
      approximately $1.9 million, decreases in the savings portfolios of approximately
      $500,000; partially offset by increases in the NOW and Money Market and time
      deposit portfolios of approximately $2.9 million and $6.9 million, respectively.





Borrowings
      increased approximately $6.5 million during the first quarter of 2007 primarily
      in the repo sweep accounts.





Material
      Changes in Results of Operations





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 that will cover overhead and other costs and provide
      a reasonable return to our stockholders. Net interest income is affected by
      interest income from loans, investment securities and federal funds sold offset
      by interest paid on deposits and borrowings. The following table compares the
      weighted average tax equivalent yields for loans, investment securities and
      federal funds sold and the weighted average rates for deposits and borrowings
      for the first quarter of 2007 and 2006.





March
                31,
              2007
            
            March
                31,
              2006Interest
                Yields Earned:
            
            Yields
            
            YieldsLoans
            
            
            9.08
            %
            
            8.61
            %Investment
                Securities
            
            
            5.23
            %
            
            4.98
            %Federal
                Funds Sold
            
            
            4.88
            %
            
            4.53
            %Interest
                Rates Paid:
            
            
            Rates
            
            
            RatesDeposits
            
            
            4.07
            %
            
            3.25
            %Borrowings
            
            
            4.89
            %
            
            4.46
            %


10


Total
      interest income for the first quarter of 2007 increased approximately $1.1
      milion, or 13.49%, when compared to first quarter of 2006. Average balances
      for
      loans and investment securities increased approximately $26.4 million and $10.4
      million, respectively when comparing first quarter 2007 to first quarter 2006.
      Average balances in federal funds sold decreased approximately $6.1 million
      when
      comparing first quarter 2007 to first quarter 2006. See table above to compare
      rates paid on deposits and borrowings for first quarter 2007 and first quarter
      2006.





Total
      interest expense for the first quarter of 2007 increased approximately $1.1
      million or 38.00% when compared to the first quarter of 2006. Average balances
      in the interest bearing deposit portfolios increased approximately $37.0 million
      or 12.53% when compared to first quarter of 2006. The average balances in the
      noninterest bearing deposit portfolio decreased approximately $17.8 million
      or
      28.92% when compared to first quarter of 2006. The percentages of average
      noninterest bearing deposits to the total average deposit portfolio for the
      first quarter of 2007 and 2006 were 13.14% and 20.80%, respectively. Average
      borrowing balances increased approximately $6.2 million when comparing first
      quarter of 2007 to first quarter of 2006.





Net
      interest income decreased approximately $22,000 or .43%, for the first quarter
      of 2007 as compared to the first quarter of 2006 as a result of the items
      discussed above.





The
      net
      interest margin of the Company, net interest income divided by average
      earning-assets, was 4.65% for the first quarter of 2007 compared to 4.97% for
      the first quarter of 2006.





Noninterest
      income increased $77,000 or 9.13% for the first quarter of 2007 over the same
      period in 2006. A mortgage origination income decrease of $25,000 was primarily
      due to a decrease in the average volume of activity in the mortgage held for
      sale portfolio when comparing first quarter of 2007 to first quarter 2006.
      Increases in service charges on deposits and other service charges of $52,000
      resulted from increased deposit balances and the introduction of an overdraft
      protection product which generated additional NSF fees during 2007. A net
      increase in other income of $40,000 resulted primarily as a result of increased
      activity in the majority of income accounts such as trust fees, master money
      card income, data processing income, profit on sale of ORE, safe deposit box
      rental income, etc. These increases were offset by a decrease in rental income
      or approximately $43,000 for the first quarter of 2007 when compared to the
      same
      period in 2006 as a result of the sale of a multi-family rental property during
      the third quarter of 2006.





Noninterest
      expense increased $507,000 or 12.43% for the first quarter of 2007 over the
      same
      period in 2006, with increases in salary and employee benefits, occupancy,
      and
      computer services of approximately $349,000, $30,000 and $4,000, respectively.
      Salary and employee benefits increased primarily due to annual salary
      adjustments and the additional staffing of a new branch in Cumming which opened
      in January 2007. Occupancy expenses also increased approximately for the first
      quarter of 2007 over the same period in 2006 due to the new branch in Cumming.
      The general and administrative expenses increase of $124,000 consists primarily
      of additional advertising and marketing expense, office supplies, outside
      services and other expenses of approximately $29,000, $32,000, $2,000 and
      $61,000, respectively. Outside services include FDIC insurance, legal and
      professional services, insurance, director fees and State of Georgia Department
      of Banking fees.


11


Income
      tax expense for the three months ended March 31, 2007 and 2006 was $408,000
      and
      $573,000, respectively. The effective tax rate for the first quarter of 2007
      and
      2006 was 29.29% and 31.07%, respectively. Tax-exempt income on investment
      securities in municipal bonds was 19.29% of pre-tax income for the first quarter
      of 2007 when compared to 11.50% of pre-tax income for the first quarter of
      2006.








Asset
      Quality





The
      allowance for loan losses represents a reserve for probable losses in the loan
      portfolio and is evaluated periodically. The determination of the allowance
      for
      loan losses is subjective and based on consideration of a number of factors
      and
      assumptions. The methodology used to analyze the adequacy of the Allowance
      for
      Loans and Lease Losses consists of assigning allocated general reserve where
      deemed appropriate based on Internal Watch List relationships. Reserves for
      these loans are weighted with emphasis on the degree of identified risk. Reviews
      for these credits include an analysis of the borrower’s financial position, an
      assessment of the value of pledged collateral and their past performance showing
      their ability to properly service the debt as well as an assessment of their
      anticipated future financial condition. These credits are assigned one of two
      risk ratings: Watch or Substandard. Loans assigned a risk rating of substandard
      will have reserve based on FAS 114, which defines loans impaired as “when based
      on current information and events, if it is probable that the creditor will
      be
      unable to collect all interest and principal payments due according to the
      contractual terms of the loan agreement.” If a loan is considered impaired, but
      adequately collateralized there should be no reserve assigned to the loan within
      the allowance for loan losses analysis. All nonaccrual loans are considered
      impaired. Additions to nonaccrual loans at March 31, 2007, consisted primarily
      of real estate secured loans and were adequately collateralized with real estate
      and other pledged collateral.





The
      risk
      associated with lending 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 are an element considered for
      all
      loans. Real estate loans are impacted by market conditions regarding the value
      of the underlying property used as collateral. Commercial loans are also
      impacted by the management of the business as well as economic conditions.
      The
      Company also makes unsecured loans from time to time. The risk to the Company
      is
      greater for unsecured loans as the ultimate repayment of the loan is only
      dependent on the borrower’s ability to pay. The balance of unsecured loans at
      March 31, 2007 was $9.5 million which does not pose a significant risk to the
      Company.





At
      March
      31, 2007 and December 31, 2006, the ratio of the allowance for loan losses
      to
      total loans was .96% and .99%, respectively. The reserve established as of
      March
      31, 2007 is considered to be adequate for any expected losses and is supported
      by the methodology and supporting documentation of the analysis. No provision
      for loan losses was charged to expense for the quarters ended March 31, 2007
      and
      2006.


12


Net
      charge-offs for the first quarter of 2007 totaled $67,494 compared to net
      charge-offs of $4,674 for the first quarter of 2006 as detailed below:





March
                31, 2007
            
            March
                31, 2006Charge-offs:Commercial
            
            $
            -
            
            $
            671Real
                Estate
            
            
            39,071
            
            
            28,083Consumer
            
            
            46,126
            
            
            36,065Total
                Charge-offs
            
            
            85,197
            
            
            64,819Recoveries:Commercial
            
            
            500
            
            
            8,865Real
                Estate
            
            
            -
            
            
            1,184Consumer
            
            
            17,203
            
            
            50,096Total
                Recoveries
            
            
            17,703
            
            
            60,145Net
                Charge-offs
            
            $
            67,494
            
            $
            4,674








Nonperforming
      assets consist of non-accrual loans, accruing loans 90 days past due,
      restructured loans and other real estate owned. The following summarizes
      non-performing assets:





March
                31, 2007
            
            December
                31, 2006Accruing
                loans 90 days past due
            
            $
            100,664
            
            $
            37,585Non-accrual
                loans
            
            
            4,190,255
            
            
            502,233Other
                real estate
            
            
            809,234
            
            
            537,975Restructured
                loans
            
            
            51,035
            
            
            52,560Total
                non-performing assets
            
            $
            5,151,188
            
            $
            1,130,353





Nonperforming
      assets increased $4,020,835 or 355.72% from December 31, 2006 to March 31,
      2007.
      See the discussion that follows within this section for a description of the
      assets that comprised this increase.





Loans
      classified as 90 days past due increased $63,079 or 167.83% from December 31,
      2006 to March 31, 2007. The increase is the net result of the following changes:








Balance
                at December 31, 2006
            
            $
            37,585New
                loans classified to 90 days past due status
            
            
            100,664Payments
                received
            
            
            (37,585
            )Balance
                at March 31, 2007
            
            $
            100,664The
                following summarizes accruing loans 90 days past due:Unimproved
                commercial use land loan
            
            $
            74,439Residential
                loan
            
            
            26,225Total
                accruing loans 90 days past due
            
            $
            100,664




13


Impaired
      loans consist of loans on nonaccrual status. The increase is the net result
      of
      the following changes:





Balance
                at December 31, 2006
            
            $
            502,233Loans
                reclassified to nonaccrual status in 2007
            
            
            4,061,641Payments
                received on nonaccrual loans during 2007
            
            
            (24,982
            )Nonaccrual
                loans charged-off during 2007
            
            
            (40,179
            )Nonaccrual
                loans reclassified to other real estate
            
            
            (304,784
            )Nonaccrual
                loans reclassified to accrual status in 2007
            
            
            (3,674
            )Balance
                at March 31, 2007
            
            $
            4,190,255





Additions
      to loans on nonaccrual status consisted of twenty-one real estate secured loans
      totaling $3,975,547, one commercial loan totaling $46,177 and five consumer
      loans totaling $39,918. The real estate secured loans consist of one $2.5
      million loan secured with lake property, sixteen loans for construction of
      1-4
      family residential
      housing totaling approximately $1.2 million and four loans secured by 1-4 family
      residential properties. The appraised value for the lake property and the
      construction housing was approximately $2.8 million and $1.2 million,
      respectively. The interest income recognized on such loans for the three-month
      periods ended March 31, 2007 and 2006 was not material.





The
      Company’s other real estate consists of six properties totaling $809,234 at
      March 31, 2007 and six properties totaling $537,975 at December 31, 2006. The
      increase in other real estate was the result of the foreclosure of two
      residential properties of approximately $304,784 during the first quarter of
      2007 offset by sales of approximately $33,525.





At
      March
      31, 2007, the Company’s other real estate consisted of the following:





Rental
                Residential Properties
            
            $
            304,784Commercial
                Properties
            
            
            399,500Lots
            
            
            104,950Total
            
            $
            809,234





Our
      Other
      Real Estate Owned (“OREO”) procedures provide that a foreclosure appraisal be
      obtained which provides a fair market value and a disposition (quick sale)
      value. The disposition value is the valuation used to place the property into
      OREO. Any difference between the disposition value and the loan balance is
      recommended for charge off. Once the property is in OREO, the property is listed
      with a realtor to begin sales efforts.





Liquidity
      and Capital Resources





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





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





The
      Company’s liquidity position depends primarily upon the liquidity of its assets
      relative to its need to respond to short-term demand for funds caused by
      withdrawals from deposit accounts and loan funding commitments. Primary sources
      of liquidity are scheduled repayments on the Company’s loans and interest on and
      maturities of its investment securities. Sales of investment securities
      available for sale represent another source of liquidity to the Company. The
      Company may also utilize its cash and due from banks and federal funds sold
      to
      meet liquidity requirements as needed.


14


The
      Company also has the ability, on a short-term basis, to purchase federal funds
      from other financial institutions up to $30.0 million. At March 31, 2007, the
      Company had no federal funds purchased. Presently, the Company has made
      arrangements with commercial banks for short-term advances under a repurchase
      agreement line of credit of which none was advanced at March 31, 2007. The
      Company has approximately $11.6 million outstanding in commercial sweep accounts
      at March 31, 2007. In addition, the Company has a total available line of $38.9
      million, subject to available collateral, from the Federal Home Loan Bank.
      The
      Company has $38.0 million in advances on this line at March 31,
      2007.





Habersham
      Bank's liquidity policy requires that the ratio of cash and certain short-term
      investments to net withdrawable deposit accounts be at least 20%. The Bank’s
      liquidity ratios at March 31, 2007 and 2006 were 22.23% and 26.84%,
      respectively.





At
      March
      31, 2007 Habersham Bancorp and Habersham Bank were required to have minimum
      Tier
      1 and total capital ratios of 4% and 8%, respectively. Additionally, the Company
      and the Bank are required to maintain a leverage ratio (Tier 1 capital to average
      assets) of at least 4%. The Company’s and the Bank’s ratios at March 31, 2007
      follow:





Habersham
              Bank
            
            Habersham
              BancorpTier
                1
            
            
            12.73
            %
            
            13.54
            %Total
                Capital
            
            
            13.61
            %
            
            14.40
            %Leverage
            
            
            10.16
            %
            
            10.81
            %








Item
                3.
            Quantitative
                and Qualitative Disclosures about Market Risk.





As
      of
      March 31, 2007 there were no substantial changes in the composition of the
      Company’s market-sensitive assets and liabilities or their related market values
      from that reported as of December 31, 2006. The foregoing disclosures related
      to
      the market risk of the Company should be read in conjunction with the Company’s
      audited consolidated financial statements, related notes and management’s
      discussion and analysis of financial condition and results of operations for
      the
      year ended December 31, 2006 included in the Company’s 2006 Annual Report on
      Form 10K.








Item
                4.
            CONTROLS
                AND PROCEDURES





As
      of the
      end of the period covered by this report, the Company’s management, including
      the Company’s Executive Officer and Chief Financial Officer, reviewed and
      evaluated the effectiveness of the design and operation of the Company’s
      disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based
      upon that evaluation, the Company’s Chief Executive Officer and Chief Financial
      Officer concluded that the Company’s disclosure controls and procedures are
      effective in timely alerting them to material information relating to the
      Company, (including its consolidated subsidiaries) that is required to be
      included in the Company’s periodic filings with the Securities and Exchange
      Commission.


15


There
      have not been any changes in the Company’s internal control over financial
      reporting or, to the Company’s knowledge, in other factors, during the fiscal
      quarter to which this report relates that could significantly affect those
      internal controls subsequent to the date management carried out its evaluation,
      and there have been no corrective actions with respect to significant
      deficiencies or material weaknesses.








PART
      II





OTHER
      INFORMATION





Item
                1.
            Legal
                proceedings.


None


Item
                2.
            Unregistered
                sales of equity securities and use of proceeds.





Issuer
      Purchases of Equity Securities





During
      the period covered by this report, the Company did not sell any equity
      securities that were not registered under the Securities Act of 1933, as
      amended.





The
      following table sets forth information regarding the Company's purchases of
      its
      common stock on a monthly basis during the first quarter of 2007.





Period
            
            Total
                Number of Shares Purchased
            
            Average
                Price Paid Per Share
            
            Total
                Number of Shares (or Units) Purchased as Part of Publicly Announced
                Plans
                or Programs1
            
            Maximum
                Number (or Appropriate Dollar Value) of Shares (or Units) that May
                Yet Be
                Purchased Under the Plans or ProgramsJanuary
                1 through January 31, 2007
            
            0
            
            0
            
            0
            
            0February
                1 through February 28, 2007
            
            0
            
            0
            
            0
            
            0March
                1 through March 31, 2007
            
            0
            
            0
            
            0
            
            0Total
            
            0
            
            0
            
            0
            
            0





The
      Company does not have a publicly announced stock repurchase plan and did not
      otherwise repurchase any of its shares of common stock during the period covered
      by this report. The Company did not terminate an existing stock repurchase
      plan
      during the period covered by this report.








Item
                3.
            Defaults
                upon senior securities.


None





Item
                4.
            Submission
                of matters to a vote of security holders.


None





Item
                5.
            Other
                information.


None





16




Item
                6.
            Exhibits





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




31.1
            Certification
                of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.





31.2
            Certification
                of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.





32
            Certification
                of Chief Executive Officer and Chief Financial Officer Pursuant to
                Section
                906 of the Sarbanes-Oxley Act of 2002.








*Indicates
      a management compensatory plan or agreement.








SIGNATURES





In
      accordance with the requirements of the Exchange Act, the registrant has caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.





HABERSHAM
      BANCORP


(Registrant)




Date
                  May 8, 2007
              /S/
                  Annette BanksChief
                  Financial Officer(for
                  the Registrant and as theRegistrant’s
                  principal financial andaccounting
                  officer)






17