<PAGE>   1
                     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 June 30, 1999


   [ ]   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                  (I.R.S. Employer
 incorporation or organization)                 Identification No.)

282 Historic HWY 441  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.

                                                 Yes [X]    No [ ]

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

2,693,851 shares, common stock, $1.00 par value, as of July 31, 1999







<PAGE>   2


Item. 1   Financial Statements

HABERSHAM BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (dollars in thousands)

<TABLE>
<CAPTION>
ASSETS                                               JUNE 30, 1999     DECEMBER 31, 1998

<S>                                                  <C>               <C>
Cash and due from banks                                $  13,244           $   5,799
Federal funds sold                                         1,320               8,300
Investment securities available for sale
 (cost of $40,931 at June 30, 1999 and
  $45,492 at December 31, 1998)                           40,333              46,340
Investment securities held to maturity
 (estimated fair values of $14,383 at
  June 30, 1999 and $15,889 at
  December 31, 1998)                                      14,606              15,610
Trading securities                                         3,039               3,495
Other investments                                          5,746               4,194

Loans held for sale                                       54,089              72,163

Loans                                                    252,691             209,735
  Less allowance for loan losses                          (3,128)             (2,709)
                                                       ---------           ---------
    Loans, net                                           249,563             207,026
                                                       ---------           ---------

Goodwill and other intangible assets                       3,152               3,321
Other assets                                              18,526              17,821
                                                       ---------           ---------
    TOTAL ASSETS                                       $ 403,618           $ 384,069
                                                       =========           =========

LIABILITIES
Noninterest bearing deposits                           $  28,988           $  28,408
Interest bearing deposits                                264,351             252,045
Short-term borrowings and Federal funds
  purchased                                               12,623                 140
Other borrowings                                           2,700               2,700
Federal Home Loan Bank advances                           47,170              53,811
Other liabilities                                         12,511              14,751
                                                       ---------           ---------
    TOTAL LIABILITIES                                    368,343             351,855
                                                       ---------           ---------

SHAREHOLDERS' EQUITY
Common stock, $1.00 par value,
 10,000,000 shares authorized;
  2,693,851 and 2,448,267 shares issued
  at June 30, 1999 and December 31, 1998,
  respectively                                             2,694               2,448
Additional paid-in capital                                12,423               9,445
Retained earnings                                         20,553              20,058
Accumulated other comprehensive income (loss)               (395)                263
                                                       ---------           ---------
    TOTAL SHAREHOLDERS' EQUITY                            35,275              32,214
                                                       ---------           ---------
    TOTAL LIABILITIES AND SHAREHOLDERS'
      EQUITY                                           $ 403,618           $ 384,069
                                                       =========           =========
</TABLE>


See notes to condensed consolidated financial statements.
<PAGE>   3


HABERSHAM BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) For the Three-Month Periods Ended June 30, 1999 and 1998
(dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
INTEREST INCOME                                         1999                 1998
<S>                                                 <C>                   <C>
Loans                                               $     6,713           $    6,274
Investment securities                                       746                  734
Federal funds sold                                           25                  142
Other                                                       125                   76
                                                    -----------           ----------
  TOTAL INTEREST INCOME                                   7,609                7,226

INTEREST EXPENSE
Time deposits, $100,000 and over                            729                  814
Other deposits                                            2,166                2,462
Short-term and other borrowings, primarily
  FHLB advances                                             907                  504
                                                    -----------           ----------
  TOTAL INTEREST EXPENSE                                  3,802                3,780

NET INTEREST INCOME                                       3,807                3,446
Provision for loan losses                                   221                  159
                                                    -----------           ----------

NET INTEREST INCOME AFTER
 PROVISION FOR LOAN LOSSES                                3,586                3,287

OTHER INCOME
  Gain on sale of loans                                   2,462                2,280
  Loan fee income                                           727                  704
  Service charges on deposits                               159                  157
  Other service charges and commissions                      80                   62
  Travel service income                                     241                  375
  Securities gains (losses), net                             (6)                  14
  Unrealized gain on trading securities                      76                   --
  Other income                                              280                  202
                                                    -----------           ----------
    Total other income                                    4,019                3,794

OTHER EXPENSES
  Salary and employee benefits                            4,511                3,955
  Occupancy                                                 761                  679
  Travel service expense                                    217                  344
  Computer services                                         144                  168
  General and administrative expense                      1,282                1,400
                                                    -----------           ----------
    Total other expense                                   6,915                6,546

INCOME BEFORE INCOME TAXES                                  690                  535
Income tax expense                                          142                  116
                                                    -----------           ----------
NET INCOME                                          $       548           $      419
                                                    ===========           ==========
NET INCOME PER COMMON SHARE - BASIC                 $       .21           $      .17
                                                    ===========           ==========
NET INCOME PER COMMON SHARE - DILUTED               $       .21           $      .17
                                                    ===========           ==========

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING                                    2,611,792            2,411,267
                                                    ===========           ==========

WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES OUTSTANDING              2,611,792            2,507,699
                                                    ===========           ==========

Dividends per share                                 $       .05           $      .04
                                                    ===========           ==========
</TABLE>



See notes to condensed consolidated financial statements.

<PAGE>   4

HABERSHAM BANCORP AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) For the Six-Month Periods Ended June 30, 1999 and 1998
(dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
INTEREST INCOME                                         1999                 1998
<S>                                                 <C>                   <C>
Loans                                               $    12,855           $   12,237
Investment securities                                     1,552                1,430
Federal funds sold                                           81                  329
Other                                                       277                  140
                                                    -----------           ----------
  TOTAL INTEREST INCOME                                  14,765               14,136

INTEREST EXPENSE
Time deposits, $100,000 and over                          1,529                1,609
Other deposits                                            4,352                4,838
Short-term and other borrowings, primarily
  FHLB advances                                           1,567                  823
                                                    -----------           ----------
  TOTAL INTEREST EXPENSE                                  7,448                7,270

NET INTEREST INCOME                                       7,317                6,866
Provision for loan losses                                   452                  318
                                                    -----------           ----------

NET INTEREST INCOME AFTER
 PROVISION FOR LOAN LOSSES                                6,865                6,548

OTHER INCOME
  Gain on sale of loans                                   5,088                3,810
  Loan fee income                                         1,402                1,160
  Service charges on deposits                               326                  309
  Other service charges and commissions                     151                  123
  Travel service income                                     578                  660
  Securities gains, net                                      16                   34
  Unrealized loss on trading securities                    (456)                  --
  Other income                                              550                  380
                                                    -----------           ----------
    Total other income                                    7,655                6,476

OTHER EXPENSES
  Salary and employee benefits                            8,758                7,249
  Occupancy                                               1,468                1,313
  Travel service expense                                    520                  603
  Computer services                                         307                  300
  General and administrative expense                      2,521                2,461
                                                    -----------           ----------
    Total other expense                                  13,574               11,926

INCOME BEFORE INCOME TAXES                                  946                1,098
Income tax expense                                          194                  236
                                                    -----------           ----------
NET INCOME                                          $       752           $      862
                                                    ===========           ==========
NET INCOME PER COMMON SHARE - BASIC                 $       .30           $      .36
                                                    ===========           ==========
NET INCOME PER COMMON SHARE - DILUTED               $       .30           $      .34
                                                    ===========           ==========

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING                                    2,530,672            2,410,966
                                                    ===========           ==========

WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES OUTSTANDING              2,530,672            2,507,964
                                                    ===========           ==========

Dividends per share                                 $       .10           $      .08
                                                    ===========           ==========
</TABLE>



See notes to condensed consolidated financial statements.
<PAGE>   5


HABERSHAM BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) For the Six-Month Periods Ended June 30, 1999 and 1998
(dollars in thousands)

<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:                             1999                1998

<S>                                                            <C>                 <C>
  Net income                                                   $     752           $     862
  Adjustments to reconcile net income to net cash
   provided by (used in) operating activities:
      Provision for loan losses                                      452                 318
      Depreciation                                                   691                 648
      Gain on sale of investment securities                          (16)                (34)
      Unrealized holding loss on trading securities                  456                  --
      Gain on sale of other real estate                              (11)                 (9)
      Net gain on sale of loans                                   (5,088)             (3,810)
      Amortization of intangible assets                              169                 137
      Deferred income tax benefit                                    (16)                (16)
      Proceeds from sale of loans held for sale                  318,554             139,910
      Net increase in loans held for sale                       (296,280)           (164,125)

  Changes in assets and liabilities:
     Increase in interest receivable                                 (88)                (97)
     Increase in other assets                                       (582)               (207)
     Decrease in interest payable                                   (848)               (149)
     (Decrease) increase in other liabilities                     (1,392)              8,380
                                                               ---------           ---------
  Net cash provided by (used in) operating activities             17,051             (18,192)
                                                               ---------           ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Investment securities available for sale:
    Proceeds from maturity                                         6,163               4,537
    Proceeds from sale                                             5,016               2,564
    Purchases                                                     (6,152)            (12,758)
  Investment securities held to maturity:
    Proceeds from maturity                                         2,487               1,075
    Purchases                                                     (1,483)             (3,211)
  Other investments:
    Proceeds from sale                                             5,450               1,247
    Purchases                                                     (3,938)             (1,675)
 Net cash paid for purchase of CB Financial Corp
     common stock                                                   (216)                 --
  Loans:
    Proceeds from sale                                            19,901              21,950
    Net increase in loans                                        (62,300)            (30,991)
  Purchases of premises and equipment                               (403)               (538)
  Proceeds from sale of premises and equipment                        --                  62
  Proceeds from sale of other real estate                             42                 103
                                                               ---------           ---------
    Net cash used in investing activities                        (35,433)            (17,635)
                                                               ---------           ---------
</TABLE>

<PAGE>   6









HABERSHAM BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(Unaudited) For the Six-Month Periods Ended June 30, 1999 and 1998
(dollars in thousands)


<TABLE>
<CAPTION>
CASH FLOWS FROM FINANCING ACTIVITIES:                                1999               1998

<S>                                                                <C>                <C>
  Net increase in deposits                                           12,886              9,347
  Net increase (decrease) in short-term borrowings                   12,483             (1,869)
  (Repayment of) proceeds from Federal Home Loan
    Bank advances, net                                               (6,641)            17,542
  Cash dividends paid                                                  (257)              (193)
  Issuance of common stock                                              376                 31
                                                                   --------           --------
    Net cash provided by financing activities                        18,847             24,858
                                                                   --------           --------

Increase (decrease) in cash and cash equivalents                        465            (10,969)

CASH AND CASH EQUIVALENTS: BEGINNING OF PERIOD                       14,099             29,808
                                                                   --------           --------
CASH AND CASH EQUIVALENTS: END OF PERIOD                           $ 14,564           $ 18,839
                                                                   ========           ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
  Interest                                                         $  8,296           $  7,409
  Income taxes                                                           --                 --

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
Stock issued for purchase of CB Financial Corp.
   common stock                                                    $  2,848           $     --
Other real estate acquired through loan foreclosures                    354                293
Loans granted to facilitate the sale
  of other real estate                                                   --                170
Unrealized loss on investment securities
  available for sale, net of tax effect                                (658)               (51)
</TABLE>

See notes to condensed consolidated financial statements.


<PAGE>   7


HABERSHAM BANCORP AND SUBSIDIARIES
Notes to 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 generally accepted accounting principles 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 1998 consolidated financial statements
and notes thereto, included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998.

         Certain reclassifications have been made to the prior periods in order
to conform to classifications adopted in the current period.


2.       Accounting Policies

         Reference is made to the accounting policies of the Company described
in the notes to consolidated financial statements contained in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998. The
Company has consistently followed those policies in preparing this report.


3.       Comprehensive Income

         In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income". This statement established standards for reporting and
display of comprehensive income and its components in a full set of general
purpose financial statements. SFAS No. 130 requires all items that are required
to be recognized under accounting standards as components of comprehensive
income be reported in a financial statement that is displayed in equal
prominence with the other financial statements. The term "comprehensive income"
is used in the statement to describe the total of all components of
comprehensive income including net income. "Other comprehensive income" refers
to revenues, expenses, gains, and losses that are included in comprehensive
income but excluded from earnings under current accounting standards. Currently,
other comprehensive income for the Company consists of items previously recorded
directly in equity under SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". The Company adopted SFAS No. 130 effective January
1, 1998. Comprehensive income for the six months ended June 30, 1999 and 1998
was $94,000 and $811,000, respectively, and three months ended June 30, 1999 and
1998 was $28,000 and $370,000, respectively.


<PAGE>   8



4.       Recent Accounting Pronouncements

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

         In October 1998, the FASB issued SFAS No. 134, "Accounting for
Mortgage-backed Securities Retained After the Securitization of Mortgage Loans
Held for Sale by a Mortgage-Banking Enterprise", an amendment of FASB Statement
No. 65. SFAS No. 134 is effective for the first quarter beginning after December
15, 1998. The provisions of SFAS No. 134 did not have a significant impact on
the consolidated financial statements upon adoption.


5.       Segment Information

         The Company has two significant reportable segments: banking and
mortgage banking. The Company offers traditional banking services through the
two bank subsidiaries, Habersham Bank and Security State Bank. The Company
originates and sells loans in the secondary market through its mortgage banking
segment, BancMortgage Financial Corp.

         The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. The Company evaluates
performance based on net income of the respective segments.

At and for the six months ended June 30, 1999

<TABLE>
<CAPTION>
                                                    Mortgage
                                     Banking        Banking      Eliminations        Other       Eliminations   Consolidated

<S>                                 <C>             <C>          <C>                <C>          <C>            <C>
Interest income                     $ 13,088        $ 2,039        $   (416)        $    54         $  --         $ 14,765
Interest expense                       6,496          1,274            (416)             94            --            7,448

Provision for loan losses                155            297              --              --            --              452
Gain on sale of loans                    236          4,852              --              --            --            5,088
Other noninterest income               1,167          2,212          (1,028)            955          (639)           2,567
Depreciation on premises &
  equipment                              441            215              --              35            --              691
Other noninterest expense              5,458          7,344            (939)          1,659          (639)          12,883
Income tax expense (benefit)             419             53             (32)           (246)           --              194
Net income (loss)                      1,345             95             (63)           (625)           --              752

Total assets                        $364,140        $56,377        $(22,916)        $ 6,634         $(617)        $403,618
</TABLE>


<PAGE>   9



At and for the six months ended June 30, 1998

<TABLE>
<CAPTION>
                                                    Mortgage
                                     Banking        Banking      Eliminations        Other       Eliminations   Consolidated
<S>                                 <C>             <C>          <C>                <C>          <C>            <C>

Interest income                     $ 13,074        $ 1,546        $   (484)        $     1            (1)        $ 14,136
Interest expense                       6,689          1,065            (484)              1            (1)           7,270

Provision for loan losses                318             --              --              --            --              318
Gain on sale of loans                    149          3,661              --              --            --            3,810
Other noninterest income                 953          2,026          (1,045)          1,317          (585)           2,666
Depreciation on premises &
  equipment                              447            185              --              16            --              648
Other noninterest expense              5,215          5,649            (730)          1,729          (585)          11,278
Income tax expense (benefit)             292            179            (105)           (130)           --              236
Net income (loss)                      1,080            291            (204)           (305)           --              862


Total assets                        $328,717        $68,938        $(36,189)        $ 1,310         $(695)        $362,081
</TABLE>

6.       Business Acquisitions

         In May 1999, the Company exercised its previously acquired option to
         purchase a 45.91% interest (27,574 shares) in CB Financial Corp.
         ("CB"), Warrenton, Georgia at a total cost of $3,063,351. The
         investment in CB is accounted for using the equity method.


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"), Security State Bank ("Security Bank"), and
The Advantage Group, Inc. Habersham Bank owns all of the outstanding stock of
BancMortgage Financial Corp ("BancMortgage"), Appalachian Travel Service, Inc.
("Appalachian") and Advantage Insurers, Inc. ("Advantage Insurers"). Advantage
Insurers, which began operations March 31, 1997, offers a full line of property,
casualty and life insurance products. The Advantage Group, Inc. is a non-bank
subsidiary which administers the Company's Kids' Advantage banking program and
provides creative and printing services to other institutions. The Advantage
Group, Inc., Appalachian, and Advantage Insurers do not comprise a significant
portion of the financial position, results of operations or cash flows of the
Company for the six month period ended June 30, 1999.

         BancMortgage was organized in 1996 as a full service mortgage and
construction lending company located in the northern Atlanta Metropolitan area.
During the third quarter of 1997, BancMortgage acquired 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 for approximately $60,000. As a result of the acquisition, BancMortgage
does business as The Prestwick Mortgage Group and as BancFinancial Services
Corporation, a full-service wholesale mortgage lender specializing in sub-prime
mortgage loans, in the mid-Atlantic area.



<PAGE>   10

         Management's discussion and analysis, which follows, relates primarily
to Habersham Bank, Security Bank and BancMortgage.

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.

         Forward-looking statements involve risks and uncertainties which may
cause actual results to differ materially from those in such statements. Facts
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) the
impact of Year 2000 and technological changes; (7) acquisitions; (8) the ability
to increase market share and control expenses; (9) 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; (10) 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; (11) changes in the Company's organization, compensation and
benefit plans; (12) the costs and effects of litigation and of unexpected or
adverse outcomes in such litigation; and (13) 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.





<PAGE>   11





Material Changes in Financial Condition

         The Company's total assets increased approximately $20 million during
the first six months of 1999 primarily as a result of increases in real estate
secured loans and commercial lending activity in the loan portfolios of
Habersham Bank and Security State Bank of approximately $43 million offset by
reduction in mortgage loans held for sale of approximately $18 million and a
decrease in the investment securities portfolio of approximately $7 million
offset by new investments of approximately $2 million. The increase was funded
primarily by short-term borrowings of approximately $13 million and increases in
the certificate of deposits portfolios at Habersham Bank of approximately $12
million offset by Federal Home Loan Bank repayments of approximately $7 million.

         Nonperforming assets consist of nonaccrual loans, accruing loans 90
days past due, restructured loans and other real estate owned. Nonperforming
assets increased $436,663 or 8.07% from December 31, 1998 to June 30, 1999. The
increase for 1999 was primarily due to increases in nonaccrual real estate
mortgages and other consumer or commercial loans, of $733,000 and $200,000,
respectively, offset by reductions in previous nonaccrual loans of approximately
$252,000. Nonperforming assets were also impacted by increases in other real
estate of approximately $354,000 arising from BancMortgage operations, offset by
decreases in 90 days past due loans, previous other real estate and restructured
loans of approximately $532,000, $32,000, and $34,000, respectively.

         Additions to the allowance for loan losses are made periodically to
maintain the allowance at an appropriate level based upon management's analysis
of risk in the loan portfolio. The balance of the allowance for loan losses is
in accordance with the internal calculation of the allowance for loan losses
which considers factors such as classified and past due loans as well as
portfolio growth and diversification. A provision for loan losses in the amount
of $221,000 was charged to expense for the quarter ended June 30, 1999. This
provision for losses exceeded the net recoveries, totaling $49,000, for the
second quarter. At June 30, 1999 and December 31, 1998, the ratio of allowance
for loan losses to total loans was 1.25% and 1.29%, respectively. Management
considers the current allowance for loan losses appropriate based upon its
analysis of the potential risk in the portfolio, although there can be no
assurance that the assumptions underlying such analysis will continue to be
correct.

         The Company had impaired loans of $2,689,949 and $2,009,258 as of June
30, 1999 and December 31, 1998, respectively. Impaired loans consist of loans on
nonaccrual status. The interest income recognized on such loans for the
six-month periods ended June 30, 1999 and 1998 was not material.

         The Company's other real estate totaled $1,861,800 and $1,539,900 as of
June 30, 1999 and December 31, 1998, respectively. The increase is due to the
foreclosure of three residential properties totaling approximately $354,000
offset by the sale of property totaling approximately $32,000.


Material Changes in Results of Operations

         Total interest income for the second quarter of 1999 increased $383,000
or 5.30%, when compared to the second quarter of 1998. Total interest income for
the first six months of 1999 increased $629,000 or 4.45%, when compared to the
first six months of 1998.

<PAGE>   12



Interest income from loans for the second quarter of 1999 increased $439,000 or
6.99% when compared to the second quarter of 1998. Interest income from loans
for the first six months of 1999 increased $618,000 or 5.05%, when compared to
the first six months of 1998. This increase was primarily due to increases in
the loan portfolios of Habersham Bank and Security State Bank offset by
declining yields on loans for the second quarter and the first six months of
1999. Loan yields decreased by .47% to 9.00% for the first six months of 1999
compared to yields of 9.47% for the first six months of 1998.

         Interest income from investment securities increased $12,000 or 1.63%
for the second quarter of 1999 when compared to the second quarter of 1998.
Interest income from investment securities increased $122,000 or 8.53% for the
first six months of 1999, when compared to the first six months of 1998. The
increase in interest income from investments was primarily due to increases in
the investment portfolios of Habersham Bank and Security State Bank offset by
declining yields on investment securities for the second quarter and the first
six months of 1999. Average yields on investment securities decreased by .42% to
5.23% for the first six months of 1999 compared to 5.65% for the first six
months of 1998.

         Total interest expense for the second quarter of 1999 increased $22,000
or .58%, when compared to the second quarter of 1998. Total interest expense for
the first six months of 1999 increased $178,000 or 2.45% when compared to the
first six months of 1998. Interest expense for the second quarter of 1999 on
deposits decreased $381,000 or 11.63%, when compared to the second quarter of
1998. Interest expense for the first six months of 1999 on deposits decreased
$566,000 or 8.78%, when compared to the first six months of 1998. These
decreases were due to changes in the mix of the deposit portfolio and a
declining interest rate environment for the second quarter and first six months
of 1999. Total average deposits decreased approximately $10 million or 3.53%
during the first six months of 1999 when compared to the first six months of
1998. Average noninterest bearing deposit accounts decreased approximately $16
million offset by an increase in average interest bearing deposit accounts of
approximately $6 million. Consolidated average rates on deposits decreased by
 .31% to 4.63% during the first six months of 1999 compared to 4.94% for the
first six months of 1998.

         Interest expense on short-term and other borrowings increased $403,000
or 79.9% when compared to the second quarter of 1998. Interest expense on
short-term and other borrowings increased $744,000 or 90.40% when compared to
the first six months of 1998. The increase is primarily due to an increase in
average borrowings of approximately $27 million or 116.93% when compared to the
first six months of 1998. Consolidated average rates on borrowings increased by
 .10% to 5.50% for the first six months of 1999 compared to 5.40% for the first
six months of 1998.

         Net interest income increased approximately $361,000 or 10.48%, for the
second quarter of 1999 when compared to the second quarter of 1998. Net interest
income increased $451,000 or 6.57% when compared to the first six months of 1998
as a result of the items discussed above.

         The net interest margin of the Company, the net interest income divided
by average earning assets, was 4.12% for the first six months of 1999 as
compared to 4.28% for the first six months of 1998. The decrease in net interest
margin resulted primarily from a decrease in the yield on loans and a decrease
in the yield on investment securities offset by an increase in the average
balances in other borrowings.

<PAGE>   13

         Other income increased $225,000 or 5.93% for the second quarter of 1999
over the same period in 1998. Other income increased $1,179,000 or 18.21% for
the first six months of 1999 over the same period in 1998.

This increase was due primarily to increases in gains on sale of loans, loan
fees, service charges on deposit accounts and noninterest income of
approximately $1,278,000, $242,000, $17,000, and $98,000, respectively, offset
by an unrealized holding loss of $456,000 on the Company's trading securities,
which are subject to changes in market values.

         Other expenses increased $369,000 or 5.64% for the second quarter of
1999 over the same period in 1998. Other expenses increased $1,648,000 or 13.82%
for the first six months of 1999 over the same period in 1998. This increase was
due to increased salary and employee benefits, occupancy expenses, and data
processing expenses of approximately $1,509,000, $155,000, $7,000, respectively,
offset by decreases in general and administrative expense of $23,000. 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, as well as annual salary adjustments. The decrease in other
expenses is primarily due to a decrease in travel affiliate expense, advertising
expense and public relations activities, and repossessed property expenses of
$83,000, $19,000 and $9,000, respectively, offset by increases in outside
services, office supplies and other operating expenses of approximately $53,000,
$25,000 and $10,000, respectively.

         Income tax expense for the three months ended June 30, 1999 and 1998
was $142,000 and $116,000, respectively. Income tax expense for the six months
ended June 30, 1999 and 1998 was $194,000 and $236,000, respectively. The
effective tax rate for the six months ended June 30, 1999 and 1998 was 20.51%
and 21.49%, respectively. The effective tax rate decreased due to an increase in
tax exempt security income as a percentage of income before income taxes.


Liquidity and Capital Resources

         Liquidity management involves the matching of cash flow requirements of
customers, either depositors withdrawing funds or borrowers needing loans, and
the ability of the Company to meet those requirements. 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 payments on the Company's loans and interest on and maturities of its
investments.

         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% and Security Bank's liquidity policy requires a minimum of 25%. The
following table lists the liquidity ratios for the Banks at June 30, 1999.

<TABLE>
                         <S>               <C>
                         Habersham Bank    21.34%
                         Security Bank     22.65%
</TABLE>


<PAGE>   14



         Habersham Bank has established various sources of funds to be used in
the management of its liquidity position. Federal funds agreement guidelines
totaling $20 million have been provided by Compass Bank, The Bankers Bank,
National Bank of Commerce, Birmingham and SunTrust Bank of Atlanta. Repurchase
agreement guidelines are collateral based. Also established is a borrowing
arrangement for advances with a total available credit line of $90 million at
the Federal Home Loan Bank of Atlanta. Security Bank has also established
various sources of funds to be used in the management of its liquidity position.
Federal Funds agreement guidelines totaling $2.3 million have been provided by
Compass Bank and The Bankers Bank. Also established is a borrowing arrangement
for advances with a total available credit line of $3 million at the Federal
Home Loan Bank of Atlanta.

         At June 30, 1999, Habersham Bancorp, Habersham Bank, and Security Bank
were required to have minimum Tier 1 and total capital ratios of 4% and 8%,
respectively. Additionally, the Company and the Banks are required to maintain a
leverage ratio (Tier 1 capital to average assets) of at least 4%. The Company
and the Banks' ratios at June 30, 1999 follow:

<TABLE>
<CAPTION>
                                  Habersham       Security           Habersham
                                    Bank            Bank              Bancorp
          <S>                     <C>             <C>                <C>
          Tier 1                    8.21%           13.41%            10.74%
          Total Capital             9.21%           14.66%            11.77%
          Leverage                  6.14%           11.51%             8.32%
</TABLE>


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 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 rate
are falling, net interest income improves.






<PAGE>   15








         The interest rate sensitivity analysis, calculated as of June 30, 1999,
below has a three month negative gap of approximately $40 million (interest
bearing liabilities exceeding interest earning assets repricing within three
months).

<TABLE>
<CAPTION>
                                                   DUE IN         DUE AFTER      DUE AFTER       DUE AFTER    DUE AFTER    TOTAL
                                                   THREE        THREE THROUGH   SIX THROUGH     ONE THROUGH      FIVE
                                                   MONTHS         SIX MONTHS   TWELVE MONTHS     FIVE YEARS     YEARS
<S>                                              <C>            <C>            <C>              <C>           <C>         <C>
INTEREST EARNING ASSETS:
 Federal funds sold                              $   1,320                                                                $  1,320
 Investment securities                               1,706        $  1,008        $  5,006        $ 13,103     $ 34,116     54,939
 Loans                                             127,193          20,766          37,593          54,547       66,681    306,780
                                                 ---------        --------        --------        --------     --------   --------
  Total interest earning assets                    130,219          21,774          42,599          67,650      100,797    363,039
INTEREST BEARING LIABILITIES:
 Deposits
  Money Market and NOW                              62,112                                                                  62,112
  Savings                                            8,726                                                                   8,726
  Certificates of deposit                           40,077          51,139          58,312          43,985           --    193,513
 Borrowings                                         59,793              --              --           2,700           --     62,493
                                                 ---------        --------        --------        --------     --------   --------
  Total interest bearing
   liabilities                                     170,708          51,139          58,312          46,685           --    326,844


Excess(deficiency) of interest earning
 assets over(to) interest bearing
 liabilities                                     $ (40,489)       $(29,365)       $(15,713)       $ 20,965     $100,797   $ 36,194
                                                 =========        ========        ========        ========     ========   ========

Cumulative gap                                   $ (40,489)       $(69,854)       $(85,567)       $(64,602)    $ 36,195


Ratio of cumulative gap to total
 cumulative earning assets                          (31.09)%        (45.96)%        (43.97)%        (24.64)%       9.97%

Ratio of cumulative interest earning assets
  to interest bearing liabilities                    76.28%          68.51%          69.46%          80.23%      111.07%
</TABLE>

    Management strives to maintain the ratio of cumulative interest earning
assets to cumulative interest bearing liabilities within a range of 60% to 140%.

YEAR 2000

         The Company recognizes that there is a business risk in computerized
systems as the next century approaches. The Company has defined Year 2000
readiness as computerized systems used by the Company having the ability to: 1)
correctly process dates before and after the year 2000, 2) recognize the year
2000 as a leap year, 3) accept and display dates unambiguously, and 4) process
logic dates that are used for "non-date functions."

         The Company has developed an ongoing Action Plan designed to ensure
that its operational and financial systems will not be adversely affected by
failures due to processing errors arising from calculations using the Year 2000
date or other operations that are date sensitive. The Action Plan consists of
five phases: Awareness, Assessment, Remediation, Validation and Implementation.
The Company has formed a Year 2000 committee assigned to this project and the
Boards of Directors and senior management of the Company and the Banks have
established Year 2000 compliance as a strategic initiative. The Year 2000
Committee meets on a monthly basis to monitor testing progress as well as all
other aspects of the Year 2000 issue.

<PAGE>   16



Assessment Phase - In the Assessment Phase, the Company inventoried all
hardware, software and non-computerized systems. Each inventory item has been
prioritized as to its Year 2000 compliance. We completed this phase during the
first quarter of 1998.

Awareness Phase - A Customer Awareness Committee was formed to develop a plan
for communication tools to be utilized throughout 1999 in an effort to ensure
that our customers are aware of the impact that Year 2000 issues may have on
their individual businesses and also to assure our customers that we are making
every effort to ensure the stability and continued service to our customers into
the next millennium. Communications tools used by the Customer Awareness
Committee include informational brochures, newsletters, seminars, toll free
telephone numbers, and contact personnel identified for each subsidiary.

Remediation and Validation Phase - As a part of the remediation phase, a Year
2000 Contingency Committee developed a business resumption contingency plan as
well as a business remediation contingency plan. This Year 2000 Contingency Plan
has been completed and approved by the Boards of Directors. Validation of the
Plan has also been completed. The Plan addresses worst case scenarios such as
total or partial failure of our mainframe operating system as well as other
software that plays an integral part in the day to day operations of our
Company. The Plan details the resources and procedures necessary to manually
process transactions in the event the core systems do not function on January 1,
2000. Alternative methods of providing service in the event of other disasters,
such as a power failure, are addressed in the plan also. In addition, the
Company has made every attempt to address external risks, primarily credit and
liquidity, associated with our major customers and businesses. The way that
these material customers approach and comply with the Year 2000 will have a
potential significant impact on the Company. In an effort to identify and manage
the risks posed by those customers, the Company has identified material
customers; evaluated their Year 2000 preparedness through questionnaires and
interviews; assessed their Year 2000 risk to the Company; and implemented
appropriate controls to manage and mitigate their Year 2000 risk to the Company.
Currently, there are no significant customers which are rated as "high" Year
2000 risk and which the Company believes present a significant risk of loss.
This Year 2000 Contingency Plan has been completed and approved by the Boards of
Directors.

Implementation Phase - Testing of our systems was substantially complete as of
December 31, 1998. All testing appears to have been successful. However, the
Company's information technology ("IT") systems are comprised of third party
application and operating systems used in accounting functions related to
lending and deposit activities. The IT systems also consist of hardware, both
including main frame computer equipment and personal computers. Since we are not
the manufacturer of the products and systems on which we rely, we have also been
working with our third party vendors to determine whether there are any
outstanding Year 2000 problems. All systems identified as mission critical have
been certified as Year 2000 compliant by vendors providing the software
applications or hardware. Non-IT systems, such as door security and vault time
locks which may be date sensitive, have been identified as well and have been
included in the testing program of the Company. These efforts are substantially
completed.




<PAGE>   17



         A Year 2000 Readiness Timeline shows the status of the Company's Year
2000 Action Plan covering 1998 and 2nd quarter 1999:

<TABLE>
<CAPTION>
                                                    1998                 1999
                                                    ----                 ----
                                             1st  2nd  3rd  4th   1st  2nd  3rd  4th
                                             ------------------   ------------------
<S>                                          <C>  <C>  <C>  <C>   <C>  <C>  <C>  <C>
Y2K Action Plan approved                      X
Monthly Y2K Committee Meetings                X    X    X    X     X    X
Quarterly Board Reports                       X    X    X    X     X    X
Assessment Phase completed                    X
Y2K Testing Plan & Manual approved                 X
Y2K Customer Awareness Program approved            X
Y2K Contingency Plan approved                           X
Y2K Training Began                                      X
Testing of mission critical systems began               X
HB Phase II Exam completed by FDIC                           X
Analysis of Funds Takers and Providers completed             X
Analysis of Fiduciary Services completed                     X
Testing of mission critical systems substantially complete   X
SSB Phase II Exam completed by FDIC                                X
Y2K Coordinated Crisis Management Plan completed                   X
Y2K Liquidity Plan completed                                       X
Customer Awareness 1999 Timeline completed                         X
Customer Outreach Program completed                                X
Y2K Contingency Plan testing began                                 X
Y2K Contingency Plan testing completed                                  X
Employee Training began                                                 X
Event Planning began                                                    X
</TABLE>

Cost - At December 31, 1998, costs incurred for Year 2000 related upgrades of
computer equipment and software totaled approximately $15,000 and are included
in other operating expenses. A Year 2000 budget of less than $100,000 has been
established for systems that must be upgraded or remediated during 1999.
Approximately $4,000 of directly related Year 2000 expense was incurred during
the second quarter of 1999.

Liquidity - In an attempt to ensure that the Banks have sufficient liquidity to
cover potential cash withdrawals prior to the Year 2000, the Year 2000
Contingency Plan requires monitoring of cash levels, communication with
depositors regarding Year 2000 readiness, the availability of FDIC deposit
insurance and ensuring that the Banks have available lines of credit to meet
immediate cash requirements.

         Based on information currently available, while management anticipates
there could be isolated and intermittent disruptions of various services, there
is no expectations of extensive system failures that would have a material
adverse effect on the financial condition or results of operations of the
Company.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

As of June 30, 1999, there were no substantial change from the interest rate
sensitivity analysis or the market value of portfolio equity for various changes
in interest rates calculated as of December 31, 1998. 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, 1998 included in the Company's 1998
Annual report on Form 10K.



<PAGE>   18


PART II
OTHER INFORMATION

Item 1.  Legal proceedings.
                 None

Item 2.  Changes in securities.
                 None

Item 3.  Defaults upon senior securities.
                 None

Item 4.  Submission of matters to a vote of security holders.
         (a) The regular annual meeting of the shareholders of the Company was
held on April 17, 1999.

         (b)      The business conducted at the meeting included the election of
                  the Board of Directors. The Directors elected at the meeting
                  were: Thomas A. Arrendale, Jr., Thomas A. Arrendale, III.,
                  James J. Holcomb, James A. Stapleton, Jr., David D. Stovall,
                  C. Kenneth White, and Calvin R. Wilbanks.

At the registrant's Annual Meeting of Shareholders on April 17, 1999, the
shareholders elected directors to serve for a term of one year or until their
successors are duly qualified and elected. The following table sets forth the
number of votes cast and withheld with respect to each nominated director.
Abstentions and broker non-votes are also listed for each nominee.

<TABLE>
<CAPTION>
Name                                Votes For         Votes Against    Abstention & Non-Votes
<S>                                 <C>               <C>              <C>
Thomas A. Arrendale, Jr.            1,993,128              200                    0
Thomas A. Arrendale, III            1,993,128              200                    0
David D. Stovall                    1,993,128              200                    0
James J. Holcomb                    1,993,128              200                    0
James A. Stapleton, Jr.             1,993,128              200                    0
C. Kenneth White                    1,993,128              200                    0
Calvin R. Wilbanks                  1,993,128              200                    0
</TABLE>

Item 5.  Other information.
                 None

Item 6.  Exhibits, list and reports on FORM 8-K

        (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.

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

<S>      <C>
 3.1     Amended and restated Articles of Incorporation of Habersham Bancorp, as
         amended. (1)
</TABLE>



<PAGE>   19

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

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

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

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

10.4*    Habersham Bancorp 1996 Incentive Stock Option Plan. (6)

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

10.6     Option Agreement dated as of March 11, 1998 by and among Habersham
         Bancorp and certain shareholders of Empire Bank Corp. (8)

11.1     Computation of Earnings Per Share.

27.0     Financial Data Schedule (for SEC use only).

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

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

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

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

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

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

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

(8)      Incorporated herein be reference to exhibit of same number in the
Registrant's Annual Report on Form 10-Q for the quarter ended June 30, 1998
(File No. 0-13153).
</TABLE>


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




<PAGE>   20








                                   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 August 14, 1999                 /s/ David D. Stovall
                                     --------------------
                                     President and
                                     Chief Financial Officer
                                     (for the Registrant and as the
                                     Registrant's principal financial and
                                     accounting officer)