##### 



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 1934For the quarterly period ended September 30, 2003TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934For 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.
                                                                                
Yes x  No

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

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

2,937,500 shares, common stock, $1.00 par value, as of October 31, 2003





---



##### 



Item. 1 Financial Statements

HABERSHAM BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(dollars in thousands)

ASSETS
    
    SEPTEMBER 30,2003
    
    DECEMBER 31,2002Cash and due from banks
    
    $
    9,929
    
    
    $
    13,832Federal funds sold
    
    
    8,393
    
    
    
    27,137Investment securities available for sale
(cost of $70,949 at September 30, 2003 and
$53,793 at December 31, 2002)
    
    
    71,153
    
    
    
    54,819Investment securities held to maturity
(estimated fair value of $5,588 at
September 30, 2003 and $7,211 at
December 31, 2002)
    
    
    5,275
    
    
    
    6,889Other investments
    
    
    1,652
    
    
    
    2,389Loans held for sale
    
    
    2,207
    
    
    
    Loans
    
    
    269,852
    
    
    
    307,346Less allowance for loan losses
    
    
    (3,806
    )
    
    
    (3,533
    )Loans, net
    
    
    266,046
    
    
    
    303,813Intangible assets
    
    
    2,489
    
    
    
    2,489Other assets
    
    
    18,341
    
    
    
    18,043TOTAL ASSETS
    
    $
    385,485
    
    
    $
    429,411LIABILITIESNoninterest-bearing deposits
    
    $
    41,982
    
    
    $
    47,967Interest-bearing deposits
    
    
    248,935
    
    
    
    288,559Short-term borrowings
    
    
    143
    
    
    
    932Federal funds purchased and securities
sold under repurchase agreements
    
    
    10,204
    
    
    
    8,227Federal Home Loan Bank advances
    
    
    30,000
    
    
    
    30,000Other liabilities
    
    
    2,347
    
    
    
    2,982TOTAL LIABILITIES
    
    
    333,611
    
    
    
    378,667SHAREHOLDERS EQUITYCommon Stock, $1.00 par value,
10,000,000 shares authorized;
2,848,483 shares issued at September 30, 2003
and 2,815,093 shares issued at
December 31, 2002
    
    
    2,848
    
    
    
    2,815Additional paid-in capital
    
    
    13,968
    
    
    
    13,721Retained earnings
    
    
    34,923
    
    
    
    33,531Accumulated other comprehensive income
    
    
    135
    
    
    
    677TOTAL SHAREHOLDERS EQUITY
    
    
    51,874
    
    
    
    50,744TOTAL LIABILITIES AND SHAREHOLDERS
EQUITY
    
    $
    385,485
    
    
    $
    429,411


See notes to condensed consolidated financial statements.





---



##### 



HABERSHAM BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) For the Three-Month Periods Ended September 30, 2003 and 2002
(dollars in thousands, except per share amounts)

2003
    
    2002INTEREST INCOMELoans
    
    $
    4,729
    
    
    $
    5,745Investment securities
    
    
    620
    
    
    
    758Federal funds sold
    
    
    20
    
    
    
    5Other
    
    
    26
    
    
    
    93TOTAL INTEREST INCOME
    
    
    5,395
    
    
    
    6,601INTEREST EXPENSETime deposits, $100,000 and over
    
    
    529
    
    
    
    835Other deposits
    
    
    939
    
    
    
    1,476Short-term and other borrowings, primarily
FHLB advances
    
    
    466
    
    
    
    563TOTAL INTEREST EXPENSE
    
    
    1,934
    
    
    
    2,874NET INTEREST INCOME
    
    
    3,461
    
    
    
    3,727Provision for loan losses
    
    
    263
    
    
    
    239NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES
    
    
    3,198
    
    
    
    3,488NONINTEREST INCOMEGain on sale of loans
    
    
    244
    
    
    
    94Loan fee income
    
    
    72
    
    
    
    85Service charges on deposits
    
    
    201
    
    
    
    186Other service charges and commissions
    
    
    45
    
    
    
    65Securities gains, net
    
    
    2
    
    
    
    4Other income
    
    
    313
    
    
    
    490Total other income
    
    
    877
    
    
    
    924NONINTEREST EXPENSESalary and employee benefits
    
    
    1,869
    
    
    
    1,709Occupancy
    
    
    387
    
    
    
    340Computer services
    
    
    97
    
    
    
    115General and administrative expense
    
    
    1,220
    
    
    
    884Total other expense
    
    
    3,573
    
    
    
    3,048INCOME BEFORE INCOME TAXES
    
    
    502
    
    
    
    1,364Income tax expense
    
    
    125
    
    
    
    428INCOME FROM CONTINUING OPERATIONS
    
    
    377
    
    
    
    936Income from discontinued operations, net of income
taxes of $669
    
    
    
    
    
    
    1,214NET INCOME
    
    $
    377
    
    
    $
    2,150Income from continuing operations per
common share- basic
    
    $
    .13
    
    
    $
    .34Income from discontinued operations per
common share  basic
    
    
    
    
    
    
    .43NET INCOME PER COMMON SHARE  BASIC
    
    $
    .13
    
    
    $
    .77Income from continuing operations per
common share  diluted
    
    $
    .13
    
    
    $
    .33Income from discontinued operations per
common share  diluted
    
    
    
    
    
    
    .42NET INCOME PER COMMON SHARE  DILUTED
    
    $
    .13
    
    
    $
    .75WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
    
    
    2,842,682
    
    
    
    2,784,813WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES OUTSTANDING
    
    
    2,906,121
    
    
    
    2,857,534Dividends per share
    
    $
    .06
    
    
    $
    .06


See notes to condensed consolidated financial statements.





---



##### 



HABERSHAM BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) For the Nine-Month Periods Ended September 30, 2003 and 2002
(dollars in thousands, except per share amounts)

2003
    
    2002INTEREST INCOMELoans
    
    $
    15,022
    
    
    $
    17,746Investment securities
    
    
    1,930
    
    
    
    2,270Federal funds sold
    
    
    49
    
    
    
    22Other
    
    
    110
    
    
    
    330TOTAL INTEREST INCOME
    
    
    17,111
    
    
    
    20,368INTEREST EXPENSETime deposits, $100,000 and over
    
    
    1,784
    
    
    
    2,625Other deposits
    
    
    3,128
    
    
    
    4,959Short-term and other borrowings, primarily
FHLB advances
    
    
    1,399
    
    
    
    1,702TOTAL INTEREST EXPENSE
    
    
    6,311
    
    
    
    9,286NET INTEREST INCOME
    
    
    10,800
    
    
    
    11,082Provision for loan losses
    
    
    787
    
    
    
    888NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES
    
    
    10,013
    
    
    
    10,194NONINTEREST INCOMEGain on sale of loans
    
    
    684
    
    
    
    163Loan fee income
    
    
    318
    
    
    
    242Service charges on deposits
    
    
    619
    
    
    
    527Other service charges and commissions
    
    
    144
    
    
    
    190Securities gains, net
    
    
    12
    
    
    
    843Other income
    
    
    1,105
    
    
    
    1,216Total other income
    
    
    2,882
    
    
    
    3,181NONINTEREST EXPENSESalary and employee benefits
    
    
    5,522
    
    
    
    5,067Occupancy
    
    
    1,121
    
    
    
    964Computer services
    
    
    295
    
    
    
    340General and administrative expense
    
    
    3,359
    
    
    
    3,086Total other expense
    
    
    10,297
    
    
    
    9,457INCOME BEFORE INCOME TAXES
    
    
    2,598
    
    
    
    3,918Income tax expense
    
    
    695
    
    
    
    957INCOME FROM CONTINUING OPERATIONS
    
    
    1,903
    
    
    
    2,961Income from discontinued operations, net of income
taxes of $1,220
    
    
    
    
    
    
    1,893NET INCOME
    
    $
    1,903
    
    
    $
    4,854Income from continuing operations per
common share- basic
    
    $
    .67
    
    
    $
    1.08Income from discontinued operations per
common share  basic
    
    
    
    
    
    
    .69NET INCOME PER COMMON SHARE  BASIC
    
    $
    .67
    
    
    $
    1.77Income from continuing operations per
common share  diluted
    
    $
    .66
    
    
    $
    1.05Income from discontinued operations per
common share  diluted
    
    
    
    
    
    
    .67NET INCOME PER COMMON SHARE  DILUTED
    
    $
    .66
    
    
    $
    1.72WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
    
    
    2,832,024
    
    
    
    2,734,464WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES OUTSTANDING
    
    
    2,884,284
    
    
    
    2,807,805Dividends per share
    
    $
    .18
    
    
    $
    .18


See notes to condensed consolidated financial statements.





---



##### 



HABERSHAM BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) For the Nine-Month Periods Ended SEPTEMBER 30, 2003 and 2002
(dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
    
    2003
    
    2002Net income
    
    $
    1,903
    
    
    $
    4,854Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Provision for loan losses
    
    
    787
    
    
    
    888Depreciation
    
    
    558
    
    
    
    452Securities gains, net
    
    
    (12
    )
    
    
    (843
    )(Gain)loss on sale of other real estate
    
    
    78
    
    
    
    (3
    )Gain on sale of other investments
    
    
    (60
    )
    
    
    (277
    )Gain on sale of loans
    
    
    (684
    )
    
    
    (163
    )Amortization of intangible assets
    
    
    
    
    
    
    4Equity in loss of investee
    
    
    
    
    
    
    45Deferred income tax benefit
    
    
    (36
    )
    
    
    (28
    )Proceeds from sale of loans held for sale
    
    
    39,417
    
    
    
    Origination of loans held for sale
    
    
    (40,940
    )
    
    
    Net cash used by discontinued operations
    
    
    
    
    
    
    (9,168
    )Changes in assets and liabilities:Decrease in interest receivable
    
    
    253
    
    
    
    467Decrease (increase) in other assets
    
    
    244
    
    
    
    (3,348
    )Decrease in interest payable
    
    
    (694
    )
    
    
    (1,117
    )Increase in other liabilities
    
    
    59
    
    
    
    749Net cash provided by (used in) operating activities
    
    
    873
    
    
    
    (7,488
    )CASH FLOWS FROM INVESTING ACTIVITIES:Investment securities available for sale:Proceeds from maturity
    
    
    19,116
    
    
    
    8,554Proceeds from sale and call
    
    
    5,241
    
    
    
    10,934Purchases
    
    
    (41,505
    )
    
    
    (19,896
    )Investment securities held to maturity:Proceeds from maturity
    
    
    1,005
    
    
    
    1,171Proceeds from call
    
    
    614
    
    
    
    Other investments:Proceeds from sale
    
    
    797
    
    
    
    3,234Purchases
    
    
    
    
    
    
    (2,815
    )Proceeds from sale of CB Financial
    
    
    
    
    
    
    3,308Loans:Proceeds from sale
    
    
    
    
    
    
    29,348Net decrease (increase) in loans
    
    
    35,622
    
    
    
    (6,238
    )Purchases of premises and equipment
    
    
    (1,744
    )
    
    
    (1,152
    )Proceeds from sale of premises & equipment
    
    
    
    
    
    
    204Proceeds from sale of other real estate
    
    
    2,061
    
    
    
    4,342Net additions of other real estate
    
    
    (75
    )
    
    
    (10
    )Dividends received from other investment
    
    
    
    
    
    
    62Net cash used in discontinued operations
    
    
    
    
    
    
    (651
    )Net cash provided by investing activities
    
    
    21,132
    
    
    
    30,395






---



##### 



HABERSHAM BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  CONTINUED
(Unaudited) For the Nine-Month Periods Ended September 30, 2003 and 2002
(dollars in thousands)

CASH FLOWS FROM FINANCING ACTIVITIES:
    
    2003
    
    2002Net decrease in deposits
    
    
    (45,609
    )
    
    
    (2,394
    )Net (decrease) increase in short-term borrowings
    
    
    (789
    )
    
    
    522Net increase (decrease) in federal funds purchased
and securities sold under repurchase agreements
    
    
    1,977
    
    
    
    (8,276
    )Repayment of notes payable
    
    
    
    
    
    
    (2,690
    )Issuance of common stock
    
    
    280
    
    
    
    1,140Cash dividends paid
    
    
    (511
    )
    
    
    (493
    )Net cash used by discontinued operations
    
    
    
    
    
    
    (7,298
    )Net cash used by financing activities
    
    
    (44,652
    )
    
    
    (19,489
    )(Decrease) increase in cash and cash equivalents
    
    
    (22,647
    )
    
    
    3,418CASH AND CASH EQUIVALENTS: BEGINNING OF PERIOD
    
    
    40,969
    
    
    
    16,550CASH AND CASH EQUIVALENTS: END OF PERIOD
    
    $
    18,322
    
    
    $
    19,968SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the period for:Interest
    
    $
    7,005
    
    
    $
    10,403Income taxes
    
    
    650
    
    
    
    2,490SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:Other real estate acquired through loan foreclosures
    
    $
    1,496
    
    
    $
    1,957Loans granted to facilitate the sale of
other real estate
    
    
    138
    
    
    
    Unrealized (loss) gain on investment securities
available for sale, net of tax effect
    
    
    (542
    )
    
    
    378


See notes to condensed consolidated financial statements.





---



##### 



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 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 2002 consolidated financial statements
and notes thereto, included in the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2002.

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, 2002. The
Company has consistently followed those policies in preparing this report.

3. Other Comprehensive 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
Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for
Certain Investments in Debt and Equity Securities. Comprehensive income
(loss) for the nine months ended September 30, 2003 and 2002 was $1,361,000 and
$5,232,000, respectively, and for the three months ended September 30, 2003 and
2002 was $(538,000) and $2,572,000, respectively.

4. Derivative Instruments

In the normal course of business, as part of its former mortgage banking
operations, the Company extended interest rate lock commitments to borrowers
who applied for loan funding and met certain credit and underwriting criteria.
Such commitments were typically for short terms. Such commitments to originate
fixed-rate mortgage loans for resale and forward commitments to sell
mortgage-backed securities were the Companys only derivative instruments.

The Companys objective in entering into forward commitments to sell
mortgage-backed securities was to mitigate the interest rate risk associated
with mortgage loans held for sale and commitments to originate fixed-rate
mortgage loans for resale.





---



##### 



Subsequent to the sale of BancMortgage in December of 2002, the Company has no
significant derivative instruments.

5. Stock-based Compensation

In December 2002, the Financial Accounting Standards Board (FASB) issued SFAS
No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure -
an amendment of FASB Statement No. 123.SFAS No. 148 amends SFAS No. 123,
Accounting for Stock-Based Compensation,to provide alternative methods of
transition for an entity that voluntarily changes to the fair value based
method of accounting for stock-based employee compensation. It also amends the
disclosure provisions of SFAS No. 123 to require prominent disclosure about the
effects on reported net income of an entitys accounting policy decisions with
respect to stock-based employee compensation. Finally, SFAS No. 148 also
amends Accounting Principles Board (APB) Opinion No. 28, Interim Financial
Reporting, to require disclosure about those effects in the interim financial
information. The Company adopted the disclosure provisions of SFAS No. 148
effective December 31, 2002.

The Company applies APB Opinion No. 25, Accounting for Stock Issued to
Employees,and related interpretations in accounting for its stock option
plans. Accordingly, compensation cost is measured as the excess, if any, of
the quoted market price of the Companys stock at the date of grant over the
amount an employee must pay to acquire the stock. Compensation cost determined
under SFAS No. 123 did not differ from the compensation cost determined under
APB Opinion No. 25 for the three and nine months ended September 30, 2003 and
2002, as all stock options granted are vested on the date of grant and there
were no options granted during the first nine months of 2003 or 2002.

6. Recent Accounting Pronouncements

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
No. 133. SFAS No. 149 is effective for contracts entered into or modified after
June 30, 2003. The adoption of SFAS No. 149 did not have a significant effect
on the Companys consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity.
SFAS No. 150 establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity, and imposes certain additional disclosure requirements. The provisions
of SFAS No. 150 are generally effective for all financial instruments entered
into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. The
adoption of SFAS No. 150 did not have a significant effect on the Companys
consolidated financial statements.





---



##### 



7. Segment Information

SFAS No. 131 requires that certain disclosures be made by public business
enterprises to report information about operating segments in annual financial
statements and requires those enterprises to report selected information about
operating segments in interim financial reports issued to shareholders. It
also establishes standards for related disclosures about products and services,
geographic areas, and major customers. Prior to the sale of BancMortgage, the
Companys principal segments were banking and mortgage banking. Subsequently,
the Company operates primarily in one segment.

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), an insurance subsidiary that does not comprise a significant
portion of the Companys financial position, results of operations or cash
flows. Prior to December 2002, Habersham Bank also owned all of the
outstanding stock of BancMortgage Financial Corp (BancMortgage).

BancMortgage was organized in 1996 as a full-service mortgage and
construction lending company located in the northern Atlanta metropolitan area.
During December 2002, the Company sold BancMortgage to the existing management
of BancMortgage resulting in a loss of $110,064. The Companys consolidated
income statement and statement of cash flows for the three and nine months
ended September 30, 2002 have been reclassified to reflect the operations of
BancMortgage as discontinued. Managements discussion and analysis, which
follows, therefore, relates primarily to Habersham Bank.

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

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) acquisitions; (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.

Critical Accounting Policies

In reviewing and understanding financial information for the Company, you
are encouraged to read and understand the significant accounting policies which
are used in preparing the consolidated financial statements of the Company.

These policies are described in note 2 to the consolidated financial
statements which were presented in the Companys 2002 annual report on Form
10-K. Of these policies, management believes that the accounting for the
allowance for loan losses is the most critical. Please see Asset Quality for
a further discussion of the Companys methodology in determining the allowance.

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 is an element
considered for all types of loans. Real estate loans are impacted by market
conditions regarding the value of the underlying property used as collateral.
Commercial loans are also impacted by the management of the business as well as
economic conditions.

Losses on loans result from a broad range of causes, from
borrower-specific problems to industry issues to the impact of the economic
environment. The identification of the factors that lead to default or
non-performance under a loan agreement and the estimation of loss in these
situations is very subjective. In addition, a dramatic change in the
performance of one or a small number of borrowers can have a significant impact
in the estimate of losses. As described further below, management has
implemented a process that has been applied consistently to systematically
consider the many variables that impact the estimation of the allowance for
loan losses.





---



##### 



The allowance for loan losses methodology is based on a loan
classification system. For purposes of determining the required allowance for
loan losses and resulting periodic provisions, the Company identifies the
problem loans in its portfolio and segregates the remainder of the loan
portfolio into broad segments, such as commercial, commercial real estate,
residential mortgage and consumer. The Company provides for a general
allowance for losses inherent in the portfolio for each of the above
categories. The general allowance is calculated based on estimates of inherent
losses which probably exist as of the evaluation date. Loss percentages used
for non-problem loans in this portion of the portfolio are based on historical
loss factors. The general allowance for losses on problem loans is based on a
review and evaluation of these loans, taking into consideration financial
condition and strengths of the borrower, related collateral, cash flows
available for debt repayment, and known and expected economic conditions.
General loss percentages for the problem loans are determined based upon
historical loss experience and regulatory requirements.

For loans considered impaired, specific allowances are provided in the
event that the specific collateral analysis on each problem loan indicates that
the liquidation of the collateral would not result in repayment of these loans
if the loan is collateral dependent or if the present value of expected future
cash flows on the loan are less than the balance. In addition to these
allocated reserves, the Company has established an unallocated reserve of
approximately $215,000 at September 30, 2003 and $222,000 at December 31, 2002.
The basis for the unallocated reserve is due to a number of qualitative
factors, such as concentrations of credit and changes in the outlook for local
and regional economic conditions.

Certain economic factors could have a material impact on the loan loss
allowance calculation and its adequacy. The depth and duration of any economic
recession would have an impact on the credit risk associated with the loan
portfolio. Another factor that can impact the calculation is a consideration
for concentrations in collateral which secure the loan portfolio. The
Companys loan portfolio is secured primarily by commercial and residential
real estate and such loans secured by real estate comprise approximately 87.64%
of the total loan portfolio. While there is a risk that the appraised value of
the real estate securing the loans in the portfolio could decrease in value
during an economic recession, approximately 44.18% of the real estate securing
the loan portfolio is 1-4 family residential properties which are not
generally as affected by the down turns in the economy.

The Company will from time to time make unsecured loans. The risk to the
Company
is greater for unsecured loans as the ultimate repayment of the loan is only
dependent
on the borrowers ability to pay. The balance of unsecured loans at September
30, 2003
and December 31, 2002 was $8.3 million and $8.8 million, respectively.

The Company is not aware of any large loan relationships that if defaulted
would have a significant impact on the allowance for loan losses.

Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic conditions, the
financial condition of borrowers and other factors. In addition, various
regulatory agencies, as an integral part of their examination process, periodically review
the Companys allowance for loan losses. Such agencies may require the Company to
recognize additions to the allowance based on their judgments about information
available to them at the time of their examination.

Refer to the section entitled Asset Quality for an additional discussion
of the key assumptions and methods used in determining the allowance for loan
losses.





---



##### 



Material Changes in Financial Condition

The Companys total assets decreased $44 million, to $385 million at
September 30, 2003 from $429 million at December 31, 2002. The decrease was
primarily due to decreases in federal funds sold and the Companys loan
portfolio of approximately $19 million and $37 million, respectively, offset by
increases in investment securities and in loans held for sale of approximately
$14 million and $2 million, respectively.
Corresponding reductions occurred in the deposit portfolio of approximately $46
million comprised primarily of national market certificates of deposit of $15.8
million and certificates of deposits over $100,000 of approximately $40.1
million, respectively. In view of the sale of BancMortgage in December 2002,
the Company does not currently require these certificates of deposit as a
funding source. Other certificates of deposit balances are declining due to
the low interest rates currently available in the market. Loans held for sale
increased approximately $2 million during the first nine months of 2003, as the
Company began operations of a mortgage department.

Total net loans at Habersham Bank decreased $37 million, to $266 million
at September 30, 2003 from $304 million at December 31, 2002. The decrease was
primarily the result of a decrease in the real estate loan portfolio of
approximately $48 million and by decreases of approximately $1 million in other
loan portfolios offset by increases in the commercial loan portfolio of
approximately $11 million. The decrease in the real estate loan portfolio was
primarily due to the run-off of approximately $46.4 million in construction
loans originated through BancMortgage. These loans are expected to continue to
run-off as construction is completed. In addition, other real estate loans are
being refinanced in response to favorable interest rates being offered on
mortgage loans.

Investment securities available for sale and held to maturity increased
$15 million during the first nine months of 2003 primarily due to purchases of
approximately $42 million offset by maturities and calls of approximately $27
million. Other investments decreased $737,000 from $2.4 million at December
31, 2002 to $1.7 million at September 30, 2003 due to the redemption of FHLB
stock during the first quarter of 2003 of $637,000 and the sale of an
investment in Forsyth Bancshares, Inc. common stock of $100,000.

Total liabilities decreased $45.1 million, to $333.6 million at September
30, 2003 from $378.7 million at December 31, 2002. Decreases in the deposit
portfolio were primarily due to the redemption of certificates of deposit.

Material Changes in Results of Operations

Total interest income for the third quarter of 2003 and for the first nine
months of 2003 decreased $1,206,000 or 18.27% and $3,257,000 or 15.99%,
respectively, when compared to the third quarter of 2002 and the first nine
months of 2002. These decreases were due to decreases in the loan portfolio of
Habersham Bank. Average loan balances decreased $19.7 million or 6.42% during
the first nine months of 2003 compared to the first nine months of 2002. Loan
yields decreased by 77 basis points to 6.92% for the first nine months of 2003
compared to 7.69% for the first nine months of 2003. Average investment
securities balances increased $5.7 million or 9.85% during the first nine
months of 2003 compared to the first nine months of 2002. Yields on investment
securities decreased by 118 basis points to 4.04% for the first nine months of
2003 compared to 5.22% for the first nine months of 2002.

Total interest expense for the third quarter of 2003 decreased $940,000 or
32.71%, when compared to the third quarter of 2002. Total interest expense for
the first nine months of 2003 decreased $2,975,000 or 32.04% when compared to
the first





---



##### 



nine months of 2002. The decrease in interest expense was primarily due to
redemptions of certificates of deposit with higher rates as well as a declining
interest rate environment during 2003. Average interest bearing deposits for
the first nine months of 2003 decreased approximately $41.3 million or 13.71%
when compared to the first nine months of 2002. Average certificates of
deposit decreased approximately $45.8 million offset by increases in average
savings accounts and average NOW and money market accounts of approximately
$1.3 million and $3.2 million, respectively.

Average rates on interest-bearing deposits decreased by 79 basis points to
2.52% during the first nine months of 2003 compared to 3.31% for the first nine
months of 2002. Average rates for NOW and other deposit accounts and
certificates of deposit decreased to .16% and 2.37%, respectively, during the
first nine months of 2003 compared to .19% and 3.12%, respectively, during the
first nine months of 2002.

Interest expense on short-term and other borrowings for the third quarter
of 2003 decreased $97,000 or 17.23% when compared to the third quarter of 2002
and decreased $303,000 or 17.80% for the first nine months of 2003 when
compared to the first nine months of 2002 primarily due to a decrease in
average borrowings of approximately $13.7 million or 25.71% when comparing the
first nine months of 2003 with the first nine months of 2002. Average rates on
borrowings increased by 5 basis points to 4.71% for the first nine months of
2003 compared to 4.66% for the first nine months of 2002 primarily due to the
repayment of federal funds purchased, repurchase agreements, and a National
Bank of Commerce loan which had lower rates leaving Federal Home Loan Bank
advances which has a higher rate.

Net interest income decreased approximately $266,000 or 7.14%, for the
third quarter of 2003 as compared to the third quarter of 2002 and remained
relatively constant as compared to the first nine months of 2002 as a result of
the items discussed above.

The net interest margin of the Company, net interest income divided by
average earning-assets, was 3.95% for the first nine months of 2003 compared to
5.13% for the first nine months of 2002. The decrease in the net interest
margin resulted primarily from decreases in the average rates earned in the
securities portfolio.

Noninterest income decreased $47,000 or 5.09% for the third quarter of
2003 over the same period in 2002. Noninterest income decreased $299,000 or
9.40% for the first nine months of 2003 over the same period in 2002. During
the third quarter of 2003, decreases in other income of approximately $177,000
were offset by increases in gain on sale of loans and service charges on
deposits of approximately $150,000 and $15,000, respectively. The decrease in
the first nine months of 2003 is primarily due to the decrease in securities
gain and in gain on sale of CB Financial Corp. common stock of approximately
$831,000 and $277,000, respectively, offset by increases in gain on sale of
loans and in service charges on deposits of approximately $521,000 and $92,000,
respectively. The securities gain for the first nine months of 2002 consisted
primarily of the gain on the sale of Habersham Bancorps investment in FLAG
common stock. The gain on sale of other investments consisted of the gain on
sale of Habersham Bancorps investment in CB Financial Corp. common stock. The
increase in gain on sale of loans for the three and nine month periods was
primarily the result of increased activity in the mortgage operations of the
Company.

Noninterest expense increased $525,000 or 17.22% for the third quarter of
2003 over the same period in 2002. Noninterest expense increased $840,000 or
8.88% for the first nine months of 2003 over the same period in 2002. These
increases were due to increases in salary and employee benefits and occupancy
expenses. Salary and





---



##### 



employee benefits increased primarily due to annual salary adjustments and
additional recruiting expenses relating to staffing the new office in
Braselton, Georgia, scheduled to open during the fourth quarter of 2003.
Occupancy expenses increased approximately $47,000 and $157,000 for the third
quarter and the first nine month period of 2003, respectively, over the same
periods in 2002 due in part to the addition of two offices in Braselton and
Gainesville, Georgia. General and administrative expense increased
approximately $336,000 for the third quarter of 2003 due in part to increases
in appraisal, processing, and recording expenses relating to the operation of
Habersham Banks mortgage division and servicing fee expense incurred for
mortgage servicing, and a fraud loss of approximately $149,000, $77,000, and
$32,000, respectively. General and administrative expense increased
approximately $273,0000 for the first nine month period of 2003, respectively,
over the same periods in 2002 due in part to increases in appraisal,
processing, and recording expenses relating to the operation of Habersham
Banks Mortgage division and servicing fee expense for mortgage servicing of
approximately $356,000 and $315,000, respectively. These increases in expense
were offset somewhat by decreases occurring in other real estate losses,
advertising expenses and outside services expenses, or approximately $192,000,
$128,000 and $99,000, respectively.

Income tax expense for the three months ended September 30, 2003 and 2002
was $125,000 and $428,000, respectively. Income tax expense for the nine months
ended September 30, 2003 and 2002 was $695,000 and $957,000, respectively. The
effective tax rate for the nine months ended September 30, 2003 and 2002 was
26.75% and 24.43%, respectively. The increase in the effective tax rate in
2003 was due to a decrease in tax-exempt income.

Asset Quality

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

A provision for loan losses in the amount of $263,000 was charged to
expense for the quarter ended September 30, 2003 compared to $239,000 for the
quarter ended September 30, 2002. A provision for loan losses in the amount of
$787,000 was charged to expense for the first nine months of 2003 compared to
$888,000 for the first nine months of 2002. Net charge-offs for the first nine
months of 2003 totaled approximately $514,000 compared to $989,000 for the nine
months ended September 30, 2002. At September 30, 2003 and December 31, 2002,
the ratio of allowance for loan losses to total loans, including loans held for
sale, was 1.40% and 1.15%, respectively.

Nonperforming assets consist of nonaccrual loans, accruing loans 90 days
past due, restructured loans and other real estate owned. Nonperforming assets
decreased approximately $1,556,000 or 19.49% from December 31, 2002 to
September 30, 2003. The decrease for the first nine months of 2003 was
primarily due to decreases in all categories of nonperforming assets.

Decreases occurring in accruing loans 90 days past due and restructured
loans from December 31, 2002 to September 30, 2003 totaled approximately
$649,000 and $85,000, respectively.





---



##### 



The Company had impaired loans of $1,990,000 and $2,115,000 at September
30, 2003 and December 31, 2002, respectively. Impaired loans consist of loans
on nonaccrual status. The interest income recognized on such loans for the
nine month periods ended September 30, 2003 and 2002 was not material.

The Companys other real estate totaled $2,501,000 and $3,197,000 at
September 30, 2003 and December 31, 2002, respectively. The decrease was due
primarily to
Sales of foreclosed properties of approximately $2,198,000 offset by
foreclosures of mortgage loans secured by residential property of approximately
$1,496,000 and additions of costs to complete construction of approximately
$74,000.

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.

The Company also has the ability, on a short-term basis, to purchase
federal funds from other financial institutions up to $25,000,000. At
September 30, 2003, the Company had purchased none of the available federal
funds. Presently, the Company has made arrangements with commercial banks for
short-term advances up to $18,000,000 under a repurchase agreement line of
credit of which none was advanced at
September 30, 2003, in addition to a total available line of $230,833,000 which
is available to the Company, subject to available collateral, from the Federal
Home Loan Bank of which approximately $30,000,000 was advanced at September 30,
2003.

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 September 30, 2003 and 2002 were 37.25%
and 24.51%, respectively.





---



##### 



At September 30, 2003, 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 September 30, 2003 follow:

Habersham
    
    HabershamBank
    
    BancorpTier 1
    
    
    15.78
    %
    
    
    16.90
    %Total Capital
    
    
    17.03
    %
    
    
    18.14
    %Leverage
    
    
    11.79
    %
    
    
    12.61
    %


Commitments and Contractual Obligations

The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of its lending activities to meet the financing needs
of its customers. These financial instruments include commitments to extend
credit and standby letters of credit. The Companys exposure to credit losses
in the event of nonperformance by the other party to the financial instrument
for commitments to extend credit and standby letters of credit is represented
by the contractual amounts of those instruments. The Company uses the same
credit policies in making theses commitments as it does for on-balance-sheet
instruments and evaluates each customers creditworthiness on a case by case
basis. At September 30, 2003, the Company had outstanding loan commitments
approximating $45,078,000 and standby letters of credit approximating
$1,750,000. The amount of collateral obtained, if deemed necessary, for these
financial instruments by the Company, upon extension of credit, is based on
managements credit evaluation of the customer. Collateral held, if any,
varies but may include inventory, equipment, real estate, or other property.
The accounting loss the Company would incur if any party of the financial
instrument failed completely to perform according to the term of the contract
and the collateral proved to be of no value is equal to the face amount of the
financial instrument.

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

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

Due In
    
    Due In
    
    Due In
    
    Due In
    
    Due InOne Year
    
    Two Years
    
    Three Years
    
    Four Years
    
    Five YearsCommitments on lines of credit
    
    $
    45,078,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Standby letters of credit
    
    
    1,750,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commitments under lease agreements
    
    
    118,202
    
    
    
    102,864
    
    
    
    84,298
    
    
    
    12,372
    
    
    
    Deposits
    
    
    243,699,370
    
    
    
    17,263,855
    
    
    
    18,690,541
    
    
    
    8,273,596
    
    
    
    2,981,794FHLB advances
    
    
    
    
    
    
    10,000,000
    
    
    
    
    
    
    
    
    
    
    
    Short-term borrowings
    
    
    143,081
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Securities sold under repurchase agreements
    
    
    10,204,368
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total commitments and contractual obligations
    
    $
    300,993,021
    
    
    $
    27,366,719
    
    
    $
    18,774,839
    
    
    $
    8,285,968
    
    
    $
    2,981,794






---



##### 



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

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 rates are falling, net interest income improves.

The interest rate sensitivity analysis, calculated as of September 30,
2003, below has a three month positive gap of approximately $37.5 million
(interest-bearing assets exceeding interest-bearing liabilities repricing
within three months).

DUE IN
    
    DUE AFTER
    
    DUE AFTER
    
    DUE AFTER
    
    DUE AFTERTHREE
    
    THREE THROUGH
    
    SIX THROUGH
    
    ONE THROUGH
    
    FIVE(Dollars in Thousands)
    
    MONTHS
    
    SIX MONTHS
    
    TWELVE MONTHS
    
    FIVE YEARS
    
    YEARS
    
    TOTALINTEREST-EARNING ASSETS:Fed funds sold
    
    $
    8,393
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    8,393Investment securities
    
    
    541
    
    
    
    201
    
    
    
    510
    
    
    
    8,909
    
    
    
    66,267
    
    
    
    76,428Loans
    
    
    152,379
    
    
    
    18,352
    
    
    
    35,666
    
    
    
    61,903
    
    
    
    1,552
    
    
    
    269,852Total interest-earning assets
    
    
    161,313
    
    
    
    18,553
    
    
    
    36,176
    
    
    
    70,812
    
    
    
    67,819
    
    
    
    354,673INTEREST-BEARING LIABILITIES:DepositsMoney Market and NOW
    
    
    60,753
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,753Savings
    
    
    9,268
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,268Certificates of deposit
    
    
    43,386
    
    
    
    38,382
    
    
    
    49,928
    
    
    
    47,194
    
    
    
    24
    
    
    
    178,914Borrowings
    
    
    10,347
    
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    20,000
    
    
    
    40,347Total interest-bearing liabilities
    
    
    123,754
    
    
    
    38,382
    
    
    
    49,928
    
    
    
    57,194
    
    
    
    20,024
    
    
    
    289,282Excess(deficiency) of interest-earning
assets over(to) interest-bearing liabilities
    
    $
    37,559
    
    
    $
    (19,829
    )
    
    $
    (13,752
    )
    
    $
    13,618
    
    
    $
    47,795
    
    
    $
    65,391Cumulative gap
    
    $
    37,559
    
    
    $
    17,730
    
    
    $
    3,978
    
    
    $
    17,596
    
    
    $
    65,391Ratio of cumulative gap to total
cumulative interest-earning assets
    
    
    23.28
    %
    
    
    9.86
    %
    
    
    1.84
    %
    
    
    6.13
    %
    
    
    18.44
    %Ratio of cumulative interest-earning assets
to cumulative interest-bearing liabilities
    
    
    130.35
    %
    
    
    110.93
    %
    
    
    101.88
    %
    
    
    106.53
    %
    
    
    122.60
    %






---



##### 



Management strives to maintain the ratio of cumulative interest-earning
assets to cumulative interest-bearing liabilities within a range of 80% to 120%
at the less than
one-year time frame.

At September 30, 2003, the Company was outside the range of 80% to 120%
for the Less Than 3 Months categories primarily due to the rate of real estate
construction loan repayments over the rate of national market certificates of
deposit redemptions which creates an excess of cash available for investment held in federal funds sold.
Management is taking steps to increase interest-earning assets, primarily through quality
loans and investment securities.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As of September 30, 2003, 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, 2002. 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, 2002 included in the
Companys 2002 Annual Report on Form 10K.

Item 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Companys management, including the Companys Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Companys disclosure controls and procedures pursuant to Exchange Act Rule
13a-14. 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. There have been no significant changes in the
Companys internal controls or, to the Companys knowledge, in other factors
that could significantly affect those internal controls subsequent to the date
the Company 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. Changes in securities.

None

Item 3. Defaults upon senior securities.

None

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

None

Item 5. Other information.

None

Item 6. Exhibit 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.

(b) Form 8-K filed on October 29, 2003, reporting earnings for the
third quarter of 2003 under Item 9 pursuant to instructions contained
in Item 12 and SEC Release Nos. 33-8176 and 34-47226.

Exhibit No.
    
    Document11.1
    
    Computation of Earnings Per Share.31.1
    
    Certification of Chief Executive Officer filed pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 (the Act)31.2
    
    Certification of Chief Financial Officer filed pursuant to Section 302
of the Act.32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer
furnished pursuant to Section 906 of the Act.






---



##### 



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 November 14, 2003
    
    
    
    /s/ Annette BanksChief Financial Officer
(for the Registrant and as the
Registrants principal financial and
accounting officer)