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, 2007
  
  ̈ TRANSITION
        REPORT
        UNDER SECTION 13 OR 15(d) OF THE
 SECURITIES
        EXCHANGE ACT OF 1934
 For
        the
        transition period from _____ to _____
 
 Commission
        file number 0-13153
 
 HABERSHAM
                  BANCORP(Exact
                  name of registrant as specified in its
                  charter)
 
 Georgia
              
              58-1563165(State
                  or other jurisdiction of incorporation or organization)
              
              (I.R.S.
                  Employer Identification No.)
 
 Highway
                  441 N.   P.O. Box 1980,   Cornelia,
                  Georgia
              
              30531(Address
                  of principal executive offices)
              
              (Zip
                  code)
 
 (706)
                  778-1000(Issuer’s
                  telephone number, including area code)(Former
                  name, former address and former fiscal year,if
                  changed since last report)
 
 Check
        whether the issuer: (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the registrant was required to file such reports), and (2) has been
        subject
        to such filing requirements for the past 90 days.
 Yes
x    No
         ̈
 
 Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer or a non-accelerated filer.  See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
        Act. (Check one)
 
 Large
                  accelerated filer  ̈
              
              Accelerated
                  filer  ̈
              
              Non-accelerated
                  filer x
 
 Indicate
        by check mark whether the registrant is a shell company (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:
 
 2,968,593
        shares, common stock, $1.00 par value, as of July 27, 2007
  1
  Item.
        1   Financial Statements
 
 HABERSHAM
        BANCORP AND SUBSIDIARIES
 CONDENSED
        CONSOLIDATED BALANCE SHEETS (unaudited)
 (dollars
        in thousands)
 
 ASSETS
              
              JUNE
                30,
                  2007
              
              
              DECEMBER
                31,
                  2006Cash
                  and due from banks
              
              $
              12,455
              
              
              $
              26,119Federal
                  funds sold
              
              
              -
              
              
              
              64,399Total
                  cash and cash equivalents
              
              
              12,455
              
              
              
              90,518Investment
                  securities available for sale (cost of $87,591 at  June 30, 2007
                  and $86,178 at December 31, 2006)
              
              
              84,964
              
              
              
              84,982Investment
                  securities held to maturity (estimated fair value of $2,985 at
                  June 30,
                  2007 and $3,368 at December 31, 2006)
              
              
              2,985
              
              
              
              3,289Other
                  investments
              
              
              3,409
              
              
              
              3,365Loans
                  held for sale
              
              
              2,731
              
              
              
              3,183Loans
              
              
              358,960
              
              
              
              346,261Less
                  allowance for loan losses
              
              
              (3,116
              )
              
              
              (3,445
              )Loans,
                  net
              
              
              355,844
              
              
              
              342,816Goodwill
              
              
              3,550
              
              
              
              3,550Other
                  assets
              
              
              30,465
              
              
              
              24,035TOTAL
                  ASSETS
              
              $
              496,403
              
              
              $
              555,738LIABILITIESNoninterest-bearing
                  deposits
              
              $
              41,940
              
              
              $
              47,286Time
                  deposits, $100,000 and over
              
              
              108,798
              
              
              
              176,651Other
                  interest-bearing deposits
              
              
              229,069
              
              
              
              226,692Total
                  deposits
              
              
              379,807
              
              
              
              450,629Short-term
                  borrowings
              
              
              807
              
              
              
              779Federal
                  funds purchased and securities sold under repurchase
                  agreements
              
              
              16,799
              
              
              
              5,874Federal
                  Home Loan Bank Advances
              
              
              38,000
              
              
              
              38,000Other
                  liabilities
              
              
              4,942
              
              
              
              4,892TOTAL
                  LIABILITIES
              
              
              440,355
              
              
              
              500,174STOCKHOLDERS’
                  EQUITYCommon
                  Stock, $1.00 par value, 10,000,000 shares authorized; 2,968,593
                  shares
                  issued and outstanding at June 30, 2007 and December 31,
                  2006
              
              
              2,969
              
              
              
              2,969Additional
                  paid-in capital
              
              
              15,531
              
              
              
              15,531Retained
                  earnings
              
              
              39,202
              
              
              
              37,777Accumulated
                  other comprehensive(loss)income
              
              
              (1,654
              )
              
              
              (713
              )TOTAL
                  STOCKHOLDERS’ EQUITY
              
              
              56,048
              
              
              
              55,564TOTAL
                  LIABILITIES AND STOCKHOLDERS’ EQUITY
              
              $
              496,403
              
              
              $
              555,738
 
 See
        notes
        to unaudited condensed consolidated financial statements.
  2
  HABERSHAM
        BANCORP AND SUBSIDIARIES
 CONDENSED
        CONSOLIDATED STATEMENTS OF EARNINGS
 (Unaudited)
        For the Three and Six-Month Periods Ended June 30, 2007 and 2006
 (dollars
        in thousands, except per share amounts)
 
 Three
                  Months ended
              
              
              Six
                  Months ended2007
              
              
              2006
              
              
              2007
              
              
              2006INTEREST
                  INCOMELoan
                  interest and fees on loans
              
              $
              8,208
              
              
              $
              7,092
              
              
              $
              16,071
              
              
              $
              13,977Taxable
                  investment securities
              
              
              769
              
              
              
              718
              
              
              
              1,517
              
              
              
              1,367Tax
                  exempt securities
              
              
              276
              
              
              
              236
              
              
              
              545
              
              
              
              448Federal
                  funds sold
              
              
              44
              
              
              
              148
              
              
              
              143
              
              
              
              309Other
              
              
              54
              
              
              
              64
              
              
              
              113
              
              
              
              121TOTAL
                  INTEREST INCOME
              
              
              9,351
              
              
              
              8,258
              
              
              
              18,389
              
              
              
              16,222INTEREST
                  EXPENSETime
                  deposits, $100,000 and over
              
              
              1,388
              
              
              
              870
              
              
              
              2,678
              
              
              
              1,638Deposits
              
              
              2,074
              
              
              
              1,660
              
              
              
              4,120
              
              
              
              3,257Short-term
                  and other borrowings, primarily FHLB advances
              
              
              657
              
              
              
              521
              
              
              
              1,300
              
              
              
              1,040TOTAL
                  INTEREST EXPENSE
              
              
              4,119
              
              
              
              3,051
              
              
              
              8,098
              
              
              
              5,935NET
                  INTEREST INCOME
              
              
              5,232
              
              
              
              5,207
              
              
              
              10,291
              
              
              
              10,287Provision
                  for loan losses
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -NET
                  INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
              
              
              5,232
              
              
              
              5,207
              
              
              
              10,291
              
              
              
              10,287NONINTEREST
                  INCOMEMortgage
                  origination income
              
              
              237
              
              
              
              206
              
              
              
              398
              
              
              
              392Service
                  charges on deposits
              
              
              235
              
              
              
              233
              
              
              
              467
              
              
              
              407Other
                  service charges and commissions
              
              
              65
              
              
              
              66
              
              
              
              126
              
              
              
              133Investment
                  securities (losses) gains, net
              
              
              -
              
              
              
              (1
              )
              
              
              5
              
              
              
              (6
              )Gain
                  on sale of premises and equipment
              
              
              -
              
              
              
              18
              
              
              
              -
              
              
              
              18Gain
                  on sale of land
              
              
              -
              
              
              
              42
              
              
              
              -
              
              
              
              42Other
                  income
              
              
              396
              
              
              
              416
              
              
              
              857
              
              
              
              837Total
                  noninterest income
              
              
              933
              
              
              
              980
              
              
              
              1,853
              
              
              
              1,823NONINTEREST
                  EXPENSESalary
                  and employee benefits
              
              
              2,732
              
              
              
              2,435
              
              
              
              5,375
              
              
              
              4,729Occupancy
              
              
              616
              
              
              
              530
              
              
              
              1,204
              
              
              
              1,087Computer
                  services
              
              
              136
              
              
              
              128
              
              
              
              293
              
              
              
              282General
                  and administrative expense
              
              
              1,211
              
              
              
              1,154
              
              
              
              2,409
              
              
              
              2,228Total
                  noninterest expense
              
              
              4,695
              
              
              
              4,247
              
              
              
              9,281
              
              
              
              8,326EARNINGS
                  BEFORE INCOME TAXES
              
              
              1,470
              
              
              
              1,940
              
              
              
              2,863
              
              
              
              3,784Income
                  tax expense
              
              
              436
              
              
              
              615
              
              
              
              844
              
              
              
              1,188NET
                  EARNINGS
              
              $
              1,034
              
              
              $
              1,325
              
              
              $
              2,019
              
              
              $
              2,596Net
                  earnings per common share – Basic
              
              $
              .35
              
              
              $
              .45
              
              
              $
              .68
              
              
              $
              .89Net
                  earnings per common share – Diluted
              
              $
              .35
              
              
              $
              .44
              
              
              $
              .68
              
              
              $
              .87Weighted
                  average number of common shares outstanding
              
              
              2,968,593
              
              
              
              2,938,336
              
              
              
              2,968,593
              
              
              
              2,932,424Weighted
                  average number of common and common equivalent shares
                  outstanding
              
              
              2,982,724
              
              
              
              2,980,788
              
              
              
              2,989,065
              
              
              
              2,972,371Dividends
                  per share
              
              $
              .10
              
              
              $
              .09
              
              
              $
              .20
              
              
              $
              .18
  See
        notes
        to unaudited condensed consolidated financial statements.
  3
  HABERSHAM
        BANCORP AND SUBSIDIARIES
 CONDENSED
        CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 (Unaudited)
        For the Three- and Six-Month Periods Ended June 30, 2007 and 2006
 (dollars
        in thousands)
 
 Three
                  Months ended
              
              
              Six
                  Months ended2007
              
              
              2006
              
              
              2007
              
              
              2006NET
                  EARNINGS
              
              $
              1,034
              
              
              $
              1,325
              
              
              $
              2,019
              
              
              $
              2,596OTHER
                  COMPREHENSIVE INCOME (LOSS):Unrealized
                  holding (losses) gains on investment securities available for sale
                  arising
                  during the period
              
              
              (1,730
              )
              
              
              (1,489
              )
              
              
              (1,426
              )
              
              
              (1,718
              )Unrealized
                  holding gains (losses) on derivative financial instruments classified
                  as
                  cash flow  hedges, arising during the period
              
              
              55
              
              
              
              39
              
              
              
              5
              
              
              
              98Reclassification
                  adjustment for (gains) losses on  investment securities
                  available for sale
              
              
              -
              
              
              
              1
              
              
              
              (5
              )
              
              
              6Total
                  other comprehensive income (loss), before tax
              
              
              (1,675
              )
              
              
              (1,449
              )
              
              
              (1,426
              )
              
              
              (1,614
              )INCOME
                  TAXES RELATED TO OTHER COMPREHENSIVE INCOME:Unrealized
                  holding (losses) gains on investment securities available for sale
                  arising
                  during the period
              
              
              588
              
              
              
              506
              
              
              
              485
              
              
              
              584Unrealized
                  holding gains (losses) on derivative financial instruments classified
                  as
                  cash flow hedges, arising during the period
              
              
              (19
              )
              
              
              (13
              )
              
              
              (2
              )
              
              
              (33
              )Reclassification
                  adjustment for (gains) losses on investment securities available
                  for
                  sale
              
              
              -
              
              
              
              -
              
              
              
              2
              
              
              
              (2
              )Total
                  income taxes related to other comprehensive income (loss)
              
              
              569
              
              
              
              493
              
              
              
              485
              
              
              
              549Total
                  other comprehensive (loss) income, net of tax
              
              
              (1,106
              )
              
              
              (956
              )
              
              
              (941
              )
              
              
              (1,065
              )Total
                  comprehensive (loss) income
              
              $
              (72
              )
              
              $
              369
              
              
              $
              1,078
              
              
              $
              1,531
 
 See
        notes
        to unaudited condensed consolidated financial statements.
  4
  HABERSHAM
        BANCORP AND SUBSIDIARIES
 CONSOLIDATED
        STATEMENTS OF CASH FLOWS
 (Unaudited)
        For the Six-Month Periods Ended June 30, 2007 and 2006
 (dollars
        in thousands)
 
 2007
              
              
              2006CASH
                  FLOWS PROVIDED BY OPERATING ACTIVITIES:
              
              $
              417
              
              
              $
              1,977CASH
                  FLOWS FROM INVESTING ACTIVITIES:Investment
                  securities available for sale:Proceeds
                  from maturity
              
              
              2,820
              
              
              
              3,474Proceeds
                  from sales and calls
              
              
              2,786
              
              
              
              1,008Purchases
              
              
              (7,061
              )
              
              
              (17,417
              )Investment
                  securities held to maturity:Proceeds
                  from maturity
              
              
              304
              
              
              
              19Proceeds
                  from call
              
              
              -
              
              
              
              -Other
                  investments:Proceeds
                  from sale
              
              
              -
              
              
              
              328Purchases
              
              
              (44
              )
              
              
              (318
              )Net
                  (increase) decrease in loans
              
              
              (13,756
              )
              
              
              (3,881
              )Purchases
                  of premises and equipment
              
              
              (3,106
              )
              
              
              (1,447
              )Proceeds
                  from sale of premises and equipment
              
              
              -
              
              
              
              193Net
                  additions of other real estate
              
              
              -
              
              
              
              3Proceeds
                  from sale of other real estate
              
              
              40
              
              
              
              222Net
                  cash (used by) provided by investing activities
              
              
              (18,017
              )
              
              
              (17,816
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Net
                  increase (decrease) in deposits
              
              
              (70,822
              )
              
              
              (4,716
              )Net
                  increase (decrease) in short-term borrowings
              
              
              28
              
              
              
              (619
              )Net
                  (decrease) increase in federal funds purchased and securities sold
                  under
                  repurchase agreements
              
              
              10,925
              
              
              
              (4,262
              )Proceeds
                  from FHLB advances
              
              
              -
              
              
              
              3,000Repayment
                  of FHLB advances
              
              
              -
              
              
              
              (7,300
              )Issuance
                  of common stock
              
              
              -
              
              
              
              465Cash
                  dividends paid
              
              
              (594
              )
              
              
              (528
              )Net
                  cash (used by) provided by financing activities
              
              
              (60,463
              )
              
              
              (13,960
              )Decrease
                  (increase) in cash and cash equivalents
              
              
              (78,063
              )
              
              
              (29,799
              )CASH
                  AND CASH EQUIVALENTS:  BEGINNING OF PERIOD
              
              
              90,518
              
              
              
              52,866CASH
                  AND CASH EQUIVALENTS:  END OF PERIOD
              
              $
              12,455
              
              
              $
              23,067SUPPLEMENTAL
                  DISCLOSURES OF CASH FLOW INFORMATION:Other
                  real estate acquired through loan foreclosures
              
              $
              728
              
              
              $
              854Change
                  in components of other comprehensive income
              
              
              (941
              )
              
              
              (1,065
              )
 
 See
        notes
        to unaudited condensed consolidated financial statements.
  5
  HABERSHAM
        BANCORP AND SUBSIDIARIES
 Notes
        to
        Unaudited Condensed Consolidated Financial Statements
 
 1.
              Basis
                  of Presentation
 
 The
        condensed consolidated financial statements contained in this report are
        unaudited but reflect all adjustments, consisting only of normal recurring
        accruals, which are, in the opinion of management, necessary for a fair
        presentation of the results of the interim periods reflected.  Certain
        information and note disclosures normally included in financial statements
        prepared in accordance with accounting principles generally accepted in the
        United States of America have been condensed or omitted pursuant to applicable
        rules and regulations of the Securities and Exchange Commission.  The
        results of operations for the interim periods reported herein are not
        necessarily indicative of results to be expected for the full year.
 
 The
        condensed consolidated financial statements included herein should be read
        in
        conjunction with the Company's 2006 consolidated financial statements and
        notes
        thereto, included in the Company's Annual Report on Form 10-K for the fiscal
        year ended December 31, 2006.
 
 2.
              Accounting
                  Policies
 
 Reference
        is made to the accounting policies of the Company described in the notes
        to the
        consolidated financial statements contained in the Company's Annual Report
        on
        Form 10-K for the fiscal year ended December 31, 2006.  The Company
        has consistently followed those policies in preparing this report.
 
 In
        February 2007, the Financial Accounting Standard Board issued SFAS No. 159,
        *The Fair Value Option for Financial Assets and Financial Liabilities*
        (SFAS 159), which permits entities to choose to measure financial instruments
        and certain other instruments at fair value.  SFAS 159 is effective as
        of the beginning of fiscal years that begin after November 15, 2007; however,
        it
        includes an early adoption provision allowing entities to adopt within 120
        days
        of their most recent fiscal year-end.  The Company has decided not to
        implement SFAS 159 until January of 2008.
 
 3.
              Other
                  Comprehensive Income
 
 Other
        comprehensive income for the Company consists of items recorded directly
        in
        equity under Statement of Financial Accounting Standards (“SFAS”) No. 115,
“Accounting for Certain Investments in Debt and Equity Securities” in addition
        to the net of tax fair value of cash flow hedges.  Investment
        securities classified as available for sale are carried at fair value with
        the
        related unrealized gain or loss, net of deferred income taxes included as
        a
        separate component of stockholders’ equity.  At June 30, 2007, fair
        value of the available for sale investment securities decreased approximately
        $1,431,000 when compared to the fair value at December 31, 2006.  The
        corresponding equity component of unrealized gain and loss on available for
        sale
        securities, net of tax, also decreased approximately $945,000.  These
        changes were the results of movements in the bond market as it responds to
        interest rate changes in the market.  At June 30, 2007, fair value of
        the cash flow hedges increased approximately $5,000 when compared to the
        fair
        value at December 31, 2006.  The corresponding equity component of
        unrealized holding gains on derivative financial instruments classified as
        cash
        flow hedges, net of tax, also increased approximately
        $3,000.
  6
  4.
              Net
                  Earnings Per Share
 
 Basic
        net
        earnings per share is based on the weighted average number of common shares
        outstanding during the period.  Diluted net earnings per share
        includes the effect of potential common shares outstanding during the
        period.  The average market price during the period is used to compute
        equivalent shares.
 
 The
        reconciliation of the amounts used in the computation of both basic net earnings
        per share and diluted net earnings per share for the three- and six-month
        periods ended June 30, 2007 and 2006, is as follows:
 
 
 Three
                  Months ended
              
              
              Six
                  Months endedJune
                  30,
              
              
              June
                  30,2007
              
              
              2006
              
              
              2007
              
              
              2006Net
                  earnings
              
              $
              1,034,329
              
              
              $
              1,325,275
              
              
              $
              2,018,784
              
              
              $
              2,596,499Weighted
                  average common shares outstanding
              
              
              2,968,593
              
              
              
              2,938,336
              
              
              
              2,968,593
              
              
              
              2,932,424Shares
                  issued from assumed exercise of common stock equivalents
              
              
              14,131
              
              
              
              42,452
              
              
              
              20,472
              
              
              
              39,947Weighted
                  average number of common and  common equivalent shares
                  outstanding
              
              
              2,982,724
              
              
              
              2,980,788
              
              
              
              2,989,065
              
              
              
              2,972,371Earnings
                  per share:Basic
              
              $
              .35
              
              
              $
              .45
              
              
              $
              .68
              
              
              $
              .89Diluted
              
              $
              .35
              
              
              $
              .44
              
              
              $
              .68
              
              
              $
              .87
  5.
              Commitment
 
 Habersham
        Bank entered into a construction contract during the first six month period
        of
        2007 to build its Flowery Branch, Georgia branch building.  The
        construction cost of this 20,000+ square foot building is estimated to be
        approximately $3.2 million and is expected to be completed during the fourth
        quarter of 2008.
  7
  Item.
        2  Management's Discussion and Analysis of Financial Condition and
        Results of Operations.
 
 HABERSHAM
        BANCORP AND SUBSIDIARIES
 
 **Organization**
 
 Habersham
        Bancorp (the “Company”) owns all of the outstanding stock of Habersham Bank
        ("Habersham Bank") and The Advantage Group, Inc.  Habersham Bank owns
        all of the outstanding stock of Advantage Insurers, Inc. (“Advantage
        Insurers”).  Advantage Insurers offers a full line of property,
        casualty and life insurance products.  Advantage Insurers does not
        comprise a significant portion of the financial position, results of operations,
        or cash flows of the Company and as a result, management’s discussion and
        analysis, which follows relates primarily to Habersham Bank.
 
 The
        Company’s continuing primary business is the operations of banks in rural and
        suburban communities in Habersham, White, Cherokee, Warren, Gwinnett, Stephens
        and Forsyth counties in Georgia.  The Company’s primary source of
        revenue is providing loans to businesses and individuals in its market
        area.
 
 **Executive
        Summary**
 
 Habersham
        Bancorp reported second quarter earnings of $1,034,000 or $.35 per diluted
        share, a decrease of 21.96% when compared to second quarter earnings of
        $1,325,000 or $.44 per diluted share in 2006.  Year-to-date earnings
        for the six-month period ended June 30, 2007, was $2,019,000 or $.68 per
        diluted
        share, a decrease of 22.23%, when compared to year-to-date earnings of
        $2,596,000 or $.87 per diluted share for the same period in 2006.
 
 The
        Company’s primary source of income is interest income from loans and investment
        securities. Its profitability depends largely on net interest income, which
        is
        the difference between the interest received on interest-earning assets and
        the
        interest paid on deposits, borrowings, and other interest-bearing
        liabilities.  Net interest income for the second quarter and for the
        six-month period ended June 30, 2007 was approximately $5,232,000 and
        $10,291,000, respectively.
 
 The
        net
        interest margin for the second quarter and first six months of 2007 was 4.75%
        and 4.70%, respectively compared to 5.03% and 5.00%, for the same periods
        in
        2006.  Two factors which impact the net interest margin are average
        interest bearing assets and average interest-bearing liabilities which increased
        approximately $30.2 million and $36.4 million, respectively, when comparing
        first six months of 2007 to first six months of 2006.
 
 Total
        net
        income consists of net interest income plus other noninterest income less
        noninterest expense.  Decreases in non-interest income of
        approximately $47,000 and increases in noninterest expense of approximately
        $448,000 factored into net income, when comparing second quarter 2007 to
        second
        quarter 2006.   Increases in noninterest income and noninterest
        expense totaled approximately $30,000 and $955,000, respectively, when comparing
        first six months of 2007 to the same period in 2006.  The increase in
        other non-interest expense consisted primarily of additional expenses in
        salary
        and employee benefits and occupancy costs.  Personnel costs, occupancy
        costs and other operating expenses increased approximately 13.66%, 10.76%
        and
        7.65%, respectively for the first six months of 2007 over the first six months
        of 2006 as a result primarily of the expansion into the Forsyth County market
        with the opening of a new office in Cumming, Georgia in January
        2007.
 
 Total
        assets decreased approximately $59.3 million or 10.67% from $555.7 million
        at
        December 31, 2006 to $496.4 million at June 30, 2007.  At December 31,
        2006, Habersham Bank had excess cash received from a short-term deposit invested
        in cash and due from banks and in federal funds sold.  The excess cash
        was drawn down with the pay out of the deposited funds during the first quarter
        of 2007.  Excluding the reduction of these funds of approximately
        $70.7 million, the total loan portfolio, and other assets increased
        approximately $12.7 million and $6.4 million, respectively, and were offset
        by
        decreases in cash and cash equivalents and in the investment securities
        portfolio of approximately $7.4 million and $278,000,
        respectively.  The increase in other assets primarily resulted from
        the purchase of land for expansion efforts into new markets totaling
        approximately $2.5 million and the purchase of bank owned life insurance
        for
        approximately $2.8 million.
  8
  Deposit
        balances at December 31, 2006 included approximately $78.5 million in an
        interest bearing deposit account from a single depositor which remained in
        Habersham Bank’s deposit portfolio for several days after
        year-end.  The total deposit portfolio at June 30, 2007 reflected an
        increase of approximately $7.7 million net of the movement of this $78.5
        million.
 
 **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.  Factors that could
        cause actual results to differ from those discussed in the forward-looking
        statements include, but are not limited to:  (1) the strength of
        the U.S. economy in general and the strength of the local economies in which
        operations are conducted; (2) the effects of and changes in trade, monetary
        and fiscal policies and laws, including interest rate policies of the Board
        of
        Governors of the Federal Reserve System; (3) inflation, interest rate,
        market and monetary fluctuations; (4) the timely development of and
        acceptance of new products and services and perceived overall value of these
        products and services by users; (5) changes in consumer spending, borrowing
        and saving habits; (6) risks involved in making and integrating
        acquisitions and expanding into new geographic markets; (7) the ability to
        increase market share and control expenses; (8) the effect of changes in
        laws and regulations (including laws and regulations concerning taxes, banking,
        securities and insurance) with which the Company and its subsidiaries must
        comply; (9) the effect of changes in accounting policies and practices, as
        may
        be adopted by the regulatory agencies as well as the Financial Accounting
        Standards Board; (10) changes in the Company’s organization, compensation
        and benefit plans; (11) the costs and effects of litigation and of
        unexpected or adverse outcomes in such litigation; and (12) the success of
        the Company at managing the risks involved in the foregoing.
 
 Such
        forward-looking statements speak only as of the date on which such statements
        are made, and the Company undertakes no obligation to update any forward-looking
        statement to reflect events or circumstances after the date on which such
        statement is made or to reflect the occurrence of unanticipated
        events.
 
 **Material
        Changes in Financial Condition**
 
 The
        Company’s total assets decreased
        $59.3 million, or 10.67%, to $496.4  million at June 30, 2007 from
        $555.7 million at December 31, 2006.   At December 31, 2006,
        Habersham Bank had excess cash received from short-term deposit invested
        in cash
        and due from banks and in federal funds sold.  Excess cash of
        approximately $70.7 million was drawn down with the pay out of the deposited
        funds during the first quarter of 2007.  Excluding this pay out,
        increases in the total loan portfolio of Habersham Bank and in other assets
        totaled approximately $12.7 million and $6.4 million, respectively, and were
        offset by decreases in cash and cash equivalents and in the investment
        securities portfolio of approximately $7.4 million and $278,000,
        respectively.
 
 During
        the first six months of 2007, purchases of investment securities available
        for
        sale totaled approximately $7.1 million, offset by maturities and calls of
        approximately $5.9 million.  The purchases consisted of approximately
        $3.4 million in U.S. government-sponsored enterprise bonds, $1.1
        million  in mortgage backed securities, $2.5 million in municipal
        bonds and $44,000 in other investments.  The unrealized loss on the
        investment securities available for sale portfolio increased approximately
        $1.4
        million during the period ending June 30, 2007.
  9
  Loan
        demand increased during the during the first six months of 2007 with increases
        in the loan portfolios for real estate secured lending, commercial and consumer
        customers of approximately $10.1 million, $2.9 million and $324,000,
        respectively.
 
 Other
        assets includes other real estate foreclosed properties, fixed assets,
        investments in life insurance policies and other various asset
        accounts.  Increases in life insurance, fixed assets, other real
        estate and other various asset accounts  totaled approximately $2.7
        million, $2.5 million, $694,000, and $500,000, respectively.  Upon
        board  approval for a Senior Executive Retirement Plan (“SERP”) for
        five of the Company’s key employees to be funded by the purchase
        of  bank owned life insurance policies, Habersham Bank made this
        investment and obtained the policies during the first six months of
        2007.  The increase in fixed assets resulted primarily from the
        purchase of land in the Flowery Branch area of Hall County to further the
        expansion efforts of Habersham Bank totaling approximately $2.5 million and
        the
        purchase of land in Warren County in order to move into a branch building
        totaling approximately $88,000.  Other real estate owned increased
        during the first six months of 2007 as a result of the seven foreclosures
        of
        real estate secured loans offset by sales and write downs.
 
 Total
        deposits decreased approximately $70.8 million when comparing balances at
        June
        30, 2007 to December 31, 2006 balances, with approximately $65.5 million
        of the
        decrease occurring in interest bearing deposits and approximately $5.3 million
        of the decrease occurring in non-interest bearing demand
        deposits.   Borrowings increased when comparing June 30, 2007
        balances to December 31, 2006, approximately $10.9 million as a result of
        increased activity in repurchase sweep accounts.  During the first six
        months of 2007, federal funds purchased and securities sold under repurchase
        agreements and short-term borrowings increased by approximately $10.9 million
        and $28,000, respectively.
 
 **Material
        Changes in Results of Operations**
 
 Net
        interest income is the largest single source of income for the
        Company.  Management strives to attain a level of earning asset growth
        while providing a net yield on earning assets that will cover overhead and
        other
        costs and provide a reasonable return to our stockholders.  Net
        interest income is affected by interest income from loans, investment securities
        and federal funds sold offset by interest paid on deposits and
        borrowings.  The following table compares the weighted average tax
        equivalent yields for loans, investment securities and federal funds sold
        and
        the weighted average rates for deposits and borrowings for the second quarters
        and the first six months of 2007 and 2006.
 
 Three
                  Months ended
              
              
              Six
                  Months ended2007
              
              
              2006
              
              
              2007
              
              
              2006INTEREST
                  YIELDS EARNED:Loans
              
              
              9.25
              %
              
              
              8.84
              %
              
              
              9.17
              %
              
              
              8.72
              %Investment
                  securities
              
              
              5.28
              %
              
              
              5.03
              %
              
              
              5.26
              %
              
              
              5.01
              %Federal
                  funds sold
              
              
              5.18
              %
              
              
              5.09
              %
              
              
              4.96
              %
              
              
              4.78
              %INTEREST
                  RATES PAID:Deposits
              
              
              4.15
              %
              
              
              3.25
              %
              
              
              4.11
              %
              
              
              3.25
              %Borrowings
              
              
              5.07
              %
              
              
              4.64
              %
              
              
              4.98
              %
              
              
              4.55
              %
 
 Total
        interest income for the second quarter of 2007 increased approximately $1.1
        million or 13.24%, when compared to second quarter of 2006.  Increases
        in the average balances for the second quarter of 2007 in loans and investment
        securities of approximately $34.4 million and $3.5 million, respectively,
        were
        offset by decrease in average quarter balances in federal funds sold of
        approximately $8.3 million when comparing the second quarters of 2007 and
        2006.  Total interest income for the first six months of 2007
        increased approximately $2.2 million or 13.36% when compared to the same
        period
        in 2006. Increases in the average balances for the first six months of 2007
        in
        loans and investment securities of approximately $30.3 million and $6.9 million,
        respectively, were offset by decreases in the average balances in federal
        funds
        sold for the first six months of 2007 of approximately $7.2 million when
        comparing the first six months of 2007 and 2006.  See table above to
        compare yields earned on loans, investment securities and federal funds
        sold.
  10
  Total
        interest expense for the second quarter of 2007 increased approximately $1.1
        million or 35.00% when compared to the second quarter of
        2006.  Increases in the average balances for the second quarter of
        2007 in deposits and other borrowings totaled approximately $22.5 million
        and
        $6.9 million, respectively, when compared to the second quarter of
        2006.  Total interest expense for the first six month of 2007
        increased approximately $2.2 million or 36.44% when compared to the first
        six
        month of 2006.  Increases in the average balance for the first six
        months of 2007 in deposits and other borrowings totaled approximately $29.8
        million and $6.6 million, respectively, when compared to the first six months
        of
        2006.  See table above to compare interest rates paid on deposits and
        other borrowings.
 
 Net
        interest income increased approximately $25,000 or .48%, for the second quarter
        of 2007 and increased approximately $4,000 or .04% for the first six months
        of
        2007 when compared to the same periods in 2006 as a result of the items
        discussed above.
 
 The
        net
        interest margin of the Company, net interest income divided by average earning
        assets, was 4.75% for the second quarter of 2007 compared to 5.03% for the
        second quarter of 2006, and was 4.70% for the first six months of 2006 compared
        to 5.00% for the first six months of 2006.
 
 Noninterest
        income decreased $47,000 or 4.80% for the second quarter of 2007 over the
        same
        period in 2006 and increased $30,000 or 1.65% for the first six months of
        2007
        over the same period in 2006.  For the second quarter of 2007,
        increases in mortgage origination income and service charges on deposits
        totaled
        approximately $31,000 and $2,000, respectively, compared to the second quarter
        of 2006.  For the first six months of 2007, increases in mortgage
        origination income and service charges on deposits totaled approximately
        $6,000
        and $60,000, respectively, compared to the first six months of
        2006.  Increased average balances in the deposit portfolio and average
        volume of activity in the mortgage held for sale portfolio are reflected
        in
        these increases.
 
 Other
        income decreased $20,000 for the second quarter of 2007 and increased $20,000
        for the first six months of 2007 compared to the same periods in
        2006.   Decreases for the second quarter in rental income and
        profit from other real estate totaling approximately $45,000 and $32,000,
        respectively, where offset by increases in trust fees, master money
        fees,  miscellaneous income and other income accounts totaling
        approximately $25,000, $10,000, $8,000 and
        $14,000,  respectively.  Increases for the first six months
        of 2007 in trust fees, master money fees, miscellaneous income and other
        income
        accounts totaling approximately $36,000, $32,000, $19,000, and $47,000,
        respectively, were offset by decreases in rental income and profit from other
        real estate totaling $87,000 and $27,000, respectively.   The
        decrease in rental income results from the sale of  a multi-family
        rental property during the third quarter of 2006.
 
 Noninterest
        expense increased $448,000 or 10.55% for the second quarter of 2007 over
        the
        same period in 2006, with increases in salary and employee benefits, occupancy
        and computer services of approximately $297,000, $86,000 and $8,000,
        respectively.  Noninterest expense increased $955,000 or 11.47% for
        the first six months of 2007 over the same period in 2006, with increases
        in
        salary and employee benefits, occupancy and computer services of approximately
        $646,000, $117,000 and $11,000, respectively.   Salary and
        employee benefits increased primarily due to annual salary adjustments and
        the
        additional staffing of a new branch in Cumming which opened in January
        2007.  Occupancy expenses also increased for the second quarter of
        2007 and the first six months of 2007 over the same periods in 2006 due to
        expenses related the new branch in Cumming.  The general and
        administrative expenses increase of $57,000 for the second quarter of 2007
        consists primarily of increases in outside services and other expenses of
        approximately $35,000 and $53,000, respectively, offset by decreases in
        advertising and marketing expense and office supplies of approximately $20,000
        and $12,000, respectively.  The general and administrative expenses
        increase of $181,000 for the first six month of 2007 consists primarily of
        increases in advertising and marketing expense, outside services, office
        supplies and other expenses of approximately $42,000, $37,000, $19,000 and
        $83,000, respectively.  Outside services include FDIC insurance, legal
        and professional services, insurance, director fees and State of Georgia
        Department of Banking fees.
 
 Income
        tax expense for the three months ended June 30, 2007 and 2006 was $436,000
        and
        $615,000, respectively.  Income tax expense for the first six months
        ended June 30, 2007 and 2006 was $844,000 and $1,188,000,
        respectively.  The effective tax rate for the second quarter of 2007
        and 2006 was 29.65% and 31.70%, respectively. The effective tax rate for
        the six
        months ended June 30, 2007 and 2006 was 29.48% and 31.40%,
        respectively.  Tax-exempt income on investment securities in municipal
        bonds was 19.03% of pre-tax income for the first six months of 2007 when
        compared to 11.84% for the first six months of 2006.
  11
  **Asset
        Quality**
 
 The
        allowance for loan losses represents a reserve for probable losses in the
        loan
        portfolio and is evaluated periodically.  The determination of the
        allowance for loan losses is subjective and based on consideration of a number
        of factors and assumptions. The methodology used to analyze the adequacy
        of the
        Allowance for Loans and Lease Losses consists of assigning allocated general
        reserve where deemed appropriate based on Internal Watch List
        relationships.  Reserves for these loans are weighted with emphasis on
        the degree of identified risk.  Reviews for these credits include an
        analysis of the borrower’s financial position, an assessment of the value of
        pledged collateral and their past performance showing their ability to properly
        service the debt as well as an assessment of their anticipated future financial
        condition.  These credits are assigned one of two risk ratings: Watch
        or Substandard.  Loans assigned a risk rating of substandard will have
        a loan loss allowance allocation based on FAS 114, which defines loans impaired
        as “when based on current information and events, if it is probable that the
        creditor will be unable to collect all interest and principal payments due
        according to the contractual terms of the loan agreement.” If a loan is
        considered impaired, but adequately collateralized there should be no allocation
        assigned to the loan within the allowance for loan losses
        analysis.  All non-accrual loans are considered
        impaired.  Additions to non-accrual loans at June 30, 2007, consisted
        primarily of real estate secured loans and were adequately collateralized
        with
        real estate and other pledged collateral.
 
 The
        risk
        associated with lending varies with the creditworthiness of the borrower,
        the
        type of loan (consumer, commercial, or real estate) and its maturity. Cash
        flows
        adequate to support a repayment schedule are an element considered for all
        loans.  Real estate loans are impacted by market conditions regarding
        the value of the underlying property used as collateral.  Commercial
        loans are also impacted by the management of the business as well as economic
        conditions. The Company also makes unsecured loans from time to time. The
        risk
        to the Company is greater for unsecured loans as the ultimate repayment of
        the
        loan is only dependent on the borrower’s ability to pay.  The balance
        of unsecured loans at June 30, 2007 was $9.5 million which does not pose
        a
        significant risk to the Company.
 
 At
        June  30, 2007 and December 31, 2006, the ratio of the allowance for
        loan losses to total loans was .87% and .99%, respectively.  An
        estimate, based upon the loan loss reserve methodology for Habersham Bank,
        is
        calculated each month to determine the status of the allowance, either a
        surplus
        or a deficiency.  This estimate includes calculations for allocated
        and unallocated general reserves.  The allocated general reserve
        consisting of loans on the internal watch list with risk ratings of 4 (watch)
        or
        5 (substandard) have specific amounts in the calculation.  The amount
        of the allocated general reserve has decreased approximately $328,000 during
        the
        first six months of 2007.  The unallocated general reserve consisting
        of other graded and ungraded loans increased approximately $13,000 during
        the
        first six months of 2007.   The reserve for loan loss calculation
        estimated a surplus of approximately $1 million at December 31, 2006 and
        a
        surplus of approximately $823,000 at June 30, 2007.  The allowance
        established as of June  30, 2007 is considered to be adequate for any
        expected losses and is supported by the methodology and supporting documentation
        of the analysis.  No provision for loan losses was charged to expense
        for the quarters ended June  30, 2007 and 2006.
  12
  Net
        charge-offs for the first six months of 2007 totaled $358,864 compared to
        net
        charge-offs of $87,501 for the first six months of 2006 as detailed
        below:
 
 June
                  30, 2007
              
              
              June
                  30, 2006Charge-offs:Commercial
              
              $
              46,177
              
              
              $
              53,492Real
                  Estate
              
              
              253,624
              
              
              
              43,276Consumer
              
              
              86,632
              
              
              
              97,326Total
                  Charge-offs
              
              
              386,433
              
              
              
              194,094Recoveries:Commercial
              
              
              850
              
              
              
              11,255Real
                  Estate
              
              
              150
              
              
              
              2,109Consumer
              
              
              26,569
              
              
              
              93,229Total
                  Recoveries
              
              
              27,569
              
              
              
              106,593Net
                  Charge-offs
              
              $
              358,864
              
              
              $
              87,501
 
 Real
        estate charge-offs consisted of seven loans secured with vacant lots in Fulton
        County for an average amount of approximately $21,000 and two loans secured
        with
        rental property in Habersham and Stephens Counties totaling approximately
        $107,000.
 
 Nonperforming
        assets consist of non-accrual loans, accruing loans 90 days past due,
        restructured loans and other real estate owned. The following summarizes
        non-performing assets:
 
 June
                  30, 2007
              
              
              December
                  31, 2006Accruing
                  loans 90 days past due
              
              $
              53,273
              
              
              $
              37,585Non-accrual
                  loans
              
              
              6,763,324
              
              
              
              502,233Other
                  real estate
              
              
              1,232,193
              
              
              
              537,975Restructured
                  loans
              
              
              32,088
              
              
              
              52,560Total
                  non-performing assets
              
              $
              8,080,878
              
              
              $
              1,130,353
 
 Nonperforming
        assets increased $6,950,525 or 614.90% from December 31, 2006 to June 30,
        2007.  See the discussion that follows within this section for a
        description of the assets that comprised this increase.
 
 Loans
        classified as 90 days past due increased $15,688 or 41.74% from December
        31,
        2006 to June 30, 2007.  The increase is the net result of the
        following changes:
 
 Balance
                  at December 31, 2006
              
              $
              37,585New
                  loans classified to 90 days past due status
              
              
              138,271Payments
                  received
              
              
              (112,844
              )Charge-off
              
              
              (9,739
              )Balance
                  at June 30,  2007
              
              $
              53,273The
                  following summarizes accruing loans 90 days past due:Commercial
                  loan
              
              $
              11,165Residential
                  loan
              
              
              2,125Consumer
                  loan
              
              
              39,983Total
                  accruing loans 90 days past due
              
              $
              53,273
  13
  Impaired
        loans consist of loans on non-accrual status.  The increase is the net
        result of the following changes:
 
 Balance
                  at December 31, 2006
              
              $
              502,233Loans
                  reclassified to non-accrual status in 2007
              
              
              10,335,410Payments
                  received on non-accrual loans during 2007
              
              
              (3,054,657
              )Non-accrual
                  loans charged-off during 2007
              
              
              (311,862
              )Non-accrual
                  loans reclassified to other real estate
              
              
              (700,960
              )Non-accrual
                  loans reclassified to accrual status in 2007
              
              
              (6,840
              )Balance
                  at June 30, 2007
              
              $
              6,763,324
 
 Additions
        to loans on non-accrual status consisted of thirty-eight real estate secured
        loans totaling $10,239,767, one commercial loan totaling $46,177 and eight
        consumer loans totaling $49,466.  Payments received on non-accrual
        loans include the payoff of a $2.5 million loan secured with lake
        property.  At June 30, 2007, non-accrual loans consist of nineteen
        loans for construction of 1-4 family residential housing, seven loans secured
        by
        1-4 family residential properties and four consumer loans totaling approximately
        $6.4 million, $301,000, and $25,000, respectively. The
        appraised value for the construction housing was approximately $9.3
        million.  The interest income recognized on such loans for the
        six-month periods ended June 30, 2007 and 2006 was not material.
 
 The
        Company’s other real estate consists of fifteen properties totaling $1,232,193
        at June 30, 2007 and six properties totaling $537,975 at December 31,
        2006.
 
 The
        increase in other real estate during the first six months of 2007 was the
        result
        of the foreclosure of three residential properties and eight vacant lots
        of
        approximately $448,960  and $278,783, respectively, offset by sales of
        approximately $33,525.
 
 At
        June  30, 2007, the Company’s other real estate consisted of the
        following:
 
 1-4
                  Family residential properties
              
              $
              181,926Rental
                  residential properties
              
              
              304,784Commercial
                  properties
              
              
              399,500Lots
              
              
              345,983Total
              
              $
              1,232,193
 
 Our
        Other
        Real Estate Owned (“OREO”) procedures provide that a foreclosure appraisal be
        obtained which provides a fair market value and a disposition (quick sale)
        value.  The disposition value is the valuation used to place the
        property into OREO.  Any difference between the disposition value and
        the loan balance is recommended for charge off.  Once the property is
        in OREO, the property is listed with a realtor to begin sales
        efforts.
 
 **Liquidity
        and Capital Resources**
 
 Liquidity
        management involves the matching of the cash flow requirements of customers,
        either depositors withdrawing funds or borrowers needing loans, and the ability
        of the Company to meet those requirements.
 
 The
        Company's liquidity program is designed and intended to provide guidance
        in
        funding the credit and investment activities of the Company while at the
        same
        time ensuring that the deposit obligations of the Company are met on a timely
        basis.  In order to permit active and timely management of assets and
        liabilities, these accounts are monitored regularly in regard to volume,
        mix,
        and maturity.
 
 The
        Company’s liquidity position depends primarily upon the liquidity of its assets
        relative to its need to respond to short-term demand for funds caused by
        withdrawals from deposit accounts and loan funding
        commitments.  Primary sources of liquidity are scheduled repayments on
        the Company’s loans and interest on and maturities of its investment
        securities.  Sales of investment securities available for sale
        represent another source of liquidity to the Company.  The Company may
        also utilize its cash and due from banks and federal funds sold to meet
        liquidity requirements as needed.
 
 The
        Company also has the ability, on a short-term basis, to purchase federal
        funds
        from other financial institutions up to $30.0 million.  At June 30,
        2007, the Company had $9,165,000 in federal funds
        purchased.  Presently, the Company has made arrangements with
        commercial banks for short-term advances under a repurchase agreement line
        of
        credit of which none was advanced at June 30, 2007. The Company has
        approximately $7,634,000 million outstanding in commercial sweep accounts
        at
        June 30, 2007.  In addition, the Company has a total available line of
        $38.0 million, subject to available collateral, from the Federal Home Loan
        Bank
        (FHLB).  At June 30, 2007, the Bank has utilized all of its available
        line with the FHLB.
  14
  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 June 30, 2007 and 2006 were 17.10% and 24.66%,
        respectively.  The ratio for June 30, 2007 reflects the impact of
        decreased in cash and due from bank balances and in the movement from a federal
        funds sold position to a federal funds purchased position.  Efforts
        are underway to bring these ratios into compliance with policy.
 
 At
        June
        30, 2007 Habersham Bancorp and Habersham Bank were required to have minimum
        Tier
        1 and total capital ratios of 4% and 8%, respectively.  Additionally,
        the Company and the Bank are required to maintain a leverage ratio (Tier
        1
        capital to average assets) of at least 4%.  The Company’s and the
        Bank’s ratios at June 30, 2007 follow:
 
 Habersham
              
              HabershamBank
              
              BancorpTier
                  1
              12.69%
              
              13.51%Total
                  Capital
              13.47%
              
              14.30%Leverage
              10.28%
              
              11.02%
 
 Item
        3.  Quantitative and Qualitative Disclosures About Market
        Risk.
 
 As
        of
        June 30, 2007 there were no substantial changes in the composition of the
        Company’s market-sensitive assets and liabilities or their related market values
        from that reported as of December 31, 2006.  The foregoing disclosures
        related to the market risk of the Company should be read in conjunction with
        the
        Company’s audited consolidated financial statements, related notes and
        management’s discussion and analysis of financial condition and results of
        operations for the year ended December 31, 2006 included in the Company’s 2006
        Annual Report on Form 10K.
 
 Item
        4.  Controls and Procedures
 
 As
        of the
        end of the period covered by this report, the Company’s management, including
        the Company’s Chief Executive Officer and Chief Financial Officer, reviewed and
        evaluated the effectiveness of the design and operation of the Company’s
        disclosure controls and procedures pursuant to Exchange Act Rule
        13a-15.  Based upon that evaluation, the Company’s Chief Executive
        Officer and Chief Financial Officer concluded that the Company’s disclosure
        controls and procedures are effective in timely alerting them to material
        information relating to the Company, (including its consolidated subsidiaries)
        that is required to be included in the Company’s periodic filings with the
        Securities and Exchange Commission.
 
 There
        have not been any changes in the Company’s internal control over financial
        reporting or, to the Company’s knowledge, in other factors, during the fiscal
        quarter to which this report relates that have materially affected, or are
        reasonably likely to materially affect, the Company’s internal control over
        financial reporting.
  15
  PART
        II
 
 OTHER
        INFORMATION
 
 Item
        1.  Legal proceedings.
 None
 
 Item
        1.A.
        Risk Factors.
 
 In
        addition to the other information set forth in this report, you should carefully
        consider the factors discussed in Part I. “Item 1.A. Risk Factors” in the
        Company’s Annual Report on Form 10-K for the year ended December 31, 2006, which
        could materially affect its business, financial condition or future
        results.  The risks described in the Annual Report of Form 10-K are
        not the only risks facing the Company.  Additional risks and
        uncertainties not currently known to management or that management currently
        deems to be immaterial also may materially adversely affect the Company’s
        business, financial condition and/or operating results.
 
 
 Item
        2.  Unregistered Sales of Equity Securities and Use of
        Proceeds
 
 Issuer
        Purchases of Equity Securities
 
 The
        following table sets forth information regarding the Company's purchases
        of its
        common stock on a monthly basis during the second quarter of 2007.
 
 Period
              
              Total
                  Number of Shares Purchased
              
              
              Average
                  Price Paid Per Share
              
              
              Total
                  Number of Shares (or Units) Purchased as Part of Publicly Announced
                  Plans
                  or Programs 1
              
              
              Maximum
                  Number (or Appropriate Dollar Value) of Shares (or Units) that
                  May Yet Be
                  Purchased Under the Plans or ProgramsApril
                  1 through April 30, 2007
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0May
                  1 through May 31, 2007
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0June
                  1 through June 30, 2007
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0Total
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0
  The
        Company does not have a publicly announced stock repurchase plan and did
        not
        otherwise repurchase any of its shares of common stock during the period
        covered
        by this report.  The Company did not terminate an existing stock
        repurchase plan during the period covered by this report.
  Item
        3.  Defaults upon senior securities.
 None
  16
 
 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 28, 2007.
 
 (b)
              The
                  business conducted at the meeting included the election of the
                  Board of
                  Directors.  The Directors elected at the meeting were: Edward D.
                  Ariail, Thomas A. Arrendale, III, Ben F. Cheek, III, Michael C.
                  Martin,
                  Michael L. Owen, James A. Stapleton, Jr., David D. Stovall, and
                  Calvin R.
                  Wilbanks.
 
 At
        the
        registrant’s Annual Meeting of Shareholders on April 28, 2007, 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.  There were no broker non-votes or abstentions.
 
 Name
              
              Votes
                  For
              
              Votes
                WithheldEdward
                  D. Ariail
              
              2,448,585
              
              90,664Thomas
                  A. Arrendale, III
              
              2,533,438
              
              5,811Ben
                  F. Cheek, III
              
              2,533,838
              
              5,411Michael
                  C. Martin
              
              2,533,838
              
              5,411Michael
                  L. Owen
              
              2,176,755
              
              367,494James
                  A. Stapleton, Jr.
              
              2,261,008
              
              278,241David
                  D. Stovall
              
              2,448,585
              
              90,664Calvin
                  R. Wilbanks
              
              2,261,008
              
              278,241
  Item
        5.  Other information.
 None
  Item
        6.  Exhibits
 
 (a)
        The
        registrant submits herewith as exhibits to this report on Form 10-Q the exhibits
        required by Item 601 of Regulation S-K, subject to Rule 12b-32 under the
        Securities Exchange Act of 1934.
 
 31.1           Certification
        of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
        Act of
        2002.
 
 31.2           Certification
        of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
        Act of
        2002.
 
 32            
         Certification of Chief Executive Officer and Chief Financial Officer
        Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  17
  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 13, 2007
              
              /S/
                  Annette BanksChief
                  Financial Officer(for
                  the Registrant and as the Registrant’s principal financial
                  and  accounting officer)
   18