<PAGE>   1
                    U.S. SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D. C. 20549

                                   FORM 10-Q

            X   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
           ---          SECURITIES EXCHANGE ACT OF 1934
                 For the quarterly period ended March 31, 1999


                  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
              ---       SECURITIES EXCHANGE ACT OF 1934
                 For the transition period from       to 
                                                -----    -----
                         Commission file number 0-13153


                               HABERSHAM BANCORP
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

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

  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 
                                                      ------       -----

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

 2,473,767 shares, common stock, $1.00 par value, as of April 30, 1999


<PAGE>   2






Item. 1   Financial Statements

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

<TABLE>
<CAPTION>
ASSETS                                             MARCH 31, 1999     DECEMBER 31, 1998

<S>                                                <C>                <C>      
Cash and due from banks                               $  15,205           $   5,799
Federal funds sold                                        1,500               8,300
Investment securities available for sale
 (cost of $44,960 at March 31, 1999 and
  $45,492 at December 31, 1998)                          45,149              46,340
Investment securities held to maturity
 (estimated fair values of $16,233 at
  March 31, 1999 and $15,889 at
  December 31, 1998)                                     16,066              15,610
Trading securities                                        2,964               3,495
Other investments                                         3,105               4,194

Loans held for sale                                      70,440              72,163

Loans                                                   218,117             209,735
  Less allowance for loan losses                         (2,955)             (2,709)
                                                      ---------           ---------
    Loans, net                                          215,162             207,026
                                                      ---------           ---------

Intangible assets                                         3,214               3,321
Other assets                                             17,850              17,821
                                                      ---------           ---------
    TOTAL ASSETS                                      $ 390,655           $ 384,069
                                                      =========           =========

LIABILITIES
Non-interest bearing deposits                         $  28,895           $  28,408
Interest bearing deposits                               251,716             252,045
Short-term borrowings and Federal funds
  purchased                                               7,787                 140
Other borrowings                                          2,700               2,700
Federal Home Loan Bank Advances                          52,064              53,811
Other liabilities                                        15,335              14,751
                                                      ---------           ---------
    TOTAL LIABILITIES                                   358,497             351,855
                                                      ---------           ---------

SHAREHOLDERS' EQUITY
Common Stock, $1.00 par value,
 10,000,000 shares authorized; 2,448,767 and
  2,448,267 shares issued at March
  31, 1999 and December 31, 1998,
  respectively                                            2,449               2,448
Additional paid-in capital                                9,445               9,445
Retained earnings                                        20,139              20,058
Accumulated other comprehensive income                      125                 263
                                                      ---------           ---------
    TOTAL SHAREHOLDERS' EQUITY                           32,158              32,214
                                                      ---------           ---------
    TOTAL LIABILITIES AND SHAREHOLDERS'
      EQUITY                                          $ 390,655           $ 384,069
                                                      =========           =========
</TABLE>


See notes to condensed consolidated financial statements.


<PAGE>   3

HABERSHAM BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) For the Three-Month Periods Ended March 31, 1999 and 1998 (dollars
in thousands, except per share amounts)

<TABLE>
<CAPTION>
INTEREST INCOME                                    1999              1998
<S>                                             <C>               <C>        
Loans                                           $     6,142       $     5,963
Investment securities                                   806               696
Federal funds sold                                       56               187
Other                                                   153                63
                                                -----------       -----------
  TOTAL INTEREST INCOME                               7,157             6,909

INTEREST EXPENSE
Time deposits, $100,000 and over                        800               790
Other deposits                                        2,186             2,380
Short-term and other borrowings, primarily
  FHLB advances                                         660               319
                                                -----------       -----------
  TOTAL INTEREST EXPENSE                              3,646             3,489

NET INTEREST INCOME                                   3,511             3,420
Provision for loan losses                               231               159
                                                -----------       -----------

NET INTEREST INCOME AFTER
 PROVISION FOR LOAN LOSSES                            3,280             3,261

OTHER INCOME
  Gain on sale of loans                               2,625             1,530
  Loan fee income                                       678               457
  Service charges on deposits                           167               153
  Other service charges and commissions                  72                61
  Travel service income                                 337               284
  Securities gains, net                                  21                19
  Unrealized loss on trading securities                (531)               --
  Other income                                          267               188
                                                -----------       -----------
    Total other income                                3,636             2,692

OTHER EXPENSES
  Salary and employee benefits                        4,247             3,293
  Occupancy                                             707               634
  Travel service expense                                303               259
  Computer services                                     163               132
  General and administrative expense                  1,240             1,072
                                                -----------       -----------
    Total other expense                               6,660             5,390

INCOME BEFORE INCOME TAXES                              256               563
Income tax expense                                       52               120
                                                -----------       -----------
NET INCOME                                      $       204       $       443
                                                ===========       ===========

NET INCOME PER COMMON SHARE - BASIC             $       .08       $       .18
                                                ===========       ===========
NET INCOME PER COMMON SHARE - DILUTED           $       .08       $       .18
                                                ===========       ===========

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING                                2,448,650         2,410,661
                                                ===========       ===========

WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES OUTSTANDING          2,448,650         2,508,224
                                                ===========       ===========

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



See notes to condensed consolidated financial statements.

<PAGE>   4


HABERSHAM BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) For the Three-Month Periods Ended March 31, 1999 and 1998
(dollars in thousands)

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

<S>                                                        <C>             <C>      
  Net income                                               $     204       $     443
  Adjustments to reconcile net income to net cash
   provided by (used in) operating activities:
      Provision for loan losses                                  231             159
      Depreciation                                               332             315
      Gain on sale of investment securities                      (21)            (19)
      Unrealized holding loss on trading securities              531              --
      Gain on sale of other real estate                           (7)            (10)
      Net gain on sale of loans                               (2,625)         (1,530)
      Amortization of intangible assets                          107              69
      Deferred income tax benefit                                 (8)             (1)
      Proceeds from sale of loans held for sale              158,264         112,544
      Net increase in loans held for sale                   (154,209)       (131,353)

  Changes in assets and liabilities:
     Decrease (increase) in interest receivable                   70             (28)
     Increase in other assets                                   (121)           (142)
     Decrease in interest payable                               (793)           (340)
     Increase in other liabilities                             1,377           6,972
                                                           ---------       ---------
  Net cash provided by (used in) operating activities          3,332         (12,921)
                                                           ---------       ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Investment securities available for sale:
    Proceeds from maturity                                     3,614           1,381
    Proceeds from sale                                         2,781           1,118
    Purchases                                                 (5,392)         (7,663)
  Investment securities held to maturity:
    Proceeds from maturity                                       777             785
    Purchases                                                 (1,233)             --
  Other investments:
    Proceeds from sale                                         1,754             443
    Purchases                                                   (665)           (520)
  Loans:
    Proceeds from sale                                        16,098          11,463
    Net increase in loans                                    (24,172)        (16,884)
  Purchases of premises and equipment                           (239)           (314)
  Proceeds from sale of premises and equipment                    --               6
  Proceeds from sale of other real estate                         15             103
                                                           ---------       ---------
    Net cash used in investing activities                     (6,662)        (10,082)
                                                           ---------       ---------
</TABLE>



<PAGE>   5


HABERSHAM BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED (Unaudited) For the
Three-Month Periods Ended March 31, 1999 and 1998 (dollars in thousands)


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

<S>                                                            <C>            <C>     
  Net increase in deposits                                          158         17,838
  Net increase (decrease) in short-term borrowings                7,647         (2,192)
  Repayment of Federal Home Loan Bank advances, net              (1,747)        (1,353)
  Cash dividends paid                                              (122)           (96)
  Issuance of common stock                                           --             31
                                                               --------       --------
    Net cash provided by financing activities                     5,936         14,228
                                                               --------       --------

Increase (decrease) in cash and cash equivalents                  2,606         (8,775)

CASH AND CASH EQUIVALENTS:  BEGINNING OF PERIOD                  14,099         29,808
                                                               --------       --------
CASH AND CASH EQUIVALENTS:  END OF PERIOD                      $ 16,705       $ 21,033
                                                               ========       ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
  Interest                                                     $  4,439       $  3,829
  Income taxes                                                       --             --

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
Other real estate acquired through loan foreclosures           $     --       $     79
Loans granted to facilitate the sale
  of other real estate                                               --            170
Unrealized loss on investment securities
  available for sale, net of tax effect                            (138)            (2)
</TABLE>

See notes to condensed consolidated financial statements.



<PAGE>   6

HABERSHAM BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements


1.       Basis of Presentation

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

         The condensed consolidated financial statements included herein should
be read in conjunction with the Company's 1998 consolidated financial
statements and notes thereto, included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1998.

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


2.       Accounting Policies

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


3.       Accounting Pronouncements

         In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income". This statement established standards for reporting and
display of comprehensive income and its components in a full set of general
purpose financial statements. SFAS No. 130 requires all items that are required
to be recognized under accounting standards as components of comprehensive
income be reported in a financial statement that is displayed in equal
prominence with the other financial statements. The term "comprehensive income"
is used in the statement to describe the total of all components of
comprehensive income including net income. "Other comprehensive income" refers
to revenues, expenses, gains, and losses that are included in comprehensive
income but excluded from earnings under current accounting standards.
Currently, other comprehensive income for the Company consists of items
previously recorded directly in equity under SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities". The Company adopted SFAS
No. 130 effective January 1, 1998. Comprehensive income for the three months
ended March 31, 1999 and 1998 was $342,000 and $441,000, respectively.


<PAGE>   7


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

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


4.       Segment Information

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

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

At and for the three months ended March 31, 1999

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

<S>                                 <C>            <C>            <C>                <C>             <C>             <C>     
Interest income                     $  6,340        $    981        $   (201)        $     37         $     --         $  7,157
Interest expense                       3,184             614            (201)              49               --            3,646

Provision for loan losses                109             122              --               --               --              231
Gain on sale of loans                    170           2,455              --               --               --            2,625
Other noninterest income                 517           1,086            (459)             195             (328)           1,011
Depreciation on premises &
  equipment                              221              94              --               17               --              332
Other noninterest expense              2,731           3,566            (542)             897             (324)           6,328
Income tax expense (benefit)             172              44              27             (191)              --               52
Net income (loss)                        610              82              56             (540)              (4)             204

Total assets                        $341,712        $ 73,405        $(27,532)        $  3,463         $   (393)        $390,655
</TABLE>








<PAGE>   8



At and for the three months ended March 31, 1998

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

<S>                                 <C>             <C>            <C>               <C>            <C>            <C>     
Interest income                     $  6,432        $    689        $   (212)        $      1               (1)        $  6,909
Interest expense                       3,234             467            (212)               1               (1)           3,489

Provision for loan losses                159              --              --               --               --              159
Gain on sale of loans                    134           1,396              --               --               --            1,530
Other noninterest income                 413             938            (517)             629             (301)           1,162
Depreciation on premises &
  equipment                              223              84              --                8               --              315
Other noninterest expense              2,577           2,385            (417)             827             (297)           5,075
Income tax expense (benefit)             186              29             (35)             (60)              --              120
Net income (loss)                        600              58             (65)            (146)              (4)             443


Total assets                        $314,427        $ 60,067        $(25,932)        $  1,638         $   (702)        $349,498
</TABLE>



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


HABERSHAM BANCORP AND SUBSIDIARIES

Organization

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


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

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


<PAGE>   9

Forward Looking Statements

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

         Forward-looking statements involve risks and uncertainties which may
cause actual results to differ materially from those in such statements. Facts
that could cause actual results to differ from those discussed in the
forward-looking statements include, but are not limited to: (1) the strength of
the U.S. economy in general and the strength of the local economies in which
operations are conducted; (2) the effects of and changes in trade, monetary and
fiscal policies and laws, including interest rate policies of the Board of
Governors of the Federal Reserve System; (3) inflation, interest rate, market
and monetary fluctuations; (4) the timely development of and acceptance of new
products and services and perceived overall value of these products and
services by users; (5) changes in consumer spending, borrowing and saving
habits; (6) the impact of Year 2000 and technological changes; (7)
acquisitions; (8) the ability to increase market share and control expenses;
(9) the effect of changes in laws and regulations (including laws and
regulations concerning taxes, banking, securities and insurance) with which the
Company and its subsidiaries must comply; (10) the effect of changes in
accounting policies and practices, as may be adopted by the regulatory agencies
as well as the Financial Accounting Standards Board; (11) changes in the
Company's organization, compensation and benefit plans; (12) the costs and
effects of litigation and of unexpected or adverse outcomes in such litigation;
and (13) the success of the Company at managing the risks involved in the
foregoing.

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


Material Changes in Financial Condition

         The Company's total assets increased approximately $7 million during
the first quarter of 1999 as a result of an increase in real estate secured
loans in the loan portfolios of Habersham Bank and Security State Bank of
approximately $8 million and an increase in cash and cash equivalents of
approximately $3 million. These increases were offset by a reduction in
mortgage loans held for sale of approximately $2 million and a decrease in the
investment securities portfolio of approximately $1


<PAGE>   10

million. The increase was funded primarily by short-term borrowings of
approximately $8 million offset by Federal Home Loan Bank repayments of
approximately $2 million.

         Nonperforming assets consist of nonaccrual loans, accruing loans 90
days past due, restructured loans and other real estate owned. Nonperforming
assets increased $575,740 or 10.64% from December 31, 1998 to March 31, 1999.
The increase for 1999 was primarily due to the addition of nonaccrual real
estate mortgages of approximately $797,000 from BancMortgage operations as well
as the addition of approximately $146,000 of other real estate secured loans
offset by decreases in 90 days past due loans, other real estate and
restructured loans of approximately $326,000, $8,000, and $33,000,
respectively.

         Additions to the allowance for loan losses are made periodically to
maintain the allowance at an appropriate level based upon management's analysis
of risk in the loan portfolio. The balance of the allowance for loan losses is
in accordance with the internal calculation of the allowance for loan losses
which considers factors such as classified and past due loans as well as
portfolio growth and diversification. A provision for loan losses in the amount
of $231,000 was charged to expense for the quarter ended March 31, 1999. This
provision for losses exceeded the net recoveries for the first quarter which
totaled $14,000. At March 31, 1999 and December 31, 1998, the ratio of
allowance for loan losses to total loans was 1.35% and 1.29%, respectively.
Management considers the current allowance for loan losses appropriate based
upon its analysis of the potential risk in the portfolio, although there can be
no assurance that the assumptions underlying such analysis will continue to be
correct.

         The Company had impaired loans of $2,952,165 and $2,009,258 as of
March 31, 1999 and December 31, 1998, respectively. Impaired loans consist of
loans on nonaccrual status. The interest income recognized on such loans for
the three-month periods ended March 31, 1999 and 1998 was not material.

         The Company's other real estate totaled $1,531,870 and $1,539,900 as
of March 31, 1999 and December 31, 1998, respectively. The decrease is due to
the sale of property.


Material Changes in Results of Operations

         Total interest income for the first quarter of 1999 increased $248,000
or 3.59%, when compared to the first quarter of 1998. Interest income from
loans increased $179,000 or 3.00% due to increases in the loan portfolios of
Habersham Bank, Security State Bank and BancMortgage offset by declining yields
on loans. Loan yields decreased by .58% to 8.98% for the first quarter of 1999
compared to yields of 9.56% for the first quarter of 1998.

         Interest income from investment securities increased $110,000 or
15.80% for the first quarter of 1999 when compared to the first quarter of
1998. The increase in interest income from investments was primarily due to
increases in the investment portfolios of Habersham Bank and Security State
Bank offset by declining yields on investment securities. Average yields on
investment securities decreased by .44% to 5.23% for the first quarter of 1999
compared to 5.67% for the first quarter of 1998.

         Total interest expense for the first quarter of 1999 increased
$157,000 or 4.50%, when compared to the first quarter of 1998. Interest expense
on deposits decreased $184,000 or 5.80%, when compared to the first quarter of
1998 due to changes in the mix of the deposit portfolio and a declining
interest rate environment. Total average deposits increased approximately $9
million or 3.62% when compared to the


<PAGE>   11

first quarter of 1998. Average NOW accounts and other deposit accounts
increased approximately $16 million offset by a decrease in average
certificates of deposit of approximately $7 million.

         Consolidated average rates on deposits decreased by .48% to 4.73%
during the first quarter of 1999 compared to 5.21% for the first quarter of
1998. Average rates for NOW and other deposit accounts and certificates of
deposit decreased to 2.55% and 5.54%, respectively during the first quarter of
1999 compared to 3.07% and 5.87%, respectively during the first quarter of
1998.

         Interest expense on short-term and other borrowings increased $341,000
or 106.90% when compared to the first quarter of 1998 primarily due to an
increase in average borrowings of approximately $27 million or 116.93% when
compared to the first quarter of 1998. Consolidated average rates on borrowings
decreased by .26% to 5.29% for the first quarter of 1999 compared to 5.55% for
the first quarter of 1998.

         Net interest income increased approximately $91,000 or 2.66%, for the
first quarter of 1999 as a result of the items discussed above.

         The net interest margin of the Company, the net interest income
divided by average earning assets, was 4.05% for the first quarter of 1999 as
compared to 4.37% for the first quarter of 1998. The decrease in net interest
margin resulted primarily from a decrease in the yield on loans and a decrease
in the yield on investment securities offset by an increase in the average
balances in other borrowings.

         Other income increased $944,000 or 35.07% for the first quarter of
1999 over the same period in 1998. This increase was due primarily to increases
in gains on sale of loans, loan fees, service charges on deposit accounts and
non interest income from travel and insurance affiliates of approximately
$1,095,000, $222,000, $25,000, and $72,000, respectively, offset by an
unrealized holding loss of $531,930 on the Company's trading securities, which
are subject to changes in market values.

         Other expenses increased $1,270,000 or 23.56% for the first quarter of
1999 over the same period in 1998. This increase was due to increased salary
and employee benefits, occupancy expenses, data processing expenses and other
expenses of approximately $954,000, $73,000, $31,000, and $212,000,
respectively. Salary and employee benefits increased primarily due to the
production volume generated by BancMortgage which compensates staff by
commissions that are directly related to production volume, as well as annual
salary adjustments. The increase in other expenses is primarily due to an
increase in advertising expense and public relations activities, office
supplies, and other expenses of approximately $91,000, $51,000, and $103,000,
respectively.

         Income tax expense for the three months ended March 31, 1999 and 1998
was $52,000 and $120,000, respectively. The effective tax rate for the three
months ended March 31, 1999 and 1998 was 20.31% and 21.31%, respectively. The
effective tax rate decreased due to an increase in tax exempt security income
as a percentage of income before income taxes.

Liquidity and Capital Resources

         Liquidity management involves the matching of cash flow requirements
of customers, either depositors withdrawing funds or borrowers needing loans,
and the ability of the Company to meet those requirements. In order to permit
active and timely management of assets and liabilities, these accounts are
monitored regularly in regard to volume, mix and maturity. The Company's
liquidity position depends


<PAGE>   12

primarily upon the liquidity of its assets relative to its need to respond to
short-term demand for funds caused by withdrawals from deposit accounts and
loan funding commitments. Primary sources of liquidity are scheduled payments
on the Company's loans and interest on and maturities of its investments.

         Habersham Bank's liquidity policy requires that the ratio of cash and
certain short-term investments to net withdrawable deposit accounts be at least
20% and Security Bank's liquidity policy requires a minimum of 25%. The
following table lists the liquidity ratios for the Banks at March 31, 1999.

<TABLE>
                         <S>                      <C>   
                         Habersham Bank           24.35%
                         Security Bank            24.12%
</TABLE>


         Habersham Bank has established various sources of funds to be used in
the management of its liquidity position. Federal funds agreement guidelines
totaling $14.5 million have been provided by Compass Bank, The Bankers Bank and
SunTrust Bank of Atlanta. Repurchase agreement guidelines are collateral based.
Also established is a borrowing arrangement for advances with a total available
credit line of $90 million at the Federal Home Loan Bank of Atlanta. Security
Bank has also established various sources of funds to be used in the management
of its liquidity position. Federal Funds agreement guidelines totaling $2.3
million have been provided by Compass Bank and The Bankers Bank. Also
established is a borrowing arrangement for advances with a total available
credit line of $3 million at the Federal Home Loan Bank of Atlanta.

         Security Bank's liquidity ratio, which did not meet the minimum
liquidity policy ratio, was primarily impacted by the non-renewal of certain
deposits which were matched by offsetting assets in marketable securities.
Efforts are underway to bring the liquidity ratio up to the minimum by
concentrating upon local deposit growth.

         At March 31, 1999, Habersham Bancorp, Habersham Bank, and Security
Bank were required to have minimum Tier 1 and total capital ratios of 4% and
8%, respectively. Additionally, the Company and the Banks are required to
maintain a leverage ratio (Tier 1 capital to average assets) of at least 4%.
The Company and the Banks' ratios at March 31, 1999 follow:

<TABLE>
<CAPTION>
                             Habersham        Security        Habersham
                                Bank            Bank           Bancorp
          <S>                <C>              <C>             <C>    
          Tier 1                9.01%          12.98%           10.42%
          Total Capital        10.07%          14.11%           11.49%
          Leverage              6.53%          10.84%            7.80%
</TABLE>


Interest Rate Sensitivity

         The objective of asset and liability management is to manage and
measure the level and volatility of earnings and capital by controlling
interest rate risk. To accomplish this objective, management makes use of
interest rate and income simulation models to perform current and dynamic
projections of interest income and equity, as well as more traditional asset
and liability management methods.

         The Company's historical performance in various economic climates is
considered by management in making long-term asset and liability decisions for
the Company.

         The relative interest rate sensitivity of the Company's assets and
liabilities indicates the extent to which the Company's net interest income may
be affected by interest rate movements. The Company's ability to reprice assets
and liabilities in


<PAGE>   13

the same dollar amounts and at the same time minimizes interest rate risks. One
method of measuring the impact of interest rate changes on net interest income
is to measure, in a number of time frames, the interest sensitivity gap, by
subtracting interest sensitive liabilities from interest sensitive assets, as
reflected in the following table. Such interest sensitivity gap represents the
risk, or opportunity, in repricing. If more assets than liabilities are
repriced at a given time in a rising rate environment, net interest income
improves; in a declining rate environment, net interest income deteriorates.
Conversely, if more liabilities than assets are repriced while interest rates
are rising, net interest income deteriorates; if interest rate are falling, net
interest income improves.

         The interest rate sensitivity analysis, calculated as of March 31,
1999, below has a three month negative gap of approximately $63 million
(interest bearing liabilities exceeding interest earning assets repricing
within three months).

<TABLE>
<CAPTION>
                                              DUE IN       DUE AFTER       DUE AFTER        DUE AFTER       DUE AFTER       TOTAL
                                               THREE     THREE THROUGH    SIX THROUGH      ONE THROUGH        FIVE
                                              MONTHS       SIX MONTHS    TWELVE MONTHS      FIVE YEARS        YEARS
<S>                                          <C>         <C>             <C>               <C>              <C>           <C>      
INTEREST EARNING ASSETS:
 Federal funds sold                          $   1,500                                                                    $   1,500
 Investment securities                           2,038      $   1,376       $   7,404       $  12,900       $  37,497        61,215
 Loans                                         117,746         19,201          36,225          38,633          76,752       288,557
                                             ---------      ---------       ---------       ---------       ---------     ---------
  Total interest earning assets                121,284         20,577          43,629          51,533         114,249       351,272
INTEREST BEARING LIABILITIES:
 Deposits
  Money Market and NOW                          62,730                                                                       62,730
  Savings                                        8,498                                                                        8,498
  Certificates of deposit                       52,726         32,626          54,187          40,949              --       180,488
 Borrowings                                     59,851             --              --           2,700              --        62,551
                                             ---------      ---------       ---------       ---------       ---------     ---------
  Total interest bearing
   liabilities                                 183,805         32,626          54,187          43,649              --       314,267



Excess(deficiency) of interest earning
 assets over(to) interest bearing
 liabilities                                 $ (62,521)     $ (12,049)      $ (10,558)      $   7,884       $ 114,249     $  37,005
                                             =========      =========       =========       =========       =========     =========

Cumulative gap                               $ (62,521)     $ (74,570)      $ (85,128)      $ (77,244)      $  37,005


Ratio of cumulative gap to total
 cumulative earning assets                     (51.55%)       (52.56%)        (45.89%)        (32.59%)         10.53%

Ratio of cumulative interest earning
  assets to interest bearing liabilities        65.99%         65.55%          68.54%          75.42%         111.78%
</TABLE>

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





<PAGE>   14



YEAR 2000

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

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

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

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

Remediation and Validation Phase - As a part of the remediation phase, a Year
2000 Contingency Committee developed a business resumption contingency plan as
well as a business remediation contingency plan. This Year 2000 Contingency
Plan has been completed and approved by the Boards of Directors. Validation of
the Plan should be complete by June 30, 1999. The Plan addresses worst case
scenarios such as total or partial failure of our mainframe operating system as
well as other software that plays an integral part in the day to day operations
of our Company. The Plan details the resources and procedures necessary to
manually process transactions in the event the core systems do not function on
January 1, 2000. Alternative methods of providing service in the event of other
disasters, such as a power failure, are addressed in the plan also. In
addition, the Company has made every attempt to address external risks,
primarily credit and liquidity, associated with our major customers and
businesses. The way that these material customers approach and comply with the
Year 2000 will have a potential significant impact on the Company. In an effort
to identify and manage the risks posed by those customers, the Company has
identified material customers; evaluated their Year 2000 preparedness through
questionnaires and interviews; assessed their Year 2000 risk to the Company;
and implemented appropriate controls to manage and mitigate their Year 2000
risk to the Company. Currently, there are no significant customers which are
rated as "high" Year 2000 risk and which the Company believes present a
significant risk of loss. This Year 2000 Contingency Plan has been completed
and approved by the Boards of Directors. Validation of the Plan should be
complete by June 30, 1999.


<PAGE>   15

Implementation Phase - Testing of our systems was substantially complete as of
December 31, 1998. All testing appears to have been successful. However, the
Company's information technology ("IT") systems are comprised of third party
application and operating systems used in accounting functions related to
lending and deposit activities. The IT systems also consist of hardware, both
including main frame computer equipment and personal computers. Since we are
not the manufacturer of the products and systems on which we rely, we have also
been working with our third party vendors to determine whether there are any
outstanding Year 2000 problems. All systems identified as mission critical have
been certified as Year 2000 compliant by vendors providing the software
applications or hardware. Non-IT systems, such as door security and vault time
locks which may be date sensitive, have been identified as well and have been
included in the testing program of the Company. These efforts are scheduled to
be completed well in advance of December 31, 1999.

         A Year 2000 Readiness Timeline shows the status of the Company's Year
2000 Action Plan covering 1998 and 1st quarter 1999: 

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

Cost - At December 31, 1998, costs incurred for Year 2000 related upgrades of
computer equipment and software totaled approximately $15,000 and are included
in other operating expenses. A Year 2000 budget of less than $100,000 has been
established for systems that must be upgraded or remediated during 1999.
Approximately $2,000 of directly related Year 2000 expense was incurred during
the first quarter of 1999.

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

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


<PAGE>   16

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

As of March 31, 1999, there were no substantial change from the interest rate
sensitivity analysis or the market value of portfolio equity for various
changes in interest rates calculated as of December 31, 1998. The foregoing
disclosures related to the market risk of the Company should be read in
conjunction with the Company's audited consolidated financial statements,
related notes and management's discussion and analysis of financial condition
and results of operations for the year ended December 31, 1998 included in the
Company's 1998 Annual report on Form 10K.

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.  Exhibits, list and reports on FORM 8-K

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

<TABLE>
<CAPTION>
Exhibit No.                  Document
-----------                  --------
<S>      <C>
 3.1     Amended and restated Articles of Incorporation of Habersham Bancorp,
         as amended. (1)

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

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

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

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

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

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

<PAGE>   17

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

11.1     Computation of Earnings Per Share.

27.0     Financial Data Schedule (for SEC use only).
</TABLE>

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

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

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

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

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

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

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

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


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












<PAGE>   18





                                   SIGNATURES

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

                                     HABERSHAM BANCORP
                                         (Registrant)


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