<PAGE>
                     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 September 30, 2002


             [ ] 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:

 2,803,968 shares, common stock, $1.00 par value, as of November 10, 2002


                                       1
<PAGE>
Item. 1   Financial Statements

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

<TABLE>
<CAPTION>
ASSETS                                         SEPTEMBER 30,  DECEMBER 31,
                                                   2002           2001
<S>                                            <C>            <C>
Cash and due from banks                         $  19,968      $  16,550
Investment securities available for sale
 (cost of $48,106 at September 30, 2002 and
  $46,855 at December 31, 2001)                    49,444         47,620
Investment securities held to maturity
 (estimated fair values of $8,881 at
  September 30, 2002 and $9,767 at
  December 31, 2001)                                8,475          9,646
Other investments                                   6,047          9,604

Loans held for sale                               144,112        115,464

Loans                                             299,214        325,064
  Less allowance for loan losses                   (3,778)        (3,836)
                                                ---------      ---------
    Loans, net                                    295,436        321,228
                                                ---------      ---------

Intangible assets                                   2,489          2,508
Other assets                                       24,903         23,883
                                                ---------      ---------
    TOTAL ASSETS                                $ 550,874      $ 546,503
                                                =========      =========
LIABILITIES

Noninterest bearing deposits                    $  37,621      $  31,136
Interest bearing deposits                         296,345        305,224
Short-term borrowings                                 791            269
Federal funds purchased and securities
  sold under repurchase agreements                 22,175         30,451
Other borrowings                                    3,083          5,773
Federal Home Loan Bank Advances                    93,118        100,416
Other liabilities                                  47,880         29,252
                                                ---------      ---------
    TOTAL LIABILITIES                             501,013        502,521
                                                ---------      ---------

SHAREHOLDERS' EQUITY
Common Stock, $1.00 par value,
 10,000,000 shares authorized;
 2,794,968 and 2,698,746 shares
 issued at September 30, 2002
 and December 31, 2001, respectively                2,795          2,699
Additional paid-in capital                         13,461         12,417
Retained earnings                                  32,722         28,361
Accumulated other comprehensive income                883            505
                                                ---------      ---------
    TOTAL SHAREHOLDERS' EQUITY                     49,861         43,982
                                                ---------      ---------
    TOTAL LIABILITIES AND SHAREHOLDERS'
      EQUITY                                    $ 550,874      $ 546,503
                                                =========      =========
</TABLE>

See notes to condensed consolidated financial statements.


                                       2
<PAGE>
HABERSHAM BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) For the Three-Month Periods Ended September 30, 2002 and 2001
(dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                            2002            2001
<S>                                                     <C>             <C>
INTEREST INCOME
Loans                                                   $     7,611     $     9,244
Investment securities                                           757             716
Federal funds sold                                                5              18
Other                                                            93             154
                                                        -----------     -----------
  TOTAL INTEREST INCOME                                       8,466          10,132

INTEREST EXPENSE
Time deposits, $100,000 and over                                835           1,221
Other deposits                                                1,476           2,824
Short-term and other borrowings, primarily
 FHLB advances                                                1,121           1,395
                                                        -----------     -----------
  TOTAL INTEREST EXPENSE                                      3,432           5,440

NET INTEREST INCOME                                           5,034           4,692
Provision for loan losses                                       403             404
                                                        -----------     -----------

NET INTEREST INCOME AFTER
 PROVISION FOR LOAN LOSSES                                    4,631           4,288

NONINTEREST INCOME
  Gain on sale of loans                                       7,529           6,696
  Loan fee income                                               932             840
  Brokerage fee income                                           36              99
  Service charges on deposits                                   186             165
  Other service charges and commissions                          65              76
  Securities gains, net                                           4             106
  Gain on sale of equity investee                               277              --
  Gain (loss) on change in fair value of derivative
   instruments                                                  385            (686)
  Other income                                                  409             480
                                                        -----------     -----------
    Total noninterest income                                  9,823           7,776

NONINTEREST EXPENSE
  Salary and employee benefits                                8,496           7,664
  Occupancy                                                     776             777
  Computer services                                             198             168
  General and administrative expense                          1,737           1,883
                                                        -----------     -----------
    Total noninterest expense                                11,207          10,492

INCOME BEFORE INCOME TAXES                                    3,247           1,572
Income tax expense                                            1,097             502
                                                        -----------     -----------
NET INCOME                                              $     2,150     $     1,070
                                                        ===========     ===========

NET INCOME PER COMMON SHARE - BASIC                     $       .77     $       .40
                                                        ===========     ===========


NET INCOME PER COMMON SHARE - DILUTED                   $       .75     $       .39
                                                        ===========     ===========


WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING                                        2,784,813       2,698,746
                                                        ===========     ===========
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES OUTSTANDING                  2,857,534       2,738,387
                                                        ===========     ===========

Dividends per share                                     $       .06     $       .06
                                                        ===========     ===========
</TABLE>

See notes to condensed consolidated financial statements.


                                       3
<PAGE>
HABERSHAM BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) For the Nine-Month Periods Ended September 30, 2002 and 2001
(dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                  2002            2001
<S>                                                           <C>             <C>
INTEREST INCOME
Loans                                                         $    22,416     $    29,377
Investment securities                                               2,270           2,200
Federal funds sold                                                     22              32
Other                                                                 329             547
                                                              -----------     -----------
  TOTAL INTEREST INCOME                                            25,037          32,156

INTEREST EXPENSE
Time deposits, $100,000 and over                                    2,625           4,148
Other deposits                                                      4,959           9,633
Short-term and other borrowings, primarily
  FHLB advances                                                     3,013           4,804
                                                              -----------     -----------
  TOTAL INTEREST EXPENSE                                           10,597          18,585

NET INTEREST INCOME                                                14,440          13,571
Provision for loan losses                                           1,080           1,120
                                                              -----------     -----------

NET INTEREST INCOME AFTER
 PROVISION FOR LOAN LOSSES                                         13,360          12,451

NONINTEREST INCOME
  Gain on sale of loans                                            18,685          16,421
  Loan fee income                                                   2,592           2,682
  Brokerage fee income                                                150             408
  Service charges on deposits                                         527             502
  Other service charges and commissions                               191             217
  Securities gains, net                                               843             156
  Gain on sale of equity investee                                     277              --
  Gain (loss) on change in fair value of derivative
   instruments                                                        385             (17)
  Other income                                                      1,619           1,491
                                                              -----------     -----------
    Total noninterest income                                       25,269          21,860

NONINTEREST EXPENSE
  Salary and employee benefits                                     23,213          20,034
  Occupancy                                                         2,357           2,413
  Computer services                                                   572             534
  General and administrative expense                                5,456           5,283
                                                              -----------     -----------
    Total noninterest expense                                      31,598          28,264

INCOME BEFORE INCOME TAXES                                          7,031           6,047
Income tax expense                                                  2,177           2,002
                                                              -----------     -----------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
  IN ACCOUNTING PRINCIPLE, NET OF TAX                               4,854           4,045
Cumulative effect of change in accounting
   principle, net of tax                                               --            (162)
                                                              -----------     -----------
NET INCOME                                                    $     4,854     $     3,883
                                                              ===========     ===========

Income before cumulative effect of change
  in accounting principle per common share- basic             $      1.78     $      1.50
Cumulative effect of change in accounting
  principle per common share - basic                                   --            (.06)
                                                              -----------     -----------
NET INCOME PER COMMON SHARE - BASIC                           $      1.78     $      1.44
                                                              ===========     ===========

Income before cumulative effect of change
  in accounting principle per common share - diluted          $      1.73     $      1.49
Cumulative effect of change in accounting
  principle per common share - diluted                                 --            (.06)
                                                              -----------     -----------
NET INCOME PER COMMON SHARE - DILUTED                         $      1.73     $      1.43
                                                              ===========     ===========

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING                                              2,734,464       2,698,746
                                                              ===========     ===========
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES OUTSTANDING                        2,807,805       2,723,717
                                                              ===========     ===========

Dividends per share                                           $       .18     $       .18
                                                              ===========     ===========
</TABLE>

See notes to condensed consolidated financial statements


                                       4
<PAGE>
HABERSHAM BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) For the Nine-Month Periods Ended September 30, 2002 and 2001
(dollars in thousands)

<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:                         2002                    2001
<S>                                                        <C>                     <C>
  Net income                                               $   4,854               $   3,883
  Cumulative effect of change in accounting principle             --                     162
  Adjustments to reconcile net income to net cash
      Used in operating activities:
      Provision for loan losses                                1,080                   1,120
      Depreciation                                               918                   1,010
      Gain on sale of investment securities                     (843)                   (156)
      (Increase) decrease in fair value of
        derivative instruments                                  (385)                     17
      Loss (gain) on sale of premises & equipment                 11                     (25)
      Loss on sale of other real estate                           57                      30
      Write down of other real estate                             98                      --
      Net gain on sale of loans                              (18,685)                (16,421)
      Amortization of intangible assets                           19                     193
      Equity in (loss) earnings of investee                       45                     (85)
      Gain on sale of equity investee                           (277)                     --
      Deferred income tax expense                                 28                      47
      Proceeds from sale of loans held for sale              926,544                 812,327
      Originations of loans held for sale                   (936,728)               (831,172)

  Changes in assets and liabilities:
      Decrease in interest receivable                            575                     934
      (Increase) decrease in other assets                     (3,428)                   (113)
      Decrease in interest payable                            (1,168)                 (1,085)
      Increase in other liabilities                           19,796                  26,220
                                                           ---------               ---------
  Net cash used in operating activities                       (7,489)                 (3,114)
                                                           ---------               ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Investment securities available for sale:
      Proceeds from maturity                                   8,554                   6,277
      Proceeds from sale and call                             10,934                   7,484
      Purchases                                              (19,896)                (13,145)
  Investment securities held to maturity:
      Proceeds from maturity and call                          1,171                   2,360
  Other investments:
      Proceeds from sale                                       3,234                   9,719
      Purchases                                               (2,815)                 (8,103)
      Proceeds from sale of equity investee                    3,308                      --
  Loans:
      Proceeds from sale                                      29,348                  96,057
      Net increase in loans                                   (7,216)                (30,415)
  Purchases of premises and equipment                         (1,559)                   (741)
  Proceeds from sale of premises & equipment                     193                      43
  Proceeds from sale of other real estate                      5,096                     870
  Net additions of other real estate                             (18)                   (548)
  Dividends received from other investment                        62                      62
                                                           ---------               ---------
  Net cash provided by investing activities                   30,396                  69,920
                                                           ---------               ---------
</TABLE>


                                       5
<PAGE>
HABERSHAM BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(Unaudited) For the Nine-Month Periods Ended September 30, 2002 and 2001
(dollars in thousands)

<TABLE>
<CAPTION>
CASH FLOWS FROM FINANCING ACTIVITIES:                           2002          2001
<S>                                                           <C>           <C>
  Net decrease in deposits                                      (2,394)       (4,894)
  Net increase (decrease) in short-term borrowings                 522           (82)
  Net decrease in federal funds purchased and
    securities sold under repurchase agreements                 (8,276)      (26,577)
  Repayment of notes payable                                    (2,690)           --
  Repayment of Federal Home Loan
    Bank advances, net                                          (7,298)      (35,329)
  Proceeds from long-term borrowings                                --         4,000
  Repayments of long-term borrowings                                --           (89)
  Issuance of common stock                                       1,140            --
  Cash dividends paid                                             (493)         (486)
                                                              --------      --------
    Net cash used in financing activities                      (19,489)      (63,457)
                                                              --------      --------

Increase in cash and cash equivalents                            3,418         3,349

CASH AND CASH EQUIVALENTS:  BEGINNING OF PERIOD                 16,550        13,566
                                                              --------      --------
CASH AND CASH EQUIVALENTS:  END OF PERIOD                     $ 19,968      $ 16,915
                                                              ========      ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
  Interest                                                    $ 11,765      $ 19,670
  Income taxes                                                   2,490           827

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:

Other real estate acquired through loan foreclosures          $  2,801      $  1,727
Loans granted to facilitate the sale
  of other real estate                                              --           195
Unrealized gain on investment securities
  available for sale, net of tax effect                            378           838
Transfer of held to maturity securities to
  available for sale securities upon adoption of
  SFAS No. 133                                                      --           999
</TABLE>

See notes to condensed consolidated financial statements.


                                       6
<PAGE>
HABERSHAM BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements

1.  Basis of Presentation

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

    The condensed consolidated financial statements included herein should be
read in conjunction with the Company's 2001 consolidated financial statements
and notes thereto, included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2001.

2.  Other Comprehensive Income

    "Other comprehensive income" refers to revenues, expenses, gains, and losses
that are included in comprehensive income but excluded from earnings under
current accounting standards. Currently, other comprehensive income for the
Company consists of items recorded directly in equity under Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Comprehensive income for the nine
months ended September 30, 2002 and 2001 was $5,232,000 and $4,721,000,
respectively, and for the three months ended September 30, 2002 and 2001 was
$2,572,000 and $1,506,000, respectively.

3.  Derivative Instruments

    The Company adopted SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities", as amended, on January 1, 2001. In accordance with the
transition provisions of SFAS No. 133, the Company recorded a net-of-tax
cumulative effect loss of $162,000 on January 1, 2001 to reflect the fair value
of its forward commitments to sell mortgage-backed securities. The provisions of
SFAS No. 133 allow for a one-time transfer of investment securities previously
classified as held to maturity to available for sale upon adoption. As a result,
the Company transferred approximately $999,000 of investment securities
previously classified as held to maturity to its available for sale portfolio on
January 1, 2001.

    In the normal course of business, the Company extends interest rate lock
commitments to borrowers who apply for loan funding and meet certain credit and
underwriting criteria. Such commitments are typically for short terms. With the
exception of commitments to originate fixed-rate mortgage loans for resale and
forward commitments to sell mortgage-backed securities, the Company does not
hold any derivative instruments.

    The Company's objective in entering into forward commitments to sell
mortgage-backed securities is to mitigate the interest rate risk associated with
commitments to originate fixed-rate mortgage loans and mortgage loans held for
sale. Prior to the third quarter of 2002, the fair value of the Company's
commitments to originate


                                       7
<PAGE>
fixed-rate mortgage loans for resale resulted in an asset, such asset was
recorded only to the extent of losses in the forward commitments to sell
mortgage-backed securities and losses were recorded on the Company's commitments
to originate fixed-rate mortgage loans for resale when fair values were less
than carrying values. Beginning in the third quarter of 2002, the Company has
recorded its interest rate lock commitments at fair value, even if this results
in an asset being recorded. The Company records its forward commitments to sell
mortgage-backed securities at fair value and does not account for these as
hedges. During the quarters ended September 30, 2002 and 2001, gains and losses
relating to the change in fair value of derivative instruments in the amounts of
$385,000 and $(686,000), respectively, were recorded in income. During the
nine-month period ended September 30, 2002, there was a gain of $385,000 in the
fair value of derivative instruments, compared to a loss of $(17,000)for the
nine-month period ending September 30, 2001.

4. Accounting Pronouncements

    In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, "Business Combinations," which is effective for all business
combinations initiated after June 30, 2001. SFAS No. 141 requires companies to
account for all business combinations using the purchase method of accounting,
recognize intangible assets if certain criteria are met, as well as provide
additional disclosures regarding business combinations and allocation of
purchase price. Because the Company has not initiated any business combinations
since the effective date of SFAS No. 141, this pronouncement has not impacted
the Company's consolidated financial statements.

    In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets," which eliminates amortization of goodwill and intangible assets that
have indefinite useful lives and requires annual tests of impairments of those
assets. SFAS No. 142 also provides specific guidance about how to determine and
measure goodwill and intangible asset impairments, and requires additional
disclosures of information about goodwill and other intangible assets. The
Company adopted the provisions of SFAS No. 142 effective January 1, 2002.

    In accordance with the provisions of SFAS No. 142, the Company is required
to test its goodwill for impairment. To accomplish this the Company identified
its reporting units and determined the carrying value of each reporting unit by
assigning the assets and liabilities, including the existing goodwill and
intangible assets, to those reporting units as of the date of adoption. The
Company has up to six months from the date of adoption to determine the fair
value of each reporting unit and compare it to the reporting unit's carrying
amount. To the extent a reporting unit's carrying amount exceeds its fair value,
an indication exists that the reporting unit's goodwill may be impaired and the
Company must perform the second step of the transitional impairment test. Any
transitional impairment loss is recognized as the cumulative effect of a change
in accounting principle in the Company's statement of earnings. The Company
completed the test for goodwill impairment as required under SFAS No. 142 during
the second quarter of 2002 and determined that the goodwill recorded as of
January 1, 2002 was not impaired.

    At September 30, 2002 and December 31, 2001, the Company had net unamortized
goodwill of approximately $2,499,000. At December 31, 2001, the Company had net
unamortized equity-method goodwill of approximately $1,058,000. The following is
a summary of net income and net income per share for the three and nine months
ended September 30, 2001 excluding goodwill amortization expense.


                                       8
<PAGE>
<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED NINE MONTHS ENDED
                                               SEPTEMBER 30, 2001 SEPTEMBER 30, 2001
<S>                                            <C>                <C>
Reported net income                               $   1,070,000     $   3,883,000
Add back: goodwill amortization                          32,000            97,000
Add back: equity-method goodwill amortization            21,000            64,000
                                                  -------------     -------------
Adjusted net income                               $   1,123,000     $   4,044,000
                                                  =============     =============

BASIC NET INCOME PER SHARE:
Reported net income                               $         .40     $        1.44
Add back: goodwill amortization                             .01               .04
Add back: equity-method goodwill amortization               .01               .02
                                                  -------------     -------------
Adjusted net income                               $         .42     $        1.50
                                                  =============     =============

DILUTED NET INCOME PER SHARE:
Reported net income                               $         .39     $        1.43
Add back: equity-method goodwill amortization               .01               .04
Add back: goodwill amortization                             .01               .02
                                                  -------------     -------------
Adjusted net income                               $         .41     $        1.49
                                                  =============     =============
</TABLE>

    In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS No. 143 applies to all entities. SFAS
No. 143 applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition, construction, development,
and (or) the normal operation of a long-lived asset, except for certain lease
obligations. SFAS No. 143 is effective for financial statements issued for
fiscal years beginning after June 15, 2002. Management does not expect the
adoption of SFAS No. 143 to have a material effect on its financial condition or
results of operations.

    In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets," which addresses financial accounting and
reporting for the impairment of long-lived assets and for long-lived assets to
be disposed of. The provisions of SFAS No. 144 are effective for financial
statements issued for fiscal years beginning after December 15, 2001. The
Company adopted the provisions of SFAS No. 144 on January 1, 2002. The adoption
of SFAS No. 144 did not have a material impact on the Company's consolidated
financial statements.

    In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 44, and 64," "Amendment of FASB Statement No. 13," and "Technical
Corrections." SFAS No. 145 updates, clarifies, and simplifies existing
accounting pronouncements. SFAS No. 145 requires that in certain circumstances
previous items classified as extraordinary that do not meet the criteria in
Opinion 30 must be reclassified. FASB No. 145 is effective for fiscal years
beginning after May 15, 2002. Management does not expect the adoption of SFAS
No. 145 to have a material effect on the Company's financial condition or
results of operations.

    In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 addresses financial accounting
and reporting for costs associated with exit or disposal activities. SFAS No.
146 requires recognition of a liability for a cost associated with an exit or
disposal activity when the liability is incurred, as opposed to when the entity
commits to an exit plan under EITF No. 94-3. SFAS No. 146 is effective
prospectively for exit or disposal activities initiated after December 31, 2002.
Management does not anticipate


                                       9
<PAGE>
that SFAS No. 146 will have a material impact on the Company's financial
condition or results of operations.

    In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Institutions." SFAS No. 147 removes acquisitions of financial
institutions from the scope of both SFAS No. 72, "Accounting for Certain
Acquisitions of Banking or Thrift Institutions," and FASB Interpretation No. 9,
"Applying APB Opinions No. 16 and 17 When a Savings and Loan Association or a
Similar Institution is Acquired in a Business Combination Accounted for by the
Purchase Method" and requires that those transactions be accounted for in
accordance with FASB Statements No. 141, "Business Combinations," and No. 142,
"Goodwill and Other Intangible Assets." In addition, SFAS No. 147 amends SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," to
include in its scope long-term customer-relationship intangible assets of
financial institutions such as depositor- and borrower-relationship intangible
assets and credit cardholder intangible assets. SFAS No. 147's transition
provisions require affected institutions to reclassify their SFAS No. 72
goodwill as SFAS No. 142 goodwill as of the date the Company initially applied
SFAS No. 142 in its entirety, if such SFAS No. 72 goodwill resulted from a
business combination. Since the Company had no SFAS No. 72 goodwill upon
adoption, the adoption of SFAS No. 147 did not have a material impact on the
Company's financial condition or results of operations.


5. Segment Information

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

    Since forming BancMortgage Financial Corp. in December of 1995, loan volume
has consistently grown to approximately $448 million for the quarter ended
September 30, 2002. This increase in volume has required corresponding increases
in capital and funding from the Bank that could be difficult to sustain. As a
result, management has determined that it is in the Company's best interests to
either renegotiate certain aspects of its agreement with the BancMortgage
management team or sell BancMortgage to certain members of its management team
under the terms of the Mortgage Banking Agreement dated January 2, 1996 by and
among the Company, the Bank, BancMortgage, Robert S. Cannon and Anthony L. Watts
(the "Agreement"). The Agreement provides that Messrs. Cannon and Watts, who
currently serve as BancMortgage's co-chief executive officers, have a right of
first refusal to purchase BancMortgage at a price equal to its current value,
which was equal to $9.46 million at September 30, 2002. Messrs. Cannon and Watts
have exercised this right, and if they are able to obtain financing to
consummate this transaction, the sale will occur during the current fiscal year.
While at September 30, 2002, it was not considered probable that this
transaction would occur, on November 7, 2002, Messrs, Cannon and Watts presented
the Company with an agreement to purchase BancMortgage and the parties are
negotiating that agreement.

    The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates
performance based on net income of the respective segments. The following
represents segment information for the respective periods:


                                       10

<PAGE>
At and for the three months ended September 30, 2002

<TABLE>
<CAPTION>
                                           Mortgage
                                Banking     Banking    Eliminations    Other    Eliminations    Consolidated
<S>                            <C>         <C>         <C>            <C>       <C>             <C>
Interest income                $  6,725     $ 1,865        $(124)      $   -        $   -       $  8,466
Interest expense                  2,842         682         (124)         32            -          3,432
Provision for loan losses           263         140            -           -            -            403
Gain on sale of loans                94       7,435            -           -            -          7,529
Other noninterest income            619       1,571         (177)        620         (338)         2,294
Depreciation on premises &
  equipment                         138         130            -          18            -            286
Other noninterest expense         2,778       8,094         (177)        564         (338)        10,921
Income tax expense (benefit)        359         740            -          (2)           -          1,097
Net income (loss)                   927       1,227            -          (4)           -          2,150

Total assets                   $431,169    $151,196     $(35,428)     $4,809        $(872)      $550,874
</TABLE>


At and for the three months ended September 30, 2001

<TABLE>
<CAPTION>
                                           Mortgage
                                Banking     Banking    Eliminations    Other    Eliminations    Consolidated
<S>                            <C>         <C>         <C>            <C>       <C>             <C>
Interest income                $  8,282     $ 2,013        $(178)      $  15        $   -       $ 10,132
Interest expense                  4,578         950         (178)         90            -          5,440
Provision for loan losses           214         190            -           -            -            404
Gain on sale of loans               137       6,559            -           -            -          6,696
Other noninterest income            725         378         (157)        471         (337)         1,080
Depreciation on premises &
  equipment                         146         169            -          17            -            332
Other noninterest expense         3,011       7,069         (157)        574         (337)        10,160
Income tax expense (benefit)        376         181            -         (55)           -            502
Net income (loss)                   707         482            -        (119)           -          1,070

Total assets                   $420,938    $ 99,783     $(16,540)     $5,725        $(399)      $509,507
</TABLE>


At and for the nine months ended September 30, 2002

<TABLE>
<CAPTION>
                                           Mortgage
                                Banking     Banking    Eliminations    Other    Eliminations    Consolidated
<S>                            <C>         <C>         <C>            <C>       <C>             <C>
Interest income                $ 20,631     $ 4,669        $(263)      $   -        $   -       $ 25,037
Interest expense                  9,169       1,574         (263)        117            -         10,597
Provision for loan losses           887         193            -           -            -          1,080
Gain on sale of loans               162      18,523            -           -            -         18,685
Other noninterest income          1,931       4,054         (698)      2,311       (1,014)         6,584
Depreciation on premises &
   equipment                        402         466            -          50            -            918
Other noninterest expense         8,856      21,798         (698)      1,738       (1,014)        30,680
Income tax expense                  746       1,291            -         140            -          2,177
Net income                        2,209       2,375            -         270            -          4,854

Total assets                   $431,169    $151,196     $(35,428)     $4,809      $  (872)      $550,874
</TABLE>


                                       11
<PAGE>
At and for the nine months ended September 30, 2001

<TABLE>
<CAPTION>
                                           Mortgage
                                Banking     Banking    Eliminations    Other    Eliminations    Consolidated
<S>                            <C>         <C>         <C>            <C>       <C>             <C>
Interest income                $ 27,671     $ 5,145        $(704)      $  44        $   -       $ 32,156
Interest expense                 16,190       2,937         (704)        162            -         18,585
Provision for loan losses           643         477            -           -            -          1,120
Gain on sale of loans               483      15,938            -           -            -         16,421
Other noninterest income          2,108       3,646         (691)      1,391       (1,015)         5,439
Depreciation on premises &
   equipment                        445         505            -          60            -          1,010
Other noninterest expense         8,780      18,326         (691)      1,854       (1,015)        27,254
Income tax expense (benefit)      1,193         962            -        (153)           -          2,002
Net income (loss)                 2,497       1,755            -        (369)           -          3,883

Total assets                   $420,938    $ 99,783     $(16,540)     $5,725        $(399)      $509,507
</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") and The Advantage Group, Inc. Habersham Bank
owns all of the outstanding stock of BancMortgage Financial Corp
("BancMortgage"), and Advantage Insurers, Inc. ("Advantage Insurers"). The
Advantage Group, Inc., a non-bank subsidiary which engages in the business of
providing marketing and advertising services, ceased operation September 30,
2001. Advantage Insurers, which began operations on March 31, 1997, offers a
full line of property, casualty, and life insurance products.

      The Advantage Group, Inc. and Advantage Insurers do not comprise a
significant portion of the financial position, results of operations, or cash
flows of the Company. Management's discussion and analysis, which follows,
relates primarily to Habersham Bank and BancMortgage.

      BancMortgage was organized in 1996 as a full service mortgage and
construction lending company located in the northern Atlanta metropolitan area.
During 1997, BancMortgage acquired for approximately $60,000 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. Concurrent with the acquisition of The Prestwick
Mortgage Group, BancMortgage also formed BancFinancial Services Corporation, a
full-service wholesale mortgage lender specializing in sub-prime mortgage loans.
The Prestwick Mortgage Group and BancFinancial Services Corporation are based in
Virginia.

      Since forming BancMortgage Financial Corp. in December of 1995, loan
volume has consistently grown to approximately $448 million for the quarter
ended September 30, 2002. This increase in volume has required corresponding
increases in capital and funding from the Bank that could be difficult to
sustain. As a result, management has determined that it is in the Company's best
interests to either renegotiate certain aspects of its agreement with the
BancMortgage management team or sell BancMortgage to certain members of its
management team under the terms of the Mortgage Banking Agreement dated January
2, 1996 by and among the Company, the Bank,


                                       12
<PAGE>
BancMortgage, Robert S. Cannon and Anthony L. Watts (the "Agreement"). The
Agreement provides that Messrs. Cannon and Watts, who currently serve as
BancMortgage's co-chief executive officers, have a right of first refusal to
purchase BancMortgage at a price equal to its current book value, which was
equal to $9.46 million at September 30, 2002. Messrs. Cannon and Watts have
exercised this right, and if they are able to obtain financing to consummate
this transaction, the sale will occur during the current fiscal year. Although
BancMortgage represents a significant portion of our consolidated revenues, we
believe that its sale, if consummated, will ultimately be accretive to earnings
in view of the anticipated accompanying decrease in capital funding requirements
and compensation and other expenses relating to the operation of the subsidiary.

      During 1999, BancMortgage formed a wholly owned subsidiary, BancMortgage
Reinsurance LTD., a reinsurance company incorporated in Turks and Caicos. The
subsidiary provides insurance to companies offering private mortgage insurance.

Forward Looking Statements

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

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


                                       13
<PAGE>
      Such forward-looking statements speak only as of the date on which such
statements are made, and the Company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events.

Critical Accounting Policies

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

      These policies are described in note 1 to the consolidated financial
statements which were presented in the Company's 2001 annual report on Form
10-K. Of these policies, management believes that the accounting for the
allowance for loan losses is the most critical.

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

      The risk associated with lending varies with the creditworthiness of the
borrower, the type of loan (consumer, commercial, or real estate) and its
maturity. Cash flows adequate to support a repayment schedule is an element
considered for all types of loans. Real estate loans are impacted by market
conditions regarding the value of the underlying property used as collateral.
Commercial loans are also impacted by the management of the business as well as
economic conditions.

      The allowance for loan losses methodology is based on a loan
classification system. For purposes of determining the required allowance for
loan losses and resulting periodic provisions, the Company identifies the
problem loans in its portfolio and segregates the remainder of the loan
portfolio into broad segments, such as commercial, commercial real estate,
residential mortgage, and consumer. The Company provides for a general allowance
for losses inherent in the portfolio for each of the above categories. The
general allowance is calculated based on estimates of inherent losses which
probably exist as of the evaluation date. Loss percentages used for non-problem
loans in the portfolio are based on historical loss factors. The general
allowance for losses on problem loans is based on a review and evaluation of
these loans, taking into consideration financial condition and strengths of the
borrower, related collateral, cash flows available for debt repayment, and known
and expected economic conditions. General loss percentages for the problem loans
are determined based upon historical loss experience and regulatory
requirements. For loans considered impaired, specific allowances are provided in
the event that the specific collateral analysis on each problem loan indicates
that the liquidation of the collateral would not result in repayment of these
loans if the loan is collateral dependent or if the present value of expected
future cash flows on the loan are less than the balance. In addition to these
allocated reserves, the Company had established an unallocated reserve of
approximately $175,000 at December 31, 2001. There were approximately $140,000
in unallocated reserves at September 30, 2002. The unallocated reserve at
December 31, 2001 and September 30, 2002 was due to a number of qualitative
factors, such as concentrations of credit and changes in the outlook


                                       14
<PAGE>
for local and regional economic conditions. Management believes its allowance
for loan losses is adequate to absorb losses on loans outstanding at September
30, 2002.

Material Changes in Financial Condition

      The Company's total assets increased $4.4 million, to $550.9 million at
September 30, 2002 from $546.5 million at December 31, 2001. The increase was
primarily due to an increase in loans held for sale of approximately $28.6
million as a result of an increase in production at BancMortgage due to a lower
interest rate environment. Total loans at Habersham Bank decreased $25.8
million, to $295.4 million at September 30, 2002 from $321.2 million at December
31, 2001. The decrease was due primarily to a reduction in real estate mortgage
and construction loans of approximately $4.9 million and $9.7 million,
respectively, as well as the increase in the related participations of these
loans by approximately $8.8 million. Also, the Company sold its credit card
portfolio totaling approximately $2.0 million during the first quarter of 2002.

      Investment securities available for sale and held to maturity increased
approximately $600,000 to $57.9 million at September 30, 2002 from $57.3 million
at December 31, 2001. This increase resulted from purchases in the available for
sale portfolio of approximately $19.9 million offset by maturities of $8.6
million and sales and calls of approximately $10.9 million. The $10.9 million in
sales and calls included the sale of the Company's investment in FLAG Financial
common stock for approximately $2.2 million resulting in a gain of approximately
$838,000.

      Other investments decreased $3.6 million to $6.0 million at September 30,
2002 from $9.6 million at December 31, 2001. This reduction was due to the
redemption of $400,000 in FHLB stock during the first nine months of 2002 and
the sale of the Company's $3.1 million investment in CB Financial on September
30, 2002 resulting in a gain of approximately $277,000.

      Total liabilities decreased $1.5 million, to $501.0 million at September
30, 2002 from $502.5 million at December 31, 2001. Total borrowings decreased
from $136.9 million at December 31, 2001 to $119.2 million at September 30,
2002. The Company repaid $7.3 million and $6.6 million in FHLB advances and in
federal funds purchased, respectively, during the first nine months of 2002. In
October, 2002, the Company paid the note payable in the amount of $3,082,800 to
National Bank of Commerce in Alabama.

Material Changes in Results of Operations

      Total interest income for the third quarter of 2002 decreased $1,666,000
or 16.44%, when compared to the third quarter of 2001. Total interest income for
the first nine months of 2002 decreased $7,119,000 or 22.14% when compared to
the first nine months of 2001. The decrease in both the three month and nine
month periods is primarily due to the lower interest rate environment during
2002 compared to 2001.

      Interest income from loans for the third quarter of 2002 and for the first
nine months of 2002 decreased $1,633,000 or 17.67% and $6,961,000 or 23.70%,
respectively, when compared to the third quarter of 2001 and the first nine
months of 2001. These decreases were due to a decrease in the loan portfolio of
Habersham Bank, as well as a declining interest rate environment during the
first nine months of 2002 compared to 2001. Average loan balances decreased
$37,164,000 or 8.39% during the first nine months of 2002 compared to the first
nine months of 2001. Loan yields decreased by 1.48% to 7.37% for the first nine
months of 2002 compared to 8.85% for the first nine months of 2001.


                                       15
<PAGE>
      Interest income from investment securities increased $41,000 or 5.73% for
the third quarter of 2002 when compared to the third quarter of 2001. Interest
income from investment securities increased $70,000 or 3.18% for the first nine
months of 2002 when compared to the first nine months of 2001. These increases
were primarily due to an increase in the available for sale investment security
portfolio of Habersham Bank offset by a slight decrease in the investment
security yields. Average investment securities balances increased $3,364,000 or
6.17% during the first nine months of 2002 compared to the first nine months of
2001. Average yields on investment securities decreased by .15% to 5.23% for the
first nine months of 2002 when compared to 5.38% for the first nine months of
2001.

      Total interest expense for the third quarter of 2002 decreased $2,008,000
or 36.91%, when compared to the third quarter of 2001. Total interest expense
for the first nine months of 2002 decreased $7,988,000 or 42.98%, when compared
to the first nine months of 2001. The decrease in interest expense on deposits
was primarily due to changes in the mix of the deposit portfolio as well as a
declining interest rate environment during 2002. Total average deposits for the
first nine months of 2002 decreased approximately $16.7 million or 4.73% when
compared to the first nine months of 2001. Average certificates of deposits
decreased approximately $28.1 million which was offset by increases in average
NOW and demand deposit accounts of approximately $3.6 million and $7.5 million,
respectively. Average interest rates on total deposits decreased by 2.34% to
3.31% during the first nine months of 2002 compared to 5.65% for the first six
months of 2001.

      Interest expense on short-term and other borrowings decreased $274,000 or
19.64% when compared to the third quarter of 2001. Interest expense on
short-term and other borrowings decreased $1.8 million or 37.28% when compared
to the first nine months of 2001. The decreases were primarily due to decreases
in average borrowings of approximately $19.4 million as well as a decrease in
the average rate on borrowings of 1.35% to 4.04% for the first nine months of
2002 compared to 5.39% for the first nine months of 2001.

      Net interest income increased approximately $342,000 or 7.29%, for the
third quarter of 2002 as compared to the third quarter of 2001 and increased
approximately $869,000 or 6.40% as compared to the first nine months of 2001 as
a result of the items discussed above.

      The net interest margin of the Company, net interest income divided by
average interest-earning assets, was 4.05% for the first nine months of 2002
compared to 3.48% for the first nine months of 2001. The increase in the net
interest margin resulted primarily from decreases in average balances and in the
average rates paid on borrowings and deposit accounts.

      Noninterest income increased $2,047,000 or 26.32% for the third quarter of
2002 over the same period in 2001. Noninterest income increased $3,409,000 or
15.59% for the first nine months of 2002 over the same period in 2002. The
increase during the third quarter of 2002 is related to increased production at
BancMortgage during the third quarter of 2002 compared to the third quarter of
2001 resulting in increases in gain on sale of loans of $832,000. Also, during
the third quarter of 2002, the Company recorded a gain due to the change in fair
value of derivative instruments of $385,000 compared to a loss of $686,000
recorded for the third quarter of 2001. In addition the Company recorded a gain
on the sale of its investment in CB Financial Corp. of $277,000 during the three
months ended September 30, 2002. The increase in the first nine months of 2002
compared to 2001 is due to increased production at BancMortgage for the
nine-month period ended September 30, 2002 resulting in increases in gain on
sale of loans of $2.3 million. Also, during the


                                       16
<PAGE>
first nine months of 2002, a gain due to the change in fair value of derivative
instruments was recorded in the amount of $385,000 as compared to a loss of
$17,000 recorded for the first nine months of 2001. In addition, the Company
recognized a gain of $838,000 from the sale of its holdings of FLAG Financial
Corp. common stock during the first nine months of 2002 as well as a gain on the
sale of its investment in CB Financial Corp mentioned above.

      Noninterest expense increased $715,000 or 6.8% for the third quarter of
2002 over the same period in 2001. Noninterest expense increased $3,334,000 or
11.80% for the first nine months of 2002 over the same period in 2001. These
increases in 2002 were due to increased salary and employee benefits primarily
due to increased production volume generated by BancMortgage, which compensates
staff by commissions that are directly related to production volume, as well as
annual salary adjustments. General and administrative expenses increased
approximately $174,000 for the first nine months of 2002 over the same period in
2001 primarily due to a write down of repossessed assets in the amount of
$200,000 in the second quarter of 2002, in addition to increases in advertising
and public relations expense.

      Income tax expense for the three months ended September 30, 2002 and 2001
was $1,097,000 and $502,000, respectively. Income tax expense for the first nine
months ended September 30, 2002 and 2001 was $2,177,000 and $2,002,000,
respectively. The effective tax rates for the nine months ended September 30,
2002 and 2001 were 30.96% and 34.02%, respectively. The decrease for the nine
months ended September 30, 2002 is due to increases in tax-exempt income.

Asset Quality

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

      A provision for loan losses in the amount of $403,000 was charged to
expense for the quarter ended September 30, 2002 compared to $404,000 for the
quarter ended September 30, 2001. A provision for loan losses in the amount of
$1,080,000 was charged to expense for the first nine months of 2002 compared to
$1,120,000 for the first nine months of 2001. Net charge-offs for the first nine
months totaled approximately $1,138,000. At September 30, 2002 and December 31,
2001, the ratio of allowance for loan losses to total loans, including loans
held for sale, was .85% and .87%, respectively.

      Nonperforming assets consist of nonaccrual loans, accruing loans 90 days
past due, restructured loans and other real estate owned. Nonperforming assets
decreased approximately $2,797,000 or 23.43% from December 31, 2001 to September
30, 2002. The decrease in nonperforming assets for the nine months of 2002 was
primarily due to a net decrease of other real estate properties of approximately
$2,851,000. Past due loans over 90 days and restructured loans also decreased by
approximately $96,000 and $197,000, respectively, offset by an increase of
approximately $348,000 in nonaccrual loans during the first nine months of 2002.


                                       17
<PAGE>
      The Company had impaired loans of $3,460,000 and $3,112,000 at September
30, 2002 and December 31, 2001, respectively. Impaired loans consist of loans on
nonaccrual status. The interest income recognized on such loans for the
nine-month periods ended September 30, 2002 and 2001 was not material.

      The Company's other real estate totaled $2,253,000 and $5,104,000 at
September 30, 2002 and December 31, 2001, respectively. This decrease was due
primarily to the sale of other real estate properties and write downs of
approximately $5,096,000 and $98,000, respectively, offset by additional
foreclosures of real estate secured loans and expenses to complete construction
of approximately $2,801,000 and $18,000, respectively.

Liquidity and Capital Resources

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

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

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

      The Company also has the ability, on a short-term basis, to purchase
federal funds from other financial institutions up to $25,000,000. At September
30, 2002, the Company had purchased approximately $16,200,000 of the available
federal funds. Presently, the Company has made arrangements with commercial
banks for short-term advances up to $4,100,000 under a repurchase agreement line
of credit of which no amount was advanced at September 30, 2002, in addition to
a total available line of $230,833,000 which is available to the Company,
subject to available collateral, from the Federal Home Loan Bank of which
approximately $93,118,000 was advanced at September 30, 2002.

      Habersham Bank's liquidity policy requires that the ratio of cash and
certain short-term investments to net withdrawable deposit accounts be at least
20%. The Bank's liquidity ratios at September 30, 2002 and 2001 were 24.51% and
20.10%, respectively.

      At September 30, 2002, Habersham Bancorp and Habersham Bank were required
to have minimum Tier 1 and total risk-based 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
and the Bank's ratios at September 30, 2002 follow:


                                       18
<PAGE>
<TABLE>
<CAPTION>
                             Habersham              Habersham
                                Bank                 Bancorp
<S>                          <C>                    <C>
          Tier 1              11.20%                 11.71%
          Total Capital       12.15%                 12.65%
          Leverage             8.45%                  8.86%
</TABLE>


Commitments and Contractual Obligations

      The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of its lending activities to meet the financing needs
of its customers. These financial instruments include commitments to extend
credit and standby letters of credit. The Company's exposure to credit losses in
the event of nonperformance by the other party to the financial instrument for
commitments to extend credit and standby letters of credit is represented by the
contractual amounts of those instruments. The Company uses the same credit
policies in making these commitments as it does for on-balance-sheet instruments
and evaluates each customer's creditworthiness on a case-by-case basis. At
September 30, 2002, the Company had outstanding loan commitments exclusive of
mortgage loan commitments of BancMortgage approximating $88,542,000 and standby
letters of credit approximating $2,428,000. The amount of collateral obtained,
if deemed necessary, for these financial instruments by the Company, upon
extension of credit, is based on management's credit evaluation of the customer.
Collateral held, if any, varies but may include inventory, equipment, real
estate, or other property. The accounting loss the Company would incur if any
party of the financial instrument failed completely to perform according to the
term of the contract and the collateral proved to be of no value is equal to the
face amount of the financial instrument.

      At September 30, 2002, the Company has commitments, primarily at a fixed
rate, to originate mortgage loans in the amount of approximately $95,706,000.

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

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

<TABLE>
<CAPTION>
                                                    Due In          Due In          Due In          Due In          Due In
                                                   One Year        Two Years      Three Years     Four Years      Five Years
<S>                                              <C>             <C>              <C>            <C>             <C>
  Commitments to originate mortgage loans        $95,705,880
  Commitments on lines of credit                  88,542,318
  Standby letters of credit                        2,428,185
  Commitments under lease agreements               1,274,550     $ 1,199,057      $  887,864     $  535,888      $ 147,171
  Deposits                                       276,711,056      31,795,269       8,386,940     16,193,990        879,037
  FHLB advances                                   69,981,100                                     10,000,000
  Other borrowings                                   379,200         408,000         438,000        470,400        505,200
  Short-term borrowings                              790,984
  Federal funds purchased                         16,211,000
  Securities sold under repurchase agreements      5,964,261
   Total commitments and
    contractual obligations
                                                ------------     -----------     -----------    -----------     ----------
                                                $557,988,534     $33,402,326     $ 9,712,804    $27,200,278     $1,531,408
</TABLE>



        Although management regularly monitors the balance of outstanding
commitments to fund loans to ensure funding availability should the need arise,
management believes


                                       19
<PAGE>
that the risk of all customers fully drawing on all these lines of credit at the
same time is remote.

Interest Rate Sensitivity

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

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

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

      The interest rate sensitivity analysis, calculated as of September 30,
2002, below has a three month negative gap of approximately $229,000
(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                           $      0                                                                     $      0
 Investment securities                           2,454        $    920       $  2,315         $ 10,490       $ 41,740        57,919
 Loans                                         191,868          28,752         45,947           71,851        104,908       443,326
                                               -------          ------         ------           ------        -------       --------
  Total interest-earning assets                194,322          29,672         48,262           82,341        146,648       501,245

INTEREST-BEARING LIABILITIES:

 Deposits
  Money Market and NOW                          50,908               -              -                -              -        50,908
  Savings                                        8,338               -              -                -              -         8,338
  Certificates of deposit                       49,127          80,611         50,106           57,255              -       237,099
 Borrowings                                     86,178              95            197           11,856         20,841       119,167
                                               -------         -------         ------           ------         ------       -------
  Total interest-bearing
   liabilities                                 194,551          80,706         50,303           69,111         20,841       415,512

Excess(deficiency) of interest-earning
 assets over(to) interest-bearing
 liabilities                                  $   (229)       $(51,034)      $ (2,041)        $ 13,230       $125,807       $85,733
                                              =========       =========      =========        ========       ========       =======

Cumulative gap                                $   (229)       $(51,263)      $(53,304)        $(40,074)       $85,733

Ratio of cumulative gap to total
 cumulative interest-earning assets              (.12%)        (22.89%)       (19.58%)         (11.30%)        17.10%
Ratio of cumulative interest-earning
  assets to cumulative interest-bearing
  liabilities                                   99.88%          81.38%         83.63%           89.85%        120.63%
</TABLE>


                                       20





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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

      As of September 30, 2002, 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, 2001. 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, 2001 included in the
Company's 2001 Annual Report on Form 10K.

Item 4. Controls and Procedures

      Within 90 days prior to the date of this report, the Company carried out
an evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
upon that evaluation, the Company's Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective in timely alerting them to material information relating to the
Company (including its consolidated subsidiaries) that is required to be
included in the Company's periodic filings with the Securities and Exchange
Commission. There have been no significant changes in the Company's internal
controls or, to the Company's knowledge, in other factors that could
significantly affect those internal controls subsequent to the date the Company
carried out its evaluation, and there have been no corrective actions with
respect to significant deficiencies or material weaknesses.


                                       21
<PAGE>
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.


                                       22
<PAGE>
<TABLE>
<CAPTION>
Exhibit No.                        Document
-----------                        --------
<S>               <C>
3.1               Amended and restated Articles of Incorporation of Habersham
                  Bancorp, as amended by amendments executed as of April 16,
                  1988 and April 17, 1995 (1) and as further amended by
                  amendment executed as of April 15, 2000. (2)

3.2               By-laws of Habersham Bancorp, as amended as of November 20,
                  1989 (3) and as of March 16, 1991. (4)

11.1              Computation of Earnings Per Share.

99.1              Certification by Chief Executive Officer and Chief Financial
                  Officer.
</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, 2000
(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, 1989
(File No. 0-13153).

(4) 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).


                                       23
<PAGE>
                                   SIGNATURES

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

                                HABERSHAM BANCORP
                                     (Registrant)

Date November 14, 2002                 /S/ Annette Banks
                                       -----------------
                                     Chief Financial Officer
                                     (for the Registrant and as the
                                     Registrant's principal financial and
                                     accounting officer)


                                       24
<PAGE>
I, David D. Stovall, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Habersham Bancorp;

2.    Based on my knowledge, this quarterly report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this quarterly report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this quarterly report, fairly present in all
      material respects the financial condition, results of operations and cash
      flows of the registrant as of, and for, the periods presented in this
      quarterly report;

4.    The registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      a)    Designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this
            quarterly report is being prepared;

      b)    Evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this quarterly report (the "Evaluation Date"); and

      c)    Presented in this quarterly report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.    The registrant's other certifying officer and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent function):

      a)    All significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and

      b)    Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

6.    The registrant's other certifying officer and I have indicated in this
      quarterly report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.

Date:                    November 14, 2002



                         /S/ David D. Stovall
                         --------------------
                         Chief Executive Officer


                                       25
<PAGE>
I, Annette Banks, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Habersham Bancorp;

2.    Based on my knowledge, this quarterly report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this quarterly report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this quarterly report, fairly present in all
      material respects the financial condition, results of operations and cash
      flows of the registrant as of, and for, the periods presented in this
      quarterly report;

4.    The registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      a)    Designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this
            quarterly report is being prepared;

      b)    Evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this quarterly report (the "Evaluation Date"); and

      c)    Presented in this quarterly report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.    The registrant's other certifying officer and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent function):

      a)    All significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and

      b)    Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

6.    The registrant's other certifying officer and I have indicated in this
      quarterly report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.

Date:                    November 14, 2002




                         /S/ Annette Banks
                         -----------------
                         Chief Financial Officer


                                       26