SECURITIES AND EXCHANGE COMMISSION


Washington, D. C. 20549





FORM 10-Q





x QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE


SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended June 30, 2009.





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. Employerincorporation or organization

Identification Number)





282 Historic Highway 441 North, P. O. Box 1980, Cornelia, Georgia
30531(Address of principal executive offices)
(Zip Code)





Registrant's telephone number, including area code:   (706) 778-1000





Securities registered pursuant to Section 12(b) of the Exchange Act:
Common Stock, $1.00 par value





Securities registered pursuant to Section 12(g) of the Exchange Act: None





Indicate by check mark whether the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.


Yes o   No x





Indicate by check mark if the registrant is not required to file reports under Section 13 or Section 15(d) of the Act.


Yes o   No x





Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 o




Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files).  Yes o  No o





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Exchange Act Rule 12b-2:




Large accelerated filer o
Accelerated filer oNon-accelerated filer   o
Smaller reporting company x(do not check if a smaller reporting company)





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Yes o   No x





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


2,818,593 shares, common stock, $1.00 par value, as of August 14, 2009.







1


Item. 1   Financial Statements





HABERSHAM BANCORP AND SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS


(dollars in thousands)





JUNE 30,
2009


DECEMBER 31,
2008ASSETS

(unaudited)


(audited)Cash and due from banks

$
21,353


$
13,640Federal funds sold


20,101



620Total cash and cash equivalents


41,454



14,260Investment securities available for sale


94,143



97,278Investment securities held to maturity (estimated fair value of $1,042 at June 30, 2009 and $1,053 at December 31, 2008)


1,020



1,025Other investments


2,598



3,334Loans held for sale


620



-Loans


307,726



322,775Less allowance for loan losses


(7,517
)


(12,168
)Loans, net


300,209



310,607Premises and equipment, net


18,991



19,479Other real estate owned


34,834



27,337Cash surrender value of life insurance


10,114



9,936Accrued interest receivable


2,008



2,222Income tax receivable


2,386



2,504Other assets


9,845



6,887TOTAL ASSETS

$
518,222


$
494,869LIABILITIESNoninterest-bearing deposits

$
34,712


$
29,664Money market and NOW accounts


76,471



77,638Savings


42,297



43,180Time deposits, $100,000 and over


113,185



102,391Other time deposits


152,752



140,015Total deposits


419,417



392,888Short-term borrowings


765



760Federal funds purchased and securities sold under repurchase agreements


15,224



16,384Federal Home Loan Bank advances


38,000



38,000Accrued interest payable


3,177



2,805Other liabilities


2,302



2,034TOTAL LIABILITIES


478,885



452,871CommitmentsSTOCKHOLDERS’ EQUITYPreferred stock - Series A; 10,000 shares authorized; 3,000 shares issued and outstanding at December 31, 2008: No shares issued and outstanding at June 30, 2009


-



2,978Preferred stock - Series B: 4,000 shares authorized; no shares issued or outstanding at December 31, 2008: 4,000 shares issued and outstanding at June 30, 2009


3,963



-Common Stock, $1.00 par value, 10,000,000 shares authorized; 2,818,593 shares issued and outstanding


2,819



2,819Additional paid-in capital


13,490



13,490Retained earnings


19,172



22,518Accumulated other comprehensive income (loss)


(107
)


193TOTAL STOCKHOLDERS’ EQUITY


39,337



41,998TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$
518,222


$
494,869








See notes to unaudited condensed consolidated financial statements.


2


HABERSHAM BANCORP AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited) For the Three- and Six-Month Periods Ended June 30, 2009 and 2008


(dollars in thousands, except share and per share amounts)





Three Months ended


Six Months ended2009


2008


2009


2008INTEREST INCOMELoan interest and fees on loans

$
4,218


$
5,653


$
8,734


$
11,964Taxable investment securities


953



853



1,967



1,711Tax exempt investment securities


141



266



288



553Federal funds sold


6



11



13



79Other


5



52



9



131TOTAL INTEREST INCOME


5,323



6,835



11,011



14,438INTEREST EXPENSETime deposits, $100,000 and over


1,041



1,177



2,093



2,634Other deposits


1,660



1,768



3,341



3,629Short-term and other borrowings, primarily FHLB advances


460



620



946



1,310TOTAL INTEREST EXPENSE


3,161



3,565



6,380



7,573NET INTEREST INCOME


2,162



3,270



4,631



6,865Provision for loan losses


1,300



654



3,080



1,077NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES


862



2,616



1,551



5,788NONINTEREST INCOMEMortgage origination income


51



135



93



315Service charges on deposits


246



251



499



498Other service charges and commissions


63



70



121



140Gain on sale of investment securities available for sale


256



161



314



289Gain on sale and impairment of other investments, net


20



-



20



-Other income


413



517



926



1,049Total noninterest income


1,049



1,134



1,973



2,291NONINTEREST EXPENSESalary and employee benefits


1,846



2,553



3,904



4,934Occupancy


678



587



1,394



1,188Other real estate expense


388



162



681



294Computer services


147



123



319



268Telephone


122



115



235



234Leased equipment


118



115



246



235General and administrative expense


1,306



991



2,290



1,959Total noninterest expense


4,605



4,646



9,069



9,112LOSS BEFORE INCOME TAXES


(2,694
)


(896
)


(5,545
)


(1,033
)Income tax benefit


1,094



521



2,290



717NET LOSS

$
(1,600
)

$
(375
)

$
(3,255
)

$
(316
)Net loss  per common share – Basic

$
(.57
)

$
(.13
)

$
(1.15
)

$
(.11
)Net loss  per common share – Diluted

$
(.57
)

$
(.13
)

$
(1.15
)

$
(.11
)Weighted average number of common shares outstanding


2,818,593



2,818,593



2,818,593



2,818,593Weighted average number of common and common equivalent shares outstanding


2,818,593



2,818,593



2,818,593



2,818,593Dividends per share


-


$
.10



-


$
.20








See notes to unaudited condensed consolidated financial statements.


3


HABERSHAM BANCORP AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS


(Unaudited) For the Three- and Six-Month Periods Ended June 30, 2009 and 2008


(dollars in thousands)





Three Months ended


Six Months ended2009


2008


2009


2008NET LOSS

$
(1,600
)

$
(375
)

$
(3,255
)

$
(316
)OTHER COMPREHENSIVE LOSS:Unrealized holding losses on investment securities available for sale arising during the period


(782
)


(2,503
)


(210
)


(1,943
)Unrealized holding gains (losses) on derivative financial instruments classified as cash flow  hedges, arising during the period


39



73



69



(48
)Reclassification adjustment for realized gains on  investment securities available for sale


(256
)


(161
)


(314
)


(289
)Total other comprehensive loss, before tax


(999
)


(2,591
)


(455
)


(2,280
)INCOME TAXES RELATED TO OTHER COMPREHENSIVE LOSS:Unrealized holding losses on investment securities available for sale arising during the period


266



851



71



661Unrealized holding (gains) losses on derivative financial instruments classified as cash flow hedges, arising during the period


(13
)


(25
)


(23
)


16Reclassification adjustment for realized gains on investment securities available for sale


87



55



107



98Total income taxes related to other comprehensive loss


340



881



155



775Total other comprehensive loss,  net of tax


(659
)


(1,710
)


(300
)


(1,505
)Total comprehensive loss

$
(2,259
)

$
(2,085
)

$
(3,555
)

$
(1,821
)








See notes to unaudited condensed consolidated financial statements.


4


HABERSHAM BANCORP AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited) For the Six-Month Periods Ended June 30, 2009 and 2008


(dollars in thousands)





2009


2008CASH FLOWS PROVIDED BY (USED BY) OPERATING ACTIVITIES:

$
(1,928
)

$
1,218CASH FLOWS FROM INVESTING ACTIVITIES:Investment securities available for sale:Proceeds from maturity


6,500



6,538Proceeds from sales and calls


18,677



35,519Purchases


(22,414
)


(45,448
)Investment securities held to maturity:Proceeds from maturity


5



8Proceeds from call


-



1,103Other investments:Proceeds from sale


758



75Purchases


(2
)


-Net (decrease) increase in loans


(7,889
)


4,378Proceeds from sale of loans


5,910



-Purchases of premises and equipment


(94
)


(2,237
)Proceeds from sales of premises & equipment


8



-Capitalized completion costs of other real estate


(680
)


(731
)Proceeds from sale of other real estate


2,074



1,097Net cash provided by investing activities


2,853



302CASH FLOWS FROM FINANCING ACTIVITIES:Net increase (decrease) in deposits


26,529



(18,322
)Net increase in short-term borrowings


5



19Net (decrease) increase in federal funds purchased and securities sold under repurchase agreements


(1,159
)


9,548Proceeds from FHLB advances


7,000



7,000Repayment of FHLB advances


(7,000
)


(7,000
)Proceeds from issuance of preferred stock


1,000



-Preferred stock issuance costs


(15
)


-Cash dividends paid


(91
)


(564
)Net cash provided by (used by) financing activities


26,269



(9,319
)Increase (decrease)  in cash and cash equivalents


27,194



(7,799
)CASH AND CASH EQUIVALENTS:  BEGINNING OF PERIOD


14,260



22,385CASH AND CASH EQUIVALENTS:  END OF PERIOD

$
41,454


$
14,586SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Other real estate acquired through loan foreclosures

$
9,237


$
6,096Change in components of other comprehensive income


(300
)


(1,505
)








See notes to unaudited condensed consolidated financial statements.


5


HABERSHAM BANCORP AND SUBSIDIARIES


Notes to Unaudited Condensed Consolidated Financial Statements





1.
Basis of Presentation





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





The condensed consolidated financial statements included herein should be read in conjunction with the Company's 2008 consolidated financial statements and notes thereto, included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2008.





Certain reclassifications have been made to the 2008 financial statement presentation to correspond to the current period’s format.





2.
Accounting Policies





Reference is made to the accounting policies of the Company described in the notes to the consolidated financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2008.  The Company has consistently followed those policies in preparing this report.  The following is
an additional new significant policy.





Events or Transactions Subsequent to the Balance Sheet Date





In May 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 165, Subsequent Events.  This new standard applies to interim and annual financial periods ending after June 15, 2009.  The statement established principles
setting forth the period after the balance sheet date during which management shall evaluate events and transactions that may occur for potential recognition or disclosure in the financial statements.  For the purposes of this accounting standard, the Company has evaluated subsequent events through August 14, 2009, the date financial statement were issued.





3.
Other Comprehensive Loss





Other comprehensive loss for the Company consists of items recorded directly in equity under Statement of Financial Accounting Standards (“SFAS”) No. 115, “Accounting for Certain Investments in Debt and Equity Securities” in addition to the net of tax fair value of cash flow hedges.  Investment securities
classified as available for sale are carried at fair value with the related unrealized gain or loss, net of deferred income taxes included as a separate component of stockholders’ equity.  At June 30, 2009, fair value of the available for sale investment securities decreased approximately $524,000 when compared to the fair value at December 31, 2008.  The corresponding equity component of unrealized gain and loss on available for sale securities, net of tax, also decreased approximately
$346,000.  These changes were the results of movements in the bond market as it responds to interest rate changes in the market.  At June 30, 2009, fair value of the cash flow hedges increased approximately $69,000 when compared to the fair value at December 31, 2008.  The corresponding equity component of unrealized holding gains on derivative financial instruments classified as cash flow hedges, net of tax, also increased approximately $46,000.


6


4.
Net Loss Per Share





Basic loss per share is computed by dividing net loss less dividends paid on preferred stock by the weighted average of common shares outstanding.  Options on 172,750 and 230,750 shares were not included in the diluted loss per share computations for the three months ended June 30, 2009 and 2008, respectively, as they were antidilutive.
Options on 172,750 and 230,750 shares were not included in the diluted loss per share computations for the six month period ended June 30, 2009 and 2008, respectively, as they were antidilutive.





The reconciliation of the amounts used in the computation of loss per share for the three-month and six-month periods ended June 30, 2009 and 2008 is shown below.





(dollars in thousands, except share and and per share amounts)

Three Months
ended
June 30, 2009


Three Months
ended
June 30, 2008


Six Months
ended
June 30, 2009


Six Months
ended
June 30, 2008Net loss

$
(1,600
)

$
(375
)

$
(3,255
)

$
(316
)Less dividends on preferred stock


(46
)


-



(91
)


-Net loss available to common shareholders

$
(1,646
)

$
(375
)

$
(3,346
)

$
(316
)Weighted average common shares outstanding


2,818,593



2,818,593



2,818,593



2,818,593Loss per share:Basic

$
(.58
)

$
(.13
)

$
(1.19
)

$
(.11
)Diluted

$
(.58
)

$
(.13
)

$
(1.19
)

$
(.11
)


7


5.
Investment Securities Available for Sale





Amortized cost, estimated fair values, and gross unrealized gains and losses of investment securities available for sale are as follows:




June 30, 2009

Amortized
Cost


Gross
Unrealized
Gains


Gross
Unrealized
Losses


Estimated
Fair ValueU.S. government-sponsored enterprises

$
26,761



109



289



26,581Mortgage-backed securities


54,474



918



99



55,293State and political subdivisions


12,835



13



764



12,084Equity securities


209



-



24



185Total

$
94,279



1,040



1,176



94,143December 31, 2008

Amortized
Cost


Gross
Unrealized
Gains


Gross
Unrealized
Losses


Estimated
Fair ValueU.S. government-sponsored enterprises

$
26,698



451



16



27,133Mortgage-backed securities


55,391



1,066



45



56,412State and political subdivisions


14,592



31



1,075



13,548Equity securities


209



-



24



185Total

$
96,890



1,548



1,160



97,278





Proceeds from sales and calls of available for sale securities during the first six months of 2009 and 2008 were $18,677,000 and $35,519,000, respectively.   Gross gains of $322,000 were recognized on those sales for the first six months of 2009 and gross gains of $300,000 were recognized on those sales for the first six months
of 2008.  Gross losses of $8,000 were recognized on those sales for the first six months of 2009 and gross losses of $11,000 were recognized on those sales for the first six months of 2008.


8


The following investments available for sale have an unrealized loss at June 30, 2009 and December 31, 2008 for which an other than temporary impairment has not been recognized:





June 30, 2009


December 31, 2008No.


Estimated Fair Value


Unrealized Losses


No.


Estimated Fair Value


Unrealized LossesUnrealized loss for less than 12 months:U.S. government-sponsored enterprises


22


$
16,839



287



1


$
859



14Mortgage-backed securities


18



12,188



98



15



2,622



13State and political subdivisions


27



7,850



583



32



9,974



86067



36,877



968



48



13,455



887Unrealized loss for greater than 12 months:U.S. government-sponsored enterprises


1



56



2



1



60



2Mortgage-backed securities


1



420



1



14



4,600



33State and political subdivisions


8



2,813



181



5



1,520



214Equity securities


1



185



24



1



185



2411



3,474



208



21



6,365



27378


$
40,351



1,176



69


$
19,820



1,160








The total fair value of the securities with an unrealized loss at June 30, 2009 and December 31, 2008 represented 97.17% and 94.15%, respectively, of their amortized cost; therefore, the impairment is not considered severe. While the duration is dependent on the market, the existing unrealized loss could be shortened by the issuing agency
calling the securities.  These unrealized losses are considered temporary because of acceptable investment groups on each security and the repayment source of principal and interest are largely government backed.


9


The amortized cost and estimated fair values of investment securities available for sale, exclusive of equity investments, at June 30, 2009 and December 31, 2008, by contractual maturity, are shown below.  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties. Callable securities and mortgage-backed securities are included in the year of their contractual maturity date.




June 30, 2009
Amortized Cost


June 30, 2009
Estimated Fair Value


December 31, 2008
Amortized Cost


December 31, 2008
Estimated Fair ValueDue in one year or less

$
148



148



84



84Due after one year through five years


2,374



2,355



2,324



2,325Due after five years through ten years


10,132



10,271



16,584



16,809Due after ten years


81,416



81,184



77,689



77,875Total

$
94,070



93,958



96,681



97,093





Investment securities available for sale with carrying values of approximately $64,234,000 and $76,782,000 were pledged as collateral at June 30, 2009 and December 31, 2008, respectively, for Federal Home Loan Bank advances, public deposits, and other deposits, as required by law.








6.
Investment Securities Held to Maturity





Amortized cost, estimated fair values, and gross unrealized gains and losses of investment securities held to maturity are as follows:




June 30, 2009

Amortized
Cost


Gross
Unrealized
Gains


Gross
Unrealized
Losses


Estimated
Fair ValueMortgage-backed securities

$
22



1



-



23State and political subdivisions


998



21



-



1,019Total

$
1,020



22



-



1,042December 31, 2008

Amortized
Cost


Gross
Unrealized
Gains


Gross
Unrealized
Losses


Estimated
Fair ValueMortgage-backed securities

$
27



1



-



28State and political subdivisions


998



27



-



1,025Total

$
1,025



28



-



1,053





There were no proceeds from calls of held to maturity securities during the first six month of 2009.  Proceeds from calls of held to maturity securities during the first six months of 2008 were $1,103,000.





There were no gross gains or losses on the calls in the first six months of 2009.  Gross gains of $18,477 were  recognized on the calls in the first six months of 2008. There were no gross losses recognized on the calls in the first six months of 2008.


10


The amortized cost and estimated fair values of securities held to maturity at June 30, 2009 and December 31, 2008, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Callable
securities and mortgage-backed securities are included in the year of their contractual maturity date.





June 30, 2009
Amortized Cost


June 30, 2009
Estimated Fair Value


December 31, 2008
Amortized Cost


December 31, 2008
Estimated Fair ValueDue in one year or less

$
135



136



135



137Due after one year through five years


556



566



562



569Due after five years through ten years


324



336



324



342Due after ten years


5



4



4



5Total

$
1,020



1,042



1,025



1,053




Investment securities held to maturity with carrying values of approximately $999,000 were pledged as collateral at June 30, 2009 and December 31, 2008, for public deposits and other deposits, as required by law.








7.
Nonperforming Assets





Nonperforming assets consist of nonaccrual loans, accruing loans 90 days past due, otherreal estate owned and restructured loans. Accrual of interest is discontinued when either principal or interest becomes 90 days past due, (unless the loan is  both well secured and in
the process of collection), or when in management’s opinion, reasonable doubt exists as to the full collection of interest or principal.  Income on such loans is then recognized only to the extent that cash is received and when the future collection of principal is probable.  Our Other Real Estate Owned (“OREO”) policies and procedures provide that a foreclosure appraisal be obtained which provides a fair market value and a disposition (quick sale) value.  The disposition
value is the valuation used to place the property into OREO.  Any difference between the disposition value and the loan balance is recommended for charge-off.  When the property is transferred to OREO, the property is listed with a realtor to begin sales efforts. Restructured loans consist of loans which have had concessions granted for economic or legal reasons related to the debtor’s financial difficulties which would not otherwise be considered.  Concessions may include
a modification of the loan terms, such as a reduction of the stated interest rate, principal or accrued interest or an extension of the maturity date at a stated interest rate lower than the current market rate for new debt with similar risk.





The following summarizes nonperforming assets:





(dollars in thousands)

June 30,
2009


December 31,
2008Accruing loans 90 days past due

$
-


$
802Nonaccrual loans


50,912



56,055Other real estate


34,834



27,337Restructured loans


1,034



-Total nonperforming assets

$
86,780


$
84,194








8.
Regulatory Matters





On June 24, 2009, Habersham Bank (the “Bank”), the subsidiary bank of Habersham Bancorp (the “Company”), entered into an Order to Cease and Desist (the “Order”) with the Georgia Department of Banking and Finance (the “Department”).  The Regional director of the Federal Deposit
Insurance Corporation (the “FDIC”) has acknowledged the Order.  The Order became effective 10 days after issuance.


11


Under the terms of the Order, the Bank will prepare and submit written plans and/or reports to the regulators that address the following items: maintaining sufficient capital at the Bank; improving the Bank’s liquidity position and funds management practices; reducing adversely classified items; reviewing and revising as necessary the
Bank’s allowance for loan and lease losses policy; continuing to improve loan underwriting, loan administration, and portfolio management; reducing concentrations of credit; and revising and implementing a profitability plan and comprehensive budget to improve and sustain the Bank’s earnings.  While the Order remains in place, the Bank may not pay cash dividends or bonuses without the prior written consent of the regulators.





The Company’s management and Board intend to fully comply with the requirements of the Order.





9.
Preferred Stock





On June 25, 2009, the Company amended its Amended and Restated Articles of Incorporation to authorize 4,000 shares of Series B Convertible Redeemable Preferred Stock, no par value (the “Series B Preferred Stock").  The terms of the Series B Preferred Stock were established by the Company’s  Board of Directors.





The Series B Preferred Stock is nonvoting except as permitted, by law;  will receive a 6% per annum non-cumulative dividend, payable quarterly; has a liquidation preference of $1,000 per share and may be redeemed by the Company at any time, subject to any required regulatory or third party approvals.  The Series B Preferred
Stock is convertible into common stock at the holder’s option beginning three years after issuance at a conversion price of $4.00 per share, subject to standard anti-dilution provisions and the following limitations on conversion:  (i) the holder will not be entitled to convert the shares to the extent the conversion would result in the holder’s beneficial ownership of more than 4.99% of the shares of common stock that would be outstanding immediately following conversion unless the holder
obtains such prior regulatory approval as may be required for its resulting beneficial ownership of the common stock or an opinion of counsel that such approval is not required; and (ii) the holder will not be entitled to convert to the extent it would result in the issuance of more shares than the Company would be allowed to issue upon conversion under Nasdaq Stock Market rules (20% or more of the outstanding shares, calculated as of the original issuance date of the Series B Preferred Stock) unless the Company
obtains either prior shareholder approval of the issuance under applicable Nasdaq rules or an opinion of counsel that such approval is not required.





The Company’s Board of Directors approved the issuance of 4,000 shares of Series B  Preferred Stock in the following  transactions.  On June 25, 2009, the Company issued 1,000 shares of Series B Preferred Stock to two investors for aggregate cash proceeds of $1 million. Additionally, on June 25, 2009, the
Company issued 3,000 shares of Series B Preferred Stock to Fieldale Farms Corporation (“Fieldale”) in exchange for the 3,000 shares of Series A Non-Cumulative Perpetual Preferred Stock (“Series A Preferred Stock”) held by Fieldale and the cancellation of the parties’ respective rights and obligations under the Series A Preferred Stock Subscription Agreement, for no additional consideration.   As a result, there were no shares of Series A Preferred Stock outstanding
and 4,000 shares of Series B Preferred Stock outstanding at June 30, 2009.





The Company did not pay any underwriting or placement fees or commissions with respect to the sale, and it relied on the exemption from registration provided by Rule 506 under the Securities Act of 1933, as amended, for the offer and sale of the securities.





10.
Fair Value Measurements and Disclosures




Effective January 1, 2008, the Company adopted Financial Accounting Standards Board (“FASB”) Statement  No. 157, Fair Value Measurements (“SFAS No. 157”), which provides a framework for measuring fair value under generally accepted accounting principles.  SFAS
No. 157 applies to all financial instruments that are being measured  and reported on a fair value basis.


12




The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.  Securities available-for-sale and interest rate swap derivatives are recorded at fair value on a recurring basis.  Additionally, from time to time, the Company may be
required to record at fair value other assets on a nonrecurring basis, such as impaired loans and foreclosed real estate.  Additionally, the Company is required to disclose, but not record, the fair value of other financial instruments.




Fair Value Hierarchy




Under SFAS No.157, the Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.  These levels are:




Level 1 –
Valuation is based upon quoted prices for identical instruments traded in active markets.


Level 2 –
Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.


Level 3 –
Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability.  Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.




Following is a description of valuation methodologies used for assets and liabilities which are either recorded or disclosed at fair value.




Cash and Cash Equivalents




For disclosure purposes for cash, due form banks and Federal funds sold, the carrying amount is a reasonable estimate of fair value.




Investment Securities Available for Sale




Investment securities available for sale are recorded at fair value on a recurring basis.  Fair value measurement is based upon quoted prices, if available.  If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value
of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions.  Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange and U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter market funds.  Level 2 securities include mortgage-backed securities issued by government sponsored enterprises and municipal bonds.  Securities
classified as Level 3 include asset-backed securities in less liquid markets.




Investment Securities Held to Maturity




For disclosure purposed the fair value of investment securities held to maturity is based on quoted market prices and dealer quotes.




Other Investments




For disclosure purposes the carrying value of other investments approximates fair value.




Loans and Mortgage Loans Held for Sale




The Company does not record loans at fair value on a recurring basis.  However, from time to time, a loan is considered impaired and a specific allocation is established within the allowance for loan losses.




Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired.  Once a loan is identified as individually impaired, management measures impairment in accordance with SFAS No.114,  Accounting
by Creditors for Impairment of a Loan, (“SFAS No.114”).  The fair value of impaired loans is estimated using one of three methods, including collateral value, market value of similar debt, and discounted cash flows.  Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans.  In accordance with SFAS No.157, impaired loans where an allowance is established
based on the fair value of collateral require classification in the fair value hierarchy.  When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as nonrecurring Level 2.  When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the impaired loan as nonrecurring
Level 3.


13




For disclosure purposes, the fair value of fixed rate loans which are not considered impaired, is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings.  For unimpaired variable rate loans, the carrying amount is a reasonable estimate
of fair value for disclosure purposes.




Loans held for sale are recorded at the lower of cost or market value.  The fair value of loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics.  As such, the Company classifies loans held for sale subject to nonrecurring fair value adjustments as Level
2.




Other Real Estate Owned




Other real estate properties are adjusted to fair value upon transfer of the loans to other real estate.  Subsequently, other real estate assets are carried at the lower of carrying value or fair value.  Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation
of the value of the collateral.  When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the other real estate as nonrecurring Level 2.  When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market prices, the Company records the other real estate asset as nonrecurring Level 3.




Cash Surrender Value of Life Insurance




For disclosure purposes the carrying value of the cash surrender value of life insurance reasonable approximates its fair value.




Derivative Instruments




For derivative instruments, fair value is estimated as the amount that the Company would receive or pay to terminate the contracts at the reporting date, taking into account the current unrealized gains or losses on open contracts.




Deposits




For disclosure purposes, the fair value of demand deposits, savings accounts, NOW accounts and money market deposits is the amount payable on demand at the reporting date, while the fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using current rates at which comparable certificates would
be issued.




Federal Funds Purchased and Retail Repurchase Agreements




For disclosure purposes the carrying amount for Federal funds purchased and retail repurchase agreements is a reasonable estimate of fair value due to the short-term nature of these financial instruments.




FHLB Advances




For disclosure purposes the fair value of the FHLB fixed rate borrowing is estimated using discounted cash flows, based on the current incremental borrowing rates for similar types of borrowing arrangements.


14




Commitments to Extend Credit and Standby Letter of Credit




Because commitments to extend credit and standby letters of credit are made using variable rates and have short maturities, the carrying value and the fair value are immaterial for disclosure.




Assets Recorded at Fair Value on a Recurring Basis





The tables below present the recorded amount of assets (liabilities) measured at fair value on a recurring basis as of June 30, 2009 and December 31, 2008.





June 30, 2009(dollars in thousands)

Total


Level 1


Level 2


Level 3Investment securities available for sale

$
94,143



2,028



92,115



-Interest rate swap


(26
)


-



(26
)


-Total net assets at fair value

$
94,117



2,028



92,089



-





December 31, 2008(dollars in thousands)

Total


Level 1


Level 2


Level 3Investment securities available for sale

$
97,277



8,411



88,866



-Interest rate swap


(95
)


-



(95
)


-Total net assets at fair value

$
97,182



8,411



88,771



-








Assets Recorded at Fair Value on a Nonrecurring Basis





The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles.  These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period.  Assets
measured at fair value on a nonrecurring basis are included in the table below as of June 30, 2009 and December 31, 2008.





June 30, 2009(dollars in thousands)

Total


Level 1


Level 2


Level 3Other real estate owned

$
34,834



-



34,834



-Loans


57,790



-



57,790



-Total

$
92,624



-



92,624



-





December 31, 2008(dollars in thousands)

Total


Level 1


Level 2


Level 3Other real estate owned

$
27,337



-



27,337



-Loans


58,660



-



58,660



-Total

$
85,997



-



85,997



-


15


The carrying amount and estimated fair values of the Company’s assets and liabilities which are required to be either disclosed or recorded at fair value at June 30, 2009 and December 31, 2008 are presented below:





June 30, 2009


December 31, 2008Carrying
Amount


Fair
Value


Carrying
Amount


Fair
ValueAssets:Cash and cash equivalents

$
41,454



41,454



14,260



14,260Investment securities available for sale


94,143



94,143



97,278



97,278Investment securities held to maturity


1,020



1,042



1,025



1,053Other investments


2,598



2,598



3,334



3,334Loans held for sale


620



620



-



-Loans, net


300,209



300,266



310,607



311,010Cash surrender value of  life insurance


10,114



10,114



9,936



9,936Liabilities:Deposits

$
419,417



422,482



392,888



396,813Short-term borrowings


765



765



760



760Federal funds purchased and securities sold under repurchase agreements


15,224



15,224



16,384



16,384FHLB advances


38,000



39,102



38,000



39,280Interest rate swaps


26



26



95



95





Limitations





Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement element. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly
affect the estimates.





Fair value estimates included herein are based on existing on- and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the fair value of assets and liabilities that are not required to be recorded or disclosed at fair value like premises and equipment. In addition, the tax ramifications
related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.








11.
Recent Accounting Pronouncements





In June 2009, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R).  This statement amends certain requirements of FASB Interpretation No. 46 (revised
December 2003), Consolidation of Variable  Interest Entities, to improve financial reporting by enterprises involved with variable interest entities and to provide more relevant and reliable information to users of  financial statements. This Statement shall be effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting
period, and for interim and annual reporting periods thereafter with earlier application prohibited.  Management does not anticipate it will have a material effect on the Company's consolidated financial condition or results of operations.





In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140.The objective of this Statement is to improve the relevance, representational faithfulness, and comparability of the information that a reporting
entity provides.  This Statement must be applied as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter with earlier application prohibited. This Statement must be applied to transfers occurring on or after the effective date. Management does not anticipate it will have a material effect on the Company's consolidated financial
condition or results of operations.


16


In May 2009, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 165, Subsequent Events. SFAS No. 165 establishes principles and requirements for subsequent events, setting forth the period after the balance sheet date during which management of a reporting entity
shall evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity shall recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity shall make about events or transactions that occurred after the balance sheet date.  SFAS No. 165 is effective for interim or annual financial periods ending after June 15, 2009, and shall be applied
prospectively.  The adoption of SFAS No. 165 did not have a material effect on the Company's consolidated financial condition or results of operations.





In April 2009, the FASB issued FASB Staff Position ("FSP") FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.This FSP provides additional guidance
for estimating fair value in accordance with FAS 157 when the volume and level of activity for the asset or liability have significantly decreased. This FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly, emphasizing that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. This FSP is effective for
interim and annual reporting periods ending after June 15, 2009, and early adoption is permitted for periods ending after March 15, 2009.  The adoption of FSP 157-4 did not have a material effect on the Company's consolidated financial condition or results of operations.





In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments.This FSP requires disclosures about fair value of financial instruments for interim reporting periods as well as in annual financial statements. This
FSP also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. This FSP is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009.  The adoption of FSP 107-1 and APB 28-1 did not have a material effect on the Company's consolidated financial condition or results of operations.





In April 2009, the FASB issued FSP 115-2 and 124-2, Recognition and Presentation of Other-Than-Temporary Impairments.This FSP addresses the unique features of debt securities and clarifies the interaction of the factors that should be considered when determining whether
a debt security is other-than-temporarily impaired. This FSP expands and increases the frequency of existing disclosures about other-than-temporary impairments for debt and equity securities. This FSP does not amend existing recognition and measurement guidance for other-than- temporary impairments. The FSP is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. Earlier adoption for periods ending before March 15,
2009 is not permitted.  The adoption of FSP 115-2 and 124-2 did not have a material effect on the Company's consolidated financial condition or results of operations.





In April 2009, the FASB issued FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination that Arise from Contingencies.  This FSP amends and clarifies FASB Statement No. 141 (revised 2007), Business
Combinations,to address application issues raised by preparers, auditors, and members of the legal profession on initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination.  This FSP is effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008.  The adoption of 141(R)-1 did not have a material effect on the Company's consolidated financial condition or results of operations.


17


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





HABERSHAM BANCORP AND SUBSIDIARIES





Organization





Habersham Bancorp (the “Company”) owns all of the outstanding stock of Habersham Bank ("Habersham Bank") and The Advantage Group, Inc.  Habersham Bank owns all of the outstanding stock of Advantage Insurers, Inc. (“Advantage Insurers”).  Advantage Insurers offers a full line of property, casualty
and life insurance products.  Advantage Insurers does not comprise a significant portion of the financial position, results of operations, or cash flows of the Company and as a result, management’s discussion and analysis, which follows, relates primarily to Habersham Bank.





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





Executive Summary





Habersham Bancorp reported a second quarter loss of $1.6 million or $.57 per diluted share when compared to second quarter loss of $375,000 or $.13 per diluted share in 2008.  The year-to-date loss for the six-month period ended June 30, 2009, was $3.3 million or $1.15 per diluted share when compared to year-to-date loss of $316,000
or $.11 per diluted share, for the same period in 2008.





The Company’s primary source of income is interest income from loans and investment securities. Its profitability depends largely on net interest income, which is the difference between the interest received on interest-earning assets and the interest paid on deposits, borrowings, and other interest-bearing liabilities.





Interest income for the second quarters of 2009 and 2008 was approximately $5.3 million and $6.8 million, respectively, representing a decrease of approximately 22.12% when comparing the second quarter of 2009 to the same period of 2008.  Interest income for the six-month periods of 2009 and 2008 was approximately $11.0 million and
$14.4 million, respectively, representing a decrease of approximately 23.74% when comparing the 2009 period to the 2008 period.  The decreases resulted from the effect of decreases in average loan balances and increases in the number and balances of loans in nonaccrual status.





Interest expense for the second quarters of 2009 and 2008 was approximately $3.2 million and $3.6 million, respectively, representing a decrease of approximately 11.33% when comparing the second quarter of 2009 to the same period of 2008.  Interest expense for the six-month periods of 2009 and 2008 was approximately $6.4 million
and $7.6 million, respectively, representing a decrease of approximately 15.75% when comparing the 2009 period to the 2008 period.  These decreases resulted from declining rates paid on deposit and borrowing balances for the three month and six month periods ended June 30, 2009 when compared to the same periods in 2008.





Net interest income before provision for loan loss for the second quarter of 2009 and the six-month period ended June 30, 2009 decreased approximately $1.1 million or 33.88%, and $2.2 million or 32.54%, respectively, when compared to the same periods in 2008 as a result of the items discussed above.





Declines in the U.S. economy and our local real estate markets contributed to our increasing provision for loan losses. As delinquencies and foreclosures continue to increase, Habersham Bank recorded provisions to its allowance for loan losses during the second quarter and first six months of 2009 of approximately $1.3 million and $3.1 million,
respectively.   For the second quarter and six-month period of 2008, Habersham Bank recorded provision for loan losses to its allowance for loan losses of approximately $654,000 and $1.1 million, respectively.





The net interest margin for the second quarter and first six months of 2009 was 2.11% and 2.25%, respectively compared to 3.09% and 3.21% for the same periods in 2008.  Two factors which impact the net interest margin are average interest bearing assets, which decreased approximately $15.8 million and average interest-bearing liabilities,
which increased approximately $18.5 million, when comparing the first six months of 2009 to the first six months of 2008.


18


Total assets increased approximately $23.3 million or 4.72% from $494.9 million at December 31, 2008 to $518.2 million at June 30, 2009. Increases in cash and cash equivalents (primarily federal funds sold), other real estate and in all other assets totaling approximately $27.2 million, $7.5 million and $2.3 million, respectively, were offset
by decreases in the total net loan portfolios and in the investment securities portfolio totaling approximately $9.8 million and $3.9 million, respectively.





Total liabilities (deposits, borrowings and other liabilities) at June 30, 2009 increased approximately $26.0 million or 5.74% from $452.9 million at December 31, 2008 to $478.9 million at June 30, 2009.  Increases in the total deposit portfolio and in all other liabilities totaling approximately $26.5 million and $640,000, respectively,
were offset by decreases in the borrowings totaling approximately $1.1 million.








Forward Looking Statements





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





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





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








Material Changes in Financial Condition





Total assets increased approximately $23.3 million or 4.72% from $494.9 million at December 31, 2008 to $518.2 million at June 30, 2009.     Increases in cash and cash equivalents (primarily federal funds sold), other real estate and in all other assets totaling approximately $27.2 million, $7.5 million and $2.3 million,
respectively, were offset by decreases in the total net loan portfolios and in the investment securities portfolio totaling approximately $9.8 million and $3.9 million, respectively.


19


Cash and cash equivalents


Cash and cash equivalents consist of federal funds sold and cash and due from banks balances. Federal funds sold balances increased approximately $19.5 million and cash and due from banks balances increased approximately $7.7 million when compared to balances at December 31, 2008.  These increases resulted from customers’ activity
within their accounts during the six month period ended June 30, 2009.  Federal funds sold balances also include approximately $6.0 million resulting from a sale of loans at quarter end.





Investment securities


During the first six months of 2009, purchases of investment securities available for sale totaled approximately $22.4 million, offset by maturities, calls and sales of approximately $25.2 million.  The purchases consisted of approximately $8.2 million in U.S. government-sponsored enterprise bonds and $14.2 million in mortgage backed
securities.  The calls and sales within the investment securities portfolio generated net gains of approximately $314,000.  The unrealized loss on the investment securities available for sale portfolio decreased approximately $524,000 during the six-month period ending June 30, 2009.  Other investments of $638,000 were sold resulting in gains of approximately $120,000, which were offset by an impairment write-off of $100,000 in another investment.  Payments in the investment
securities held to maturity portfolio totaled approximately $5,000 during the first six months of 2009.





Loans


Loans held for sale increased approximately $620,000 and the total loan portfolio decreased approximately $15.0 million when comparing balances at June 30, 2009 to December 31, 2008.   Decreases occurring in the real estate construction lending, commercial real estate properties and in consumer lending portfolios totaling approximately
$12.8 million, $1.3 million and $1.7 million, respectively, were offset by increases in the residential real estate and in the commercial lending portfolios totaling approximately $560,000 and $129,000, respectively.   The allowance for loan losses decreased approximately $4.7 million during the first six months of 2009.  See a more detailed discussion in “Asset Quality”.





Other real estate and premises & equipment


Other real estate balances increased approximately $7.5 million during the first six months of 2009.  This increase was the result of foreclosures and additional expenses to build out residential construction projects totaling approximately $9.2 million and $680,000, offset by sales of ORE properties totaling approximately $2.1 million
and losses on those sales of $346,000.    See a more detailed discussion in “Asset Quality”.





Deposits


Total deposits increased approximately $26.5 million when comparing balances at June 30, 2009 to December 31, 2008 balances, with  increases occurring in time deposit and noninterest bearing deposit balances of approximately $23.5 million and $5.0 million, respectively, offset by decreases in money market and NOW accounts  and
in saving account balances of approximately, $1.2 million and $883,000, respectively.





Borrowings


Total borrowings decreased approximately $1.2 million when comparing June 30, 2009 balances to December 31, 2008 with decreases occurring in federal funds purchased and securities sold under repurchase agreements.








Material Changes in Results of Operations





Net interest income is the largest single source of income for the Company.  Management strives to attain a level of earning asset growth while providing a net yield on earning assets that will cover overhead and other costs and provide a reasonable return to our stockholders.  Net interest income is affected by interest
income from loans, investment securities and federal funds sold offset by interest paid on deposits and borrowings.  The following table compares the weighted average tax equivalent yields for loans, investment securities and federal funds sold and the weighted average rates paid for deposits and borrowings for the second quarters and the first six months of 2009 and 2008.


20




Three Months ended
June 30


Six Months ended
June 302009


2008


2009


2008INTEREST YIELDS EARNED:Loans


5.31
%


6.67
%


5.47
%


7.03
%Investment securities


4.70
%


5.18
%


4.78
%


5.29
%Federal funds sold


.25
%


2.26
%


.29
%


3.11
%INTEREST RATES PAID:Deposits


2.83
%


3.46
%


2.88
%


3.61
%Borrowings


3.60
%


3.67
%


3.64
%


4.04
%








Total interest income for the second quarter of 2009 decreased approximately $1.5 million or 22.12% when compared to the second quarter of 2008.  Total interest income for the six-month period ending June 30, 2009 decreased approximately $3.4 million or 23.74% when compared to the six-month period ending June 30, 2008.





The decrease in interest income is the result of the following: 1) Approximately $228.1 million or 72.18% of the loan portfolio is a variable rate loan product which may reprice daily, monthly, quarterly or annually.  As the prime rate decreases, as it has in the periods in question, the loan yields decrease accordingly.  2)
Average loan balances also decreased approximately $18.1 million or 5.32% due to maturities, payouts and foreclosures when comparing the six-month periods ending June 30, 2009 and 2008.  3)  Approximately $50.9 million or 16.54% of the loan portfolio is in nonaccrual status at June 30, 2009.  However, nonaccrual loans at June 30, 2009 decreased approximately $5.1 million when compared to the December 31, 2008.  Interest income is reduced as the number and balances of loans
in nonaccrual status remain at this level.   See a more detailed discussion in “Asset Quality”.





Total interest expense for the second quarter of 2009 decreased approximately $404,000 or 11.33% when compared to the second quarter of 2008.  Average balances in interest bearing accounts increased approximately $40.8 million when comparing the second quarter of 2009 to the second quarter of 2008.  During the same period,
the average interest rate paid on deposits decreased approximately .63%.  Rates on savings and money market accounts, time deposits and interest bearing demand deposits decreased approximately 1.55%, .98% and .42%, respectively.  Average balances in other borrowings decreased approximately $16.4 million when comparing the second quarter of 2009 to the second quarter of 2008 with a decrease in the average rate paid on borrowings of approximately .07%.





Total interest expense for the first six months of 2009 decreased approximately $1.2 million or 15.75% when compared to the first six months of 2008.   Average balances in interest bearing accounts increased approximately $31.2 million when comparing the first six months of 2009 and 2008.   During the same period,
the average interest rate paid on deposits decreased approximately .73%.   Rates on savings and money market accounts, time deposits and  interest bearing demand deposits decreased approximately 1.45%, 1.01% and .70%, respectively.  Average balances in other borrowings decreased approximately $12.7 million when comparing the first six months of 2009 to the first six months of 2008 with a decrease in the average rate paid on borrowings of approximately .40%.





Net interest income before provision for loan losses decreased approximately $1.1 million or 33.88% for the second quarter of 2009 and decreased approximately $2.2 million or 32.54% for the first six months of 2009 when compared to the same period in 2008 as a result of the items discussed above.





The net interest margin of the Company, net interest income divided by average earning assets, was 2.11% for the second quarter of 2009 compared to 3.08% for the second quarter of 2008, and was 2.25% for the first six months of 2009 compared to 3.21% for the first six months of 2008.





Noninterest income decreased $85,000 or 7.50% for the second quarter of 2009 over the same period in 2008 and decreased $318,000 or 13.88% for the first six months of 2009 over the same period in 2008.


21


When comparing second quarter 2009 to second quarter 2008, increases occurring in net gains realized on calls and sales within the investment securities portfolio totaling approximately $95,000 during the second quarter of 2009 were offset by decreases within mortgage origination fee income, service charges and in other income totaling approximately
$84,000, $12,000 and $84,000, respectively.   Decreases in the income from cash surrender value of life insurance, in trust fees and in gains on sale of other real estate totaling approximately $20,000, $21,000 and $19,000, respectively, are reflected in the decrease in other income.





When comparing noninterest income for the first six months of 2009 to the first six months of 2008, decreases in mortgage origination income, in other income and in service charges totaling approximately $222,000, $103,000 and $18,000, respectively, were offset by increases in net gains realized on calls and sales within the investment securities
portfolio totaling approximately $25,000.   Decreases in the income from cash surrender value of life insurance, in trust fees, in gains in sale of other real estate and in commissions on investment sales totaling approximately $21,000, $28,000, $28,000 and $14,000, respectively, are reflected in the decrease in other income.





Noninterest expense decreased $41,000 or .88% for the second quarter of 2009 over the same period in 2008 with decreases in salary and employee benefits of approximately $707,000 offset by increases in  general and administrative expense, other real estate expense, occupancy expense (including telephone and leased equipment) and
computer services of approximately $315,000, $226,000, $101,000,  and $24,000, respectively. The decrease in salary and employee benefits resulted from efforts to decrease salary expense through reduction in staff and hours worked. The increase in general and administrative expense consists primarily of increases in outside services totaling approximately $447,000 offset by decreases in marketing expenses, office supplies
and other expenses totaling approximately $61,000, $15,000 and $55,000, respectively.   Outside services includes FDIC insurance, legal and professional services, insurance, director fees and State of Georgia Department of Banking fees.  FDIC expense increased due to a special assessment totaling approximately $241,000 at the end of the second quarter of 2009.  Additionally, legal fees increased approximately $127,000 during the second quarter of 2009.  Increases in
occupancy expense, telephone and leased equipment related to charges for the Flowery Branch Office in Hall County, which opened during the fourth quarter of 2008.   Other real estate expense increases resulted from the increasing number of foreclosed properties being managed.





Noninterest expense decreased $43,000 or .47% for the first six months of 2009 over the same period in 2008 with decreases in salary and employee benefits of approximately $1.0 million offset by increases in other real estate expense, general and administrative expense, occupancy expense (including telephone and leased equipment) and computer
services of approximately $387,000, $331,000, $218,000 and $51,000, respectively. The decrease in salary and employee benefits resulted from efforts to decrease salary expense through reduction in staff and hours worked.  The increase in general and administrative expense consists primarily of increases in outside services totaling approximately $609,000 offset by decreases in marketing expenses, office supplies and other expenses totaling approximately $116,000, $21,000 and $140,000, respectively.   Outside
services includes FDIC insurance, legal and professional services, insurance, director fees and State of Georgia Department of Banking fees.  FDIC expense increased approximately $145,000 for the six months ended June 30, 2009 when compared to the same period in 2008 in addition to a special assessment totaling approximately $241,000 which was booked at the end of the second quarter of 2009.  Additionally, legal fees increased approximately $220,000 during the second quarter of 2009.  Increases
in occupancy expense, telephone and leased equipment related to charges for the Flowery Branch Office in Hall County, which opened during the fourth quarter of 2008.   Other real estate expense increases resulted from the increasing number of foreclosed properties being managed.





An income tax benefit of approximately $1,094,000 was recorded for the three months ended June 30, 2009 compared to an income tax benefit of approximately $521,000 for the three months ended June 30, 2008.  An income tax benefit of approximately $2,290,000 was recorded for the first six months of 2009 compared to an income tax benefit
of approximately $717,000 for the first six months of 2008.  The effective tax rate for the second quarter of 2009 and 2008 was 40.61% and 58.15%, respectively. The effective tax rate for the six months ended June 30, 2009 and 2008 was 41.30% and 69.41%, respectively.  Tax-exempt income of approximately $249,000 was 9.24% of pre-tax loss for the second quarter of 2009 when compared to 43.15% of pre-tax loss for the second quarter of 2008.  Tax exempt income of approximately $521,000
was 9.40% of pre-tax loss for the first six months of 2009 when compared to 76.81% of pre-tax loss for the first six months of 2008.


22


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 monthly based on a review of all significant loans, with particular emphasis on impaired, nonaccruing, 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.





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 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 are likely to exist as of the evaluation date.  Loss percentages used for non-problem loans in the portfolio are based on historical loss factors.  Specific allowance allocations for losses on problem loans are 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.





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 values of expected future cash flows on the loan are less
than the balance.  In addition to these allocated allowances, at any point in time, the Company may have an unallocated component of the allowance.  Unallocated portions of the allowance are due to a number of quantitative and qualitative factors, such as improvement in the condition of impaired loans and credit concentrations.  All nonaccrual loans are considered impaired.





The risk associated with lending varies with the creditworthiness of the borrower, the type of loan (consumer, commercial, or real estate) and its maturity.  Cash flows adequate to support a repayment schedule are an element considered for all loans.  Real estate loans are impacted by market conditions regarding the value
of the underlying property used as collateral.  Commercial loans are also impacted by the management of the business as well as economic conditions. The Company also makes unsecured loans from time to time. The risk to the Company is greater for unsecured loans as the ultimate repayment of the loan is only dependent on the borrower’s ability to pay.  The balance of unsecured loans at June 30, 2009 was $12.9 million.





At June 30, 2009 and December 31, 2008, the ratio of the allowance for loan losses to total loans was 2.44% and 3.77%, respectively.   For the second quarter and first six months of 2009, provision for loan losses expense totaled approximately $1.3 million and $3.1 million, respectively.   For the second quarter
and first six months of 2008, provision for loan losses expense totaled approximately $654,000 and $1.1 million, respectively.





Net charge-offs for the first six months of 2009 totaled $7.7 million compared to net charge-offs of $787,000 for the first six months of 2008 as detailed below:




(dollars in thousands)

No.


June 30,
2009


No.


June 30,
2008Charge-offs:Commercial


5


$
398



2


$
53Real Estate


24



7,191



15



695Consumer


30



232



29



69Total Charge-offs


59



7,821



46



817Recoveries:Commercial






3







1Real Estate






60







-Consumer






27







29Total Recoveries






90







30Net Charge-offs





$
7,731






$
787


23


Nonperforming assets consist of nonaccrual loans, accruing loans 90 days past due, restructured loans and other real estate owned. The following summarizes nonperforming assets:





(dollars in thousands)

June 30,
2009


December 31,
2008Accruing loans 90 days past due

$
-


$
802Nonaccrual loans


50,912



56,055Other real estate


34,834



27,337Restructured loans


1,034



-Total nonperforming assets

$
86,780


$
84,194





Nonperforming assets increased $2,586,000 or 3.07% from December 31, 2008 to June 30, 2009.  See the discussion that follows within this section for a description of the assets that comprised this increase.





Loans classified as 90 days past due decreased $802,000 or 100% from December 31, 2008 to June 30, 2009.   The decrease is the net result of the following changes:





(dollars in thousands)Balance at December 31, 2008

$
802New loans classified to 90 days past due status


126Payments received


(151
)Charged-off


(5
)Forbearance & modification agreements


(772
)Balance at June 30, 2009

$
-





The following summarizes accruing loans 90 days past due at June 30, 2009 and December 31, 2008:





(dollars in thousands)

June 30,
2009


December 31,
2008Real estate secured construction loans

$
-


$
25Residential loans


-



772Consumer loans


-



5Balance at June 30, 2009

$
-


$
802





Impaired loans consist of loans on nonaccrual status.  The decrease is the net result of the following changes:





Balance at December 31, 2008

$
56,055Loans reclassified to nonaccrual status in 2009


19,495Advances


371Payments received on nonaccrual loans during 2009


(10,963
)Nonaccrual loans charged-off during 2009


(6,190
)Nonaccrual loans reclassified to other real estate


(7,058
)Nonaccrual loans reclassified to repossessions


(108
)Nonaccrual loans reclassified to accrual status in 2009


(690
)Balance at June 30, 2009

$
50,912


24


Nonaccrual loans may be reclassified to accrual status upon interest and payments being brought current.





Additions of loans on nonaccrual status consisted of the following:





(dollars in thousands)




June 30, 2009Real Estate – construction & development loans


27


$
17,016Real Estate – residential loans


19



1,453Real Estate – commercial


5



506Commercial loans


7



353Consumer loans


15



167Total  nonaccrual loans


73


$
19,495








The following summarizes nonaccrual loans at June 30, 2009 and December 31, 2008:





(dollars in thousands)

Number of Properties


June 30,
2009


Number of Properties


December 31,
2008Real Estate – construction & development loans


55


$
47,103



50


$
52,443Real Estate – residential loans


14



486



11



313Real Estate – commercial


6



2,998



4



2,689Commercial loans


5



253



4



459Consumer loans


11



72



23



151Total nonaccrual loans


91


$
50,912



92


$
56,055








Other real estate at June 30, 2009 increased approximately $7.5 million or 27.42% when compared to December 31, 2008. The following summarizes other real estate at June 30, 2009 and December 31, 2008:








(dollars in thousands)

Number of Properties


June 30,
2009


Number of Properties


December 31,
2008Residential properties – spec houses


36


$
15,645



41


$
15,715Commercial properties


3



1,423



2



673Vacant lots


212



16,869



207



10,786Mobile home and lot


1



52



-



-Residential construction properties


2



845



1



163Total other real estate


254


$
34,834



251


$
27,337








The increase in other real estate is the net result of the following changes:





(dollars in thousands)Balance at December 31, 2008

$
27,337Foreclosed property


9,237Additions to complete


680Sales of other real estate


(2,420
)Balance at June 30, 2009

$
34.834





Our Other Real Estate Owned (“OREO”) procedures provide that a foreclosure appraisal be obtained which provides a fair market value and a disposition (quick sale) value.  The disposition value is the valuation used to place the property into OREO.  Any difference between the disposition value and the loan balance
is recommended for charge-off.  Once the property is in OREO, the property is listed with a realtor to begin sales efforts.   The appraised value for the other real estate properties was approximately $42.1 million at June 30, 2009.


25


The following summarizes restructured loans at June 30, 2009 and December 31, 2008:





(dollars in thousands)

June 30,
2009


December 31,
2008Real estate secured construction loans

$
529


$
-Residential loans


482



-Consumer loans


23



-Balance at June 30, 2009

$
1,034


$
-








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.





Scheduled amortization and prepayments of loans, maturities and calls of investment securities and funds from operations provide a daily source of liquidity.  In addition, the Company may and does seek outside sources of funds.





At June 30, 2009 and December 31, 2008, the Company had additional line of credit commitments, subject to available collateral, available as shown below:





(dollars in thousands)

June 30, 2009
Total Available


December 31, 2008
Total AvailableFederal discount window

$
9,830



24,630Federal funds line


10,000



10,000Retail repurchase agreement


22,516



921Retail repurchase agreement


-



3,950





The Company entered into a repurchase agreement for a long term advance of $5.0 million during the first quarter of 2008 which matures in January of 2018.  The Company has approximately $10.2 million outstanding in commercial sweep accounts at June 30, 2009.   In addition, the Company has a total available line of
$38.0 million, subject to available collateral, from the Federal Home Loan Bank.  The Company had $38.0 million in advances on this line at June 30, 2009.





Also, liquidity as a percent of deposits and total liabilities, with a target of 10%, is recommended to be calculated and monitored daily.   Based on these guidelines, the Bank’s liquidity ratios as a percent of deposits and total liabilities follow:





June 30,
2009


December 31,
2008Liquidity as a percent of deposits


21.23
%


16.70
%Liquidity as a percent of total liabilities


18.67
%


14.72
%


26


On June 25, 2009, the Company issued 1,000 shares of Series B Convertible Redeemable Preferred Stock (“Series B Preferred Stock”) to two investors in a private placement under Rule 506 of the Securities Act of 1933, as amended, for aggregate cash proceeds of $1.0 million.  It also issued to Fieldale Farms Corporation
(“Fieldale”), for no additional consideration, 3,000 shares of Series B Preferred Stock in exchange for an equal number of Series A Non-Cumulative Perpetual Preferred Stock and the cancellation of the parties’ respective rights and obligations under the Subscription Agreement dated December 31, 2008 between the Company and Fieldale relating to the Series A Preferred Stock.  The terms of the Series B Preferred Stock are set forth in Note 9 to the Financial Statements filed herewith.





FDIC and Federal Reserve Board regulations require minimum Tier 1 and total capital ratios of 4% and 8%, respectively, and a minimum leverage ratio (Tier 1 capital to average assets) of at least 4%.  Under the Order, however, the Bank is required to maintain a total capital ratio of at least 10% and a leverage ratio of at least 8%.  Because
it is subject to an Order requiring it to maintain specified minimum capital ratios, the Bank cannot be classified as “well capitalized,” and is instead classified as “adqequately capitalized” for regulatory purposes.





The Company’s and the Bank’s ratios at June 30, 2009 follow:





Habersham

HabershamBank

BancorpTier 1

8.28%

9.15%Total Capital

9.54%

10.40%Leverage

6.13%

6.79%





Item 3.  Quantitative and Qualitative Disclosures About Market Risk.





As of June 30, 2009, 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, 2008.  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, 2008 included in the Company’s 2008 Annual Report on Form 10K.





Item 4.  Controls and Procedures





As of the end of the period covered by this report, the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, reviewed and evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15.  Based
upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company, (including its consolidated subsidiaries) that is required to be included in the Company’s periodic filings with the Securities and Exchange Commission.





There have not been any changes in the Company’s internal control over financial reporting or, to the Company’s knowledge, in other factors, during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.





PART II





OTHER INFORMATION





Item 1.  Legal proceedings.





None





Item 1.A. Risk Factors.





In addition to the other information set forth in this report, you should carefully consider the factors discussed below, as well as those included in Part I. “Item 1.A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 and in Part II. “Item 1.A. Risk Factors” in the
Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, all of which could materially affect its business, financial condition or future results.  The risks described below and in the Annual Report on Form 10-K and Quarterly Report on Form 10-Q are not the only risks facing the Company.  Additional risks and uncertainties not currently known to management or that management currently deems to be immaterial also may materially adversely affect the Company’s
business, financial condition and/or operating results.


27


We are operating under a regulatory order.





On June 24, 2009, the Bank entered into an Order to Cease and Desist (the “Order”) with the Georgia Department of Banking and Finance (the “Department”).  The Regional Director of the FDIC acknowledged the Order, which became effective 10 days after issuance.





Under the terms of the Order, the Bank will prepare and submit written plans and/or reports to the regulators that address the following items: maintaining sufficient capital at the Bank;, improving the Bank’s liquidity position and funds management practices; reducing adversely classified items; reviewing and revising as necessary the
Bank’s allowance for loan and lease losses policy; continuing to improve loan underwriting, loan administration, and portfolio management; reducing concentrations of credit; and revising and implementing a profitability plan and comprehensive budget to improve and sustain the Bank’s earnings.   The Order is attached as Exhibit 10.1 to this report.





While the Order remains in place, the Bank may not pay cash dividends or bonuses without the prior written consent of the regulators.   As a result, the Company’s access to dividend funds from the Bank has been curtailed.  Additionally, as a result of the Order, the Bank is no longer considered “well capitalized”
for regulatory purposes and is therefore required to obtain a waiver before accepting, renewing or rolling over any brokered deposits and is subject to the interest rate restrictions described below, both of which limit our liquidity funding sources.  The Order has also limited our lending activities and increased our compliance costs, which could materially adversely affect our financial condition, cash flows and results of operations.








Current and future restrictions on the conduct of our business could adversely impact our ability to attract deposits or otherwise impact our profitability.





Because we are no longer considered "well capitalized" by our banking regulators, we are, among other restrictions, prohibited from paying rates in excess of 75 basis points above the local market average on deposits of comparable maturity.  Effective January 1, 2010, financial institutions that are not well capitalized will be prohibited
from paying yields for deposits in excess of 75 basis points above a new national average rate for deposits of comparable maturity, as calculated by the FDIC, except in very limited circumstances where the FDIC permits use of a higher local market rate.  This national rate may be lower than the prevailing rates in our local market, and we may be unable to secure the permission of the FDIC to use a local market rate. If restrictions on the rates we are able to pay on deposit accounts negatively impacts
our ability to compete for deposits in our market area, we may be unable to attract or maintain core deposits, and our liquidity and ability to support demand for loans could be adversely affected.








Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds





The Company did not repurchase any of its shares of common stock during the period covered by this report.





Item 3.  Defaults upon senior securities.




None





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




(a)
The regular annual meeting of the shareholders of the Company was held on April 19, 2009.





(b)
The business conducted at the meeting included the election of the Board of Directors.  The Directors elected at the meeting were: Edward D. Ariail, Thomas A. Arrendale, III,  Bonnie C. Bowling, Ben F. Cheek, III, Michael C. Martin, Michael L. Owen, James A. Stapleton, Jr., David D. Stovall, and Calvin R. Wilbanks.


28




At the registrant’s Annual Meeting of Shareholders on April 19, 2009 the shareholders elected directors to serve for a term of one year or until their successors are duly qualified and elected.  The following table sets forth the number of votes cast and withheld with respect to each nominated director.  There were
no broker non-votes or abstentions.





Name

Votes For

Votes WithheldEdward D. Ariail

2,123,890

65,647Thomas A. Arrendale, III

2,183,138

6,399Bonnie C. Bowling

2,179,408

10,129Ben F. Cheek, III

2,183,353

6,184Michael C. Martin

2,183,853

5,684Michael L. Owen

2,123,890

65,647James A. Stapleton, Jr.

2,183,353

6,184David D. Stovall

2,179,623

9,914Calvin R. Wilbanks

2,183,853

5,684





Item 5.  Other information.




None




Item 6.  Exhibits





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





10.1   Order to Cease and Desist dated June 24, 2009 between the Georgia Department of Banking and Finance, the Regional Director of the FDIC, and the Board of Directors of Habersham Bank.





31.1   Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.





31.2   Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.





32      Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


29


SIGNATURES





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





HABERSHAM BANCORP


(Registrant)








Date August 14, 2009
/s/ Annette BanksChief Financial Officer
(for the Registrant and as the
Registrant’s principal financial and
accounting officer)





30