SECURITIES
AND EXCHANGE COMMISSION


Washington,
D. C. 20549





FORM
10-Q





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


SECURITIES
EXCHANGE ACT OF 1934


For the
quarterly period ended March 31, 2008.





 ̈ TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934


For the
transition period from _____ to ___________________





Commission
file number 0-13153





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





Georgia
            
            58-1563165(State
      or other jurisdiction of incorporation or organization)
            
            (I.R.S.
      Employer Identification 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  ̈ 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  ̈ 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  ̈





1





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  ̈
            Accelerated
      filer  ̈Non-accelerated
      filer  ̈
            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  ̈ 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 April 30, 2008.





2





Item. 1
Financial Statements





HABERSHAM
BANCORP AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS (unaudited)


(dollars
in thousands)





ASSETS
            
            MARCH
      31, 2008
            
            
            DECEMBER
      31, 2007Cash
      and due from banks
            
            $
            19,348
            
            
            $
            18,196Federal
      funds sold
            
            
            9,617
            
            
            
            4,189Total
      cash and cash equivalents
            
            
            28,965
            
            
            
            22,385Investment
      securities available for sale
            
            
            96,787
            
            
            
            89,890Investment
      securities held to maturity (estimated fair value of $2,749 at March 31,
      2008 and $2,752 at December 31, 2007)
            
            
            2,684
            
            
            
            2,689Other
      investments
            
            
            3,334
            
            
            
            3,409Loans
      held for sale
            
            
            851
            
            
            
            1,866Loans
            
            
            340,802
            
            
            
            350,388Less
      allowance for loan losses
            
            
            (2,239
            )
            
            
            (2,137
            )Loans,
      net
            
            
            338,563
            
            
            
            348,251Premises
      and equipment, net
            
            
            16,570
            
            
            
            16,081Other
      real estate
            
            
            15,375
            
            
            
            11,498Cash
      surrender value of life insurance
            
            
            9,637
            
            
            
            9,539Goodwill
            
            
            3,550
            
            
            
            3,550Accrued
      interest receivable
            
            
            2,244
            
            
            
            2,752Other
      assets
            
            
            3,119
            
            
            
            2,309TOTAL
      ASSETS
            
            $
            521,679
            
            
            $
            514,219LIABILITIESNoninterest-bearing
      deposits
            
            $
            46,114
            
            
            $
            29,741Interest-bearing
      deposits
            
            
            356,581
            
            
            
            360,526Total
      deposits
            
            
            402,695
            
            
            
            390,267Short-term
      borrowings
            
            
            718
            
            
            
            766Federal
      funds purchased and securities sold under repurchase
      agreements
            
            
            20,519
            
            
            
            26,184Federal
      Home Loan Bank Advances
            
            
            38,000
            
            
            
            38,000Other
      liabilities
            
            
            5,646
            
            
            
            4,820TOTAL
      LIABILITIES
            
            
            467,578
            
            
            
            460,037STOCKHOLDERS'
      EQUITYCommon
      Stock, $1.00 par value, 10,000,000 shares authorized; 2,818,593 shares
      issued at March 31, 2008 and December 31, 2007
            
            
            2,819
            
            
            
            2,819Additional
      paid-in capital
            
            
            13,490
            
            
            
            13,490Retained
      earnings
            
            
            37,849
            
            
            
            38,135Accumulated
      other comprehensive(loss)income
            
            
            (57
            )
            
            
            (262
            )TOTAL
      STOCKHOLDERS' EQUITY
            
            
            54,101
            
            
            
            54,182TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
            
            $
            521,679
            
            
            $
            514,219








See notes
to unaudited condensed consolidated financial statements.





3





HABERSHAM
BANCORP AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS


(Uaudited)
For the Three-Month Periods Ended March 31, 2008 and 2007


(dollars
in thousands, except per share amounts)





Three
      Months ended March 31,2008
            
            
            2007INTEREST
      INCOMELoan
      interest and fees on loans
            
            $
            6,311
            
            
            $
            7,863Taxable
      investment securities
            
            
            858
            
            
            
            748Tax
      exempt securities
            
            
            287
            
            
            
            269Federal
      funds sold
            
            
            69
            
            
            
            99Other
            
            
            78
            
            
            
            59TOTAL
      INTEREST INCOME
            
            
            7,603
            
            
            
            9,038INTEREST
      EXPENSETime
      deposits, $100,000 and over
            
            
            1,470
            
            
            
            1,291Other
      deposits
            
            
            1,840
            
            
            
            2,046Short-term
      and other borrowings, primarily FHLB advances
            
            
            690
            
            
            
            643TOTAL
      INTEREST EXPENSE
            
            
            4,000
            
            
            
            3,980NET
      INTEREST INCOME
            
            
            3,603
            
            
            
            5,058Provision
      for loan losses
            
            
            423
            
            
            
            -NET
      INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
            
            
            3,180
            
            
            
            5,058NONINTEREST
      INCOMEMortgage
      origination income
            
            
            180
            
            
            
            161Service
      charges on deposits
            
            
            248
            
            
            
            232Other
      service charges and commissions
            
            
            69
            
            
            
            61Investment
      securities (losses) gains, net
            
            
            127
            
            
            
            5Other
      income
            
            
            533
            
            
            
            461Total
      noninterest income
            
            
            1,157
            
            
            
            920NONINTEREST
      EXPENSESalary
      and employee benefits
            
            
            2,381
            
            
            
            2,643Occupancy
            
            
            601
            
            
            
            587Computer
      services
            
            
            145
            
            
            
            158Telephone
            
            
            119
            
            
            
            144General
      and administrative expense
            
            
            1,228
            
            
            
            1,054Total
      noninterest expense
            
            
            4,474
            
            
            
            4,586(LOSS)
      EARNINGS BEFORE INCOME TAX (BENEFIT) EXPENSE
            
            
            (137
            )
            
            
            1,392Income
      tax benefit (expense)
            
            
            196
            
            
            
            (408
            )Net
      earnings
            
            $
            59
            
            
            $
            984Net
      earnings per common share – Basic
            
            $
            .02
            
            
            $
            .33Net
      earnings per common share – Diluted
            
            $
            .02
            
            
            $
            .33Weighted
      average number of common shares outstanding
            
            
            2,818,593
            
            
            
            2,968,593Weighted
      average number of common and common equivalent shares
      outstanding
            
            
            2,818,593
            
            
            
            2,995,405Dividends
      per share
            
            $
            .10
            
            
            $
            .10








See notes
to unaudited condensed consolidated financial statements.





4





HABERSHAM
BANCORP AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


(Unaudited)
For the Three-Month Periods Ended March 31, 2008 and 2007


(dollars
in thousands)





Three
      Months ended March 31,2008
            
            
            2007NET
      EARNINGS
            
            $
            59
            
            
            $
            984OTHER
      COMPREHENSIVE INCOME (LOSS):Unrealized
      holding (losses) gains on investment securities available for sale arising
      during the period
            
            
            559
            
            
            
            304Unrealized
      holding gains (losses) on derivative financial instruments classified as
      cash flow hedges, arising during the period
            
            
            (121
            )
            
            
            (50
            )Reclassification
      adjustment for (gains) losses on investment securities available for
      sale
            
            
            (127
            )
            
            
            (5
            )Total
      other comprehensive income (loss), before tax
            
            
            311
            
            
            
            249INCOME
      TAXES RELATED TO OTHER COMPREHENSIVE INCOME:Unrealized
      holding (losses) gains on investment securities available for sale arising
      during the period
            
            
            (190
            )
            
            
            (103
            )Unrealized
      holding gains (losses) on derivative financial instruments classified as
      cash flow hedges, arising during the period
            
            
            41
            
            
            
            17Reclassification
      adjustment for (gains) losses on investment securities available for
      sale
            
            
            43
            
            
            
            2Total
      income taxes related to other comprehensive income (loss)
            
            
            (106
            )
            
            
            (84
            )Total
      other comprehensive (loss) income, net of tax
            
            
            205
            
            
            
            165Total
      comprehensive (loss) income
            
            $
            264
            
            
            $
            1,149








See notes
to unaudited condensed consolidated financial statements.





5





HABERSHAM
BANCORP AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)
For the Three-Month Periods Ended March 31, 2008 and 2007


(dollars
in thousands)





Three
      Months ended March 31,2008
            
            
            2007CASH
      FLOWS PROVIDED BY OPERATING ACTIVITIES:
            
            $
            1,794
            
            
            $
            4,437CASH
      FLOWS FROM INVESTING ACTIVITIES:Investment
      securities available for sale:Proceeds
      from maturity
            
            
            1,536
            
            
            
            1,282Proceeds
      from sales and calls
            
            
            20,050
            
            
            
            1,241Purchases
            
            
            (27,952
            )
            
            
            (4,383
            )Investment
      securities held to maturity:Proceeds
      from maturity
            
            
            5
            
            
            
            299Other
      investments:Proceeds
      from sale
            
            
            75
            
            
            
            -Purchases
            
            
            -
            
            
            
            (44
            )Net
      (increase) decrease in loans
            
            
            5,405
            
            
            
            (7,647
            )Purchases
      of premises and equipment
            
            
            (778
            )
            
            
            (350
            )Net
      additions of other real estate
            
            
            (491
            )
            
            
            -Proceeds
      from sale of other real estate
            
            
            503
            
            
            
            39Net
      cash (used by) provided by investing activities
            
            
            (1,647
            )
            
            
            (9,563
            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Net
      increase (decrease) in deposits
            
            
            12,428
            
            
            
            (71,039
            )Net
      increase (decrease) in short-term borrowings
            
            
            (48
            )
            
            
            14Net
      (decrease) increase in federal funds purchased and securities sold under
      repurchase agreements
            
            
            (5,665
            )
            
            
            5,679Cash
      dividends paid
            
            
            (282
            )
            
            
            (297
            )Net
      cash (used by) provided by financing activities
            
            
            6,433
            
            
            
            (65,643
            )Change
      in cash and cash equivalents
            
            
            6,580
            
            
            
            (70,769
            )CASH
      AND CASH EQUIVALENTS:  BEGINNING OF PERIOD
            
            
            22,385
            
            
            
            90,518CASH
      AND CASH EQUIVALENTS:  END OF PERIOD
            
            $
            28,965
            
            
            $
            19,749SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Other
      real estate acquired through loan foreclosures
            
            $
            3,860
            
            
            $
            305Change
      in components of other comprehensive income
            
            
            205
            
            
            
            165








See notes
to unaudited condensed consolidated financial statements.





6





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 2007 consolidated financial statements and notes
thereto, included in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2007.








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, 2007.  The Company
has consistently followed those policies in preparing this report.








3. Other
Comprehensive Income





Other
comprehensive income for the Company consists of items recorded directly in
equity under Statement of Financial Accounting Standards ("SFAS") No. 115, Accounting for Certain Investments
in Debt and Equity Securities in addition to the net of tax fair value of
cash flow hedges.  Investment securities classified as available for
sale are carried at fair value with the related unrealized gain or loss, net of
deferred income taxes included as a separate component of stockholders'
equity.  At March 31, 2008, fair value of the available for sale
investment securities increased approximately $432,000 when compared to the fair
value at December 31, 2007.  The corresponding equity component of
unrealized gain and loss on available for sale securities, net of tax, also
increased approximately $285,000. These changes were the results of movements in
the bond market as it responds to interest rate changes in the
market.  At March 31, 2008, fair value of the cash flow hedges
decreased approximately $121,000 when compared to the fair value at December 31,
2007.  The corresponding equity component of unrealized holding gains
on derivative financial instruments classified as cash flow hedges, net of tax,
also decreased approximately $80,000.








4. Net
Earnings Per Share





Basic net
earnings per share is based on the weighted average number of common shares
outstanding during the period.  Diluted net earnings per share
includes the effect of potential common shares outstanding during the
period.  The average market price during the period is used to compute
equivalent shares.





7





The
reconciliation of the amounts used in the computation of both basic net earnings
per share and diluted net earnings per share for the three-month periods ended
March 31, 2008 and 2007, is as follows:





Three
      Months ended March 31,2008
            
            
            2007Net
      earnings
            
            $
            58,943
            
            
            $
            984,455Weighted
      average common shares outstanding
            
            
            2,818,593
            
            
            
            2,968,593Shares
      issued from assumed exercise of common stock equivalents
            
            
            -
            
            
            
            26,812Weighted
      average number of common and common equivalent shares
      outstanding
            
            
            2,818,593
            
            
            
            2,995,405Earnings
      per share:Basic
            
            $
            .02
            
            
            $
            .33Diluted
            
            $
            .02
            
            
            $
            .33








5. Change
in Accounting Principle





Effective
January 1, 2008, the Company adopted Emerging Issues Task Force Issue No. 06-10,
Accounting for Collateral Assignment
Split-Dollar Life Insurance Arrangements("EITF 06-10").  EITF
06-10 requires a company to recognize a liability for the postretirement benefit
related to a collateral assignment split- dollar life insurance arrangement if
the employer has agreed to maintain a life insurance policy during the
employee's retirement or provide the employee with a death benefit based on the
substantive agreement with the employee.  The company has post
retirement benefits with several of its executives and
directors.  Refer to Note 16 – "Employee Benefit and Stock Option
Plans" in the Company's consolidated financial statements included in Form 10-K
for the year ended December 31, 2007.  Since the Company has agreed to
maintain life insurance policies in place during the retirement years of these
individuals, the Company must record a liability for the present value of the
future costs to maintain the policies in force (mortality
costs.)  EITF 06-10 allows companies to record the effects of
adopting the EITF as a change in accounting principle through a
cumulative-effect adjustment to retained earnings as of the beginning of the
year of adoption.  The Company recorded a liability and a
cumulative-effect adjustment to retained earnings in the amount of $63,237, net
of tax.  Future increases in the liability will be charged to earnings
in the year incurred.  For the quarter ended March 31, 2008, $4,446
was recorded to expense for the increase in the liability for future mortality
costs.







6. Fair
Value





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.





8





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 derivatives classified
as cash flow hedges (interest rate swaps) 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
loans held for sale and certain other assets.  These nonrecurring fair
value adjustments typically involve application of the lower of cost or market
accounting or write-downs of individual assets.





Fair Value
Hierarchy





Under
SFAS 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
recorded at fair value.





Securities
Available-for-Sale





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.





Loans Held for
Sale





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.





9





Loans





The
Company does not record loans at fair value on a recurring
basis.  However, from time to time, a loan is considered impaired and
an allowance for loan losses is established.  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 in identified as individually impaired,
management measures impairment in accordance with SFAS 114, Accounting by Creditors for
Impairment of a Loan, ("SFAS 114").  The fair value of impaired
loans is estimated using one of several methods, including collateral value,
market value of similar debt, enterprise value, liquidation value 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.  At March 31, 2008, only a
small portion of the impaired loans were evaluated based on the fair value of
the collateral.  In accordance with SFAS 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.





Other Real
Estate





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.





Goodwill and Other
Intangible Assets





Goodwill
and identified intangible assets are subject to impairment testing.  A
projected cash flow valuation method is used in the completion of impairment
testing.  This valuation method requires a significant degree of
management judgment.  In the event the projected undiscounted net
operating cash flows are less than the carrying value, the asset is recorded at
fair value as determined by the valuation model.  As such, the Company
classifies goodwill and other intangible assets subjected to nonrecurring fair
value adjustments as Level 3.





Derivative Financial
Instruments – Interest Rate Swaps





The
Company uses interest rate swaps to manage its interest rate
risk.  The valuation of these instruments is determined using widely
accepted valuation techniques including discounted cash flow analysis on the
expected cash flows of each derivative.  This analysis reflects the
contractual terms of the derivatives, including the period to maturity, and uses
observable market-based input, including interest rate curves and implied
volatilities.  The fair values of interest rate swaps are determined
using the market standard methodology of netting the discounted future fixed
cash receipts and the discounted expected variable cash payments.  The
variable cash payments are based on an expectation of future interest rates
(forward curves) derived from observable market interest rate
curves.





10





Although
the Company has determined that the majority of the input used to value its
derivatives fall within Level 2 of the fair value hierarchy, the credit
valuation adjustments associated with its derivatives utilize Level 3 inputs,
such as estimates of current credit spreads to evaluate the likelihood of
default by itself and its counterparties.  However, as of March 31,
2008, the Company has assessed the significance of the impact of the credit
valuation adjustments on the overall valuation of its derivative positions and
has determined that the credit valuation adjustments are not significant to the
overall valuation of its derivatives.  As a result, the Company has
determined that its derivative valuations in their entirety are classified in
Level 2 of the fair value hierarchy.





Assets Recorded at Fair
Value on a Recurring Basis





The table
below presents the recorded amount of assets measured at fair value on a
recurring basis as of March 31, 2008.





Three
      Months ended
              March 31, 2008(In
      Thousands)
            
            Total
            
            
            Level
      1
            
            
            Level
      2
            
            
            Level
      3Investment
      securities available-for-sale
            
            $
            96,787
            
            
            
            2,009
            
            
            
            94,778
            
            
            
            -Interest
      rate swap
            
            
            (154
            )
            
            
            -
            
            
            
            (154
            )
            
            
            -Total
      assets at fair value
            
            $
            96,633
            
            
            
            2,009
            
            
            
            94,624
            
            
            
            -








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 March 31, 2008.





Three
      Months ended
              March 31, 2008(In
      Thousands)
            
            Total
            
            
            Level
      1
            
            
            Level
      2
            
            
            Level
      3Other
      real estate
            
            $
            15,375
            
            
            
            -
            
            
            
            15,375
            
            
            
            -Loans
            
            
            4,181
            
            
            
            -
            
            
            
            4,181
            
            
            
            -$
            19,556
            
            
            
            -
            
            
            
            19,556
            
            
            
            -





11





7. Recent
Accounting Pronouncements





Disclosures
about Derivative Instruments and Hedging Activities





In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities.  SFAS No. 161 is an
amendment to SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities.  The objective of SFAS No.
161 is to expand the disclosure requirements of SFAS No. 133 with the intent to
improve the financial reporting of how and why an entity uses derivative
instruments; how derivative instruments and related hedged items are accounted
for under SFAS No. 133 and its related interpretations; and how derivative
instruments and related hedged items affect an entity's financial position,
financial performance and cash flows.  The statement is effective for
financial statements issued for fiscal years beginning after November 15,
2008.  The Company does not anticipate the new accounting principle to
have a material effect on its financial position or results of
operation.








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.  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, 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 first quarter earnings of $58,943 or $.02 per diluted share, a
decrease of 94.01% when compared to first quarter earnings of $984,455 or $.33
per diluted share in 2007.  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 first quarters of 2008 and 2007 were approximately $7.6 million
and $9.0 million, respectively.  This decrease of approximately $1.4
million, or 15.88%, resulted from the response to the falling prime interest
rate, the number and balances of variable rate loans, decreases in commercial
real estate loan balances and the increase in the number and balances of loans
in nonaccrual status.  Interest expense was approximately $4.0 million
for the first quarters of 2008 and 2007. Despite increases in average
deposit and borrowing balances, interest expense remained relatively stable due
to decreases in interest rates. Deposit rates decreased from 4.07% to 3.75%
when comparing first quarter 2008 to first quarter 2007.  Interest
rates paid on borrowings decreased from 4.89% to 4.44% when comparing first
quarter 2008 to first quarter 2007.





12





The net
interest margin for the first quarter of 2008 was 3.31% when compared to 4.65%
for the first quarter of 2007.  Two factors which impact the net
interest margin are average interest-bearing liabilities and average
interest-earning assets,  which increased approximately $30.6 million
and $.6 million, respectively, when comparing first quarter of 2008 to first
quarter of 2007.





Net
interest income before provision for loan loss decreased approximately $1.5
million or 28.77%, for the first quarter of 2008 as compared to the first
quarter of 2007 as a result of the items discussed above.





Habersham
Bank recorded a provision of $423,000 to its allowance for loan losses for the
first quarter of 2008 in response to past due activity within the loan
portfolios.For the quarter
ended March 31, 2007, no addition to the provision for loan losses was
considered necessary.




During
the first quarter of 2008, total assets increased approximately $7.5 million or
1.45% from $514.2 million at December 31, 2007 to $521.7 million at March 31,
2008 as a result of activity within the investment securities portfolios, cash
and cash equivalent accounts and in other assets of approximately $18.1
million.  These increases were offset by decreases within the loan
portfolios of approximately $10.6 million.





Total
liabilities (deposits, borrowings and other liabilities) at March 31, 2008
increased approximately $7.5 million when compared to total liabilities at
December 31, 2007.  Noninterest bearing deposit balances and other
liabilities increased approximately $16.4 million and $800,000, respectively,
and were offset by decreases in the other borrowings and in interest bearing
account balances of approximately $5.7 million and $4.0 million,
respectively.








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.





13





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 of $521.7 million at March 31, 2008 reflect an increase of $7.5 million
or 1.45% from $514.2 million at December 31, 2007.  This increase
resulted from net increases in investment securities, cash and cash equivalents,
other real estate, premises and equipment, and in other assets of approximately,
$6.8 million, $6.6 million, $3.9 million, $.5 million, and $.9 million,
respectively, offset by net decreases in loans, loans held for sale and accrued
interest of approximately $9.7 million, $1.0 million and $.5 million,
respectively.





Calls and
sales of approximately $20.1 million and maturities of approximately $1.5
million occurring within the investment securities available for sale portfolio
were offset by purchases of approximately $28.0 million during the first quarter
of 2008, generating net gains of approximately $127,000. The purchases consisted
of $19.1 million in U.S. government-sponsored enterprises, $7.6 million in
Mortgage Backed Securities and $1.3 million in municipal bonds.





Federal
funds sold and cash and due from banks balances increased approximately $5.4
million and $1.2 million, respectively, as a result of increases in the total
deposit portfolio of Habersham Bank.  Other real estate increases
resulted from foreclosures of properties during the first quarter of
2008.  See a more detailed discussion in "Asset
Quality".  Fixed assets primarily increased as a result of the ongoing
construction of the Flowery Branch office, which is expected to be completed
this year.





14




The total loan portfolio
balances and loans held for sale balances decreased approximately $9.7 million
and $1.0 million respectively, when comparing balances at March 31, 2008 to
December 31, 2007.  The
decrease in the loan portfolio balances resulted from the payout and foreclosure
of approximately $5.8 million and $3.9 million,
respectively.  Decreases in the loan portfolio occurred within the
real estate construction portfolio, commercial lending portfolio and in loans
secured by farm land of approximately $16.3 million, $2.9 million and $1.7
million, respectively, were offset by increases in loans secured by residential
properties, loans secured by commercial properties and consumer loans of
approximately $7.0 million, $3.3 million and $.9 million,
respectively.





Total
deposits increased approximately $12.4 million when comparing balances at March
31, 2008 to December 31, 2007, balances, with increases occurring in the
noninterest bearing deposit balances and in NOW and money market account
balances of approximately $16.4 million and $2.8 million, respectively, offset
by decreases in the savings and time deposit account balances of approximately
$3.9 million and $2.9 million, respectively.  Total borrowings
decreased approximately $5.7 million when comparing March 31, 2008 balances to
December 31, 2007.  The decreases in the repurchase sweep accounts
consisted of a reduction of $10.7 million which was offset by the
addition of a $5 million repurchase agreement with another financial
institution.








Material
Changes in Results of Operations





Net
interest income is the largest single source of income for the
Company.  Management strives to attain a level of earning asset growth
while providing a net yield on earning assets that will cover overhead and other
costs and provide a reasonable return to our stockholders.  Net
interest income is affected by interest income from loans, investment securities
and federal funds sold offset by interest paid on deposits and
borrowings.  The following table compares the weighted average tax
equivalent yields for loans, investment securities and federal funds sold and
the weighted average rates for deposits and borrowings and the average balances
for the first quarters of 2008 and 2007.




Three
      Months ended
                March 31, 2008
              
              
              Three
      Months ended
                March 31, 2007Interest
      Yields Earned:
              
              Average
      Balance
              
              
              Yields
              
              
              Average
      Balance
              
              
              YieldsLoans
              
              $
              341,670,852
              
              
              
              7.40
              %
              
              $
              350,493,847
              
              
              
              9.08
              %Investment
      Securities
              
              
              101,957,914
              
              
              
              5.33
              %
              
              
              92,781,986
              
              
              
              5.23
              %Federal
      Funds Sold
              
              
              8,322,626
              
              
              
              3.31
              %
              
              
              8,231,806
              
              
              
              4.88
              %
 
 Interest
      Rates Paid:
              
              Average
      Balance
              
              
              Rates
              
              
              Average
      Balance
              
              
              RatesDeposits
              
              $
              354,240,038
              
              
              
              3.75
              %
              
              $
              332,586,677
              
              
              
              4.07
              %Borrowings
              
              
              62,368,175
              
              
              
              4.44
              %
              
              
              53,405,466
              
              
              
              4.89
              %





15





Total
interest income for the first quarter of 2008 decreased approximately $1.4
million, or 15.88%, when compared to first quarter of 2007 primarily due to the
decreases in loan balances and in loan yields.  The decrease in
interest income is as result of the following: 1) Approximately $267.7 million
or 74.02% of the loan portfolio is a variable rate loan product which may
reprice daily, monthly, quarterly or annually.  As the prime rate
decreases, the loan yields decrease accordingly.  2) Average loan
balances also decreased approximately $8.8 million or 2.52%, when compared to
first quarter of 2007 due to maturities, payouts and foreclosures.  3)
Interest income is reduced as the number and balances of loans in nonaccrual
status increase.  See a more detailed discussion in "Asset
Quality".





Total
interest expense for the first quarter of 2008 increased approximately $20,000
or .50% when compared to the first quarter of 2007. Rates paid on all deposit
account products decreased when compared to the first quarter of
2007. Average interest bearing deposits increased approximately $21.6
million when comparing average balances at March 31, 2008 to March 31, 2007
balances. While average balances in interest bearing demand deposit
accounts and time deposits increased approximately $24.8 million and $2.0
million, respectively, rates decreased from 5.01% to 4.98% and from 2.13% to
1.53%, respectively.  Saving account balances decreased approximately
$5.1 million and rates decreased from 4.20% to 2.93% when compared to the first
quarter of 2007.   Average borrowing balances in other
borrowings, consisting of federal funds purchased, sweep accounts and repurchase
agreements, increased approximately $8.9 million when comparing first quarter of
2008 to first quarter of 2007 and rates paid decreased from 4.26% to
3.14%.





Net
interest income decreased approximately $1.5 million or 28.77%, for the first
quarter of 2008, as compared to the first quarter of 2007, as a result of the
items discussed above.





The net
interest margin of the Company, net interest income divided by average
earning-assets, was 3.31% for the first quarter of 2008 compared to 4.65% for
the first quarter of 2007.





Noninterest
income increased $237,000 or 25.76% for the first quarter of 2008 over the same
period in 2007.  The increase in noninterest income was primarily due
to the investment securities net gains realized on calls and sales within the
available for sale portfolio of approximately $127,000.  Increases
occurred in mortgage origination income, service charges on deposit accounts,
other service charges and commissions of approximately $19,000, $16,000 and
$8,000, respectively, for the first quarter of 2008 when compared to the first
quarter of 2007.  Increases in the cash surrender value of life
insurance and trust income of approximately $53,000 and $31,000, respectively,
were offset by a decrease of approximately $13,000 in various other income
accounts.





Noninterest
expense





Noninterest
expense decreased $112,000 or 2.44% for the first quarter of 2008 over the same
period in 2007, with decreases in salary and employee benefits, telephone
expense and computer services of approximately $262,000, $25,000 and $13,000,
respectively. The decrease in salary and employee benefits resulted from
decreases in overtime expense, commission expense and in the accrual for
incentive compensation.  Tighter expense control measures have
resulted in decreases in telephone expense and computer services when comparing
first quarter of 2008 to the same period in 2007.  These decreases
were offset by increases in general and administrative expense and occupancy
expense of approximately $174,000 and $14,000, respectively. The increase in
general and administrative expenses consists primarily of additional expenses
related to other real estate expense, outside services, and various other
miscellaneous expenses of approximately $132,000, $51,000, and
$42,000,  respectively, offset by decreases in office supplies and
advertising and marketing expenses of approximately $33,000 and $24,000,
respectively.  Outside services include FDIC insurance, legal and
professional services, insurance, director fees and State of Georgia Department
of Banking fees.





16





An income
tax benefit of approximately $196,000 was recorded for the first three months of
2008 compared to an income tax expense of approximately $408,000 for the
first three months of 2007.  Tax-exempt income of approximately
$407,000 was 297.08% of pre-tax income for the first quarter of 2008 when
compared to 23.42% of pre-tax income for the first quarter of 2007.





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 value 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 March 31, 2008 was $11.3 million.





17





At March
31, 2008 and December 31, 2007, the ratio of the allowance for loan losses to
total loans was .66% and .61%, respectively.   A provision of
$423,000 was charged to expense for the quarter ended March 31, 2008 and no
provision for loan losses was charged to expense for the quarter ended March 31,
2007.





Net
charge-offs for the first quarter of 2008 totaled $320,625 compared to net
charge-offs of $67,494 for the first quarter of 2007 as detailed
below:





March 31, 2008
            
            
            March 31, 2007Charge-offs:Commercial
            
            $
            25,350
            
            
            $
            -Real
      Estate
            
            
            275,853
            
            
            
            39,071Consumer
            
            
            38,288
            
            
            
            46,126Total
      Charge-offs
            
            
            339,491
            
            
            
            85,197Recoveries:Commercial
            
            
            421
            
            
            
            500Real
      Estate
            
            
            325
            
            
            
            -Consumer
            
            
            18,120
            
            
            
            17,203Total
      Recoveries
            
            
            18,866
            
            
            
            17,703Net
      Charge-offs
            
            $
            320,625
            
            
            $
            67,494





Nonperforming
assets consist of non-accrual loans, accruing loans 90 days past due, and other
real estate owned. The following summarizes non-performing assets:





March 31, 2008
            
            
            December 31, 2007Accruing
      loans 90 days past due
            
            $
            77,283
            
            
            $
            41,594Non-accrual
      loans
            
            
            23,317,848
            
            
            
            18,326,924Other
      real estate
            
            
            15,374,610
            
            
            
            11,498,271Total
      non-performing assets
            
            $
            38,769,741
            
            
            $
            29,866,789





Nonperforming
assets increased $8.9 million or 29.81% from December 31, 2007 to March 31,
2008.  See the discussion that follows within this section for a
description of the assets that comprise this increase.





Loans
classified as 90 days past due increased approximately $36,000 or 85.80%
from December 31, 2007 to March 31, 2008.  The increase is the net
result of the following changes:








Balance
      at December 31, 2007
            
            $
            41,594New
      loans classified to 90 days past due status
            
            
            77,283Payments
      received
            
            
            (41,594
            )Balance
      at March 31, 2008
            
            $
            77,283The
      following summarizes accruing loans 90 days past due:Commercial
      loans
            
            $
            5,236Residential
      loan
            
            
            72,047Total
      accruing loans 90 days past due
            
            $
            77,283




18





Impaired
loans consist of loans on nonaccrual status.  Nonaccrual loans at
March 31, 2008 increased approximately $5.0 million or 27.23% when compared to
December 31, 2007.  The increase is the net result of the following
changes:





Balance
      at December 31, 2007
            
            $
            18,326,924Loans
      reclassified to nonaccrual status in 2008
            
            
            10,165,368Advances
            
            
            5,738Payments
      received on nonaccrual loans during 2008
            
            
            (979,563
            )Nonaccrual
      loans charged-off during 2008
            
            
            (315,298
            )Nonaccrual
      loans reclassified to other real estate
            
            
            (3,859,635
            )Nonaccrual
      loans reclassified to accrual status in 2008
            
            
            (25,686
            )Balance
      at March 31, 2008
            
            $
            23,317,848





Additions
to loans on nonaccrual status consists of seven loans within the construction
and development portfolios totaling approximately $9.9 million and five loans
secured with 1-4 family residential properties totaling approximately
$248,000.Payoffs
of four loans in the construction and development portfolios totaled $810,000
during the first quarter of 2008.  The loss of interest on nonaccrual
loans during the first quarter of 2008 totaled approximately $361,000 offset by
interest recovered upon payouts totaled approximately
$167,000.





The
following summarizes nonaccrual loans at March 31, 2008 and December 31,
2007:





March
      31, 2008
            
            
            
            
            
            December
      31, 2007Real
      Estate – construction & development loans
            
            
            27
            
            
            $
            23,062,492
            
            
            
            36
            
            
            $
            18,146,355Real
      Estate – residential loans
            
            
            7
            
            
            
            231,913
            
            
            
            4
            
            
            
            145,108Commercial
      loans
            
            
            -
            
            
            
            -
            
            
            
            1
            
            
            
            25,350Consumer
      loans
            
            
            7
            
            
            
            23,443
            
            
            
            1
            
            
            
            10,111Total
      nonaccrual loans
            
            
            41
            
            
            $
            23,317,848
            
            
            
            42
            
            
            $
            18,326,924





Other
real estate at March 31, 2008 increased approximately $3.9 million or 33.72%
when compared to December 31, 2007. The following summarizes other real estate
at March 31, 2008 and December 31, 2007:





March
      31, 2008
            
            
            
            
            
            December
      31, 2007Residential
      construction properties
            
            
            24
            
            
            $
            9,898,877
            
            
            
            22
            
            
            $
            6,324,444Vacant
      lots
            
            
            42
            
            
            
            4,836,233
            
            
            
            39
            
            
            
            4,500,483Commercial
      properties
            
            
            2
            
            
            
            639,500
            
            
            
            2
            
            
            
            639,500Residential
      properties
            
            
            -
            
            
            
            -
            
            
            
            1
            
            
            
            33,844Total
      other real estate
            
            
            68
            
            
            $
            15,374,610
            
            
            
            64
            
            
            $
            11,498,271





The
increase in other real estate was the result of the foreclosure of five
residential construction properties and additional funds for completion of
construction totaling approximately $3.9 million and $.5 million during the
first quarter of 2008 offset by sales of approximately $.5 million.





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.





19





Liquidity
and Capital Resources





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





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





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





The
Company also has the ability, on a short-term basis, to purchase federal funds
from other financial institutions up to $30 million.  At March 31,
2008, the Company had no federal funds purchased.  Presently, the
Company has made arrangements with commercial banks for short-term advances
under a repurchase agreement line of credit of which none was advanced at March
31, 2008. The Company entered into a repurchase agreement for a long term
advance of $5 million during the first quarter of 2008.  The Company
has approximately $15.5 million outstanding in commercial sweep accounts at
March 31, 2008.  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 has $38.0 million in advances on this line at March
31, 2008.





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 March 31, 2008 and 2007 were 32.46% and 22.23%,
respectively.





At March
31, 2008 Habersham Bancorp and Habersham Bank were required to have minimum Tier
1 and total capital ratios of 4% and 8%, respectively.  Additionally,
the Company and the Bank are required to maintain a leverage ratio (Tier 1
capital toaverage
assets) of at least 4%.  The Company's and the Bank's ratios at March
31, 2008 follow:





Habersham
      Bank
            
            
            Habersham
      BancorpTier
      1
            
            
            11.96
            %
            
            
            12.83
            %Total
      Capital
            
            
            12.54
            %
            
            
            13.40
            %Leverage
            
            
            9.14
            %
            
            
            9.80
            %








Item
3.  Quantitative and Qualitative Disclosures about Market
Risk.





As of
March 31, 2008 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, 2007.  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, 2007 included in the Company's 2007
Annual Report on Form 10-K.





20





Item
4T.  CONTROLS AND PROCEDURES





As of the
end of the period covered by this report, the Company's management, including
the Company's 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 been no 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 could significantly affect those
internal controls subsequent to the date management carried out its evaluation,
and there have been no corrective actions with respect to significant
deficiencies or material weaknesses.








PART
II





OTHER
INFORMATION





Item
1.  Legal proceedings.


None





Item 1.A.
Risk Factors.





In
addition to the other information set forth in this report, you should carefully
consider the factors discussed in Part I. "Item 1.A. Risk Factors" in the
Company's Annual Report on Form 10-K for the year ended December 31, 2007, which
could materially affect its business, financial condition or future
results.  The risks described in the Annual Report of Form 10-K are
not the only risks facing the Company.  Additional risks and
uncertainties not currently known to management or that management currently
deems to be immaterial also may materially adversely affect the Company's
business, financial condition and/or operating results.





Item
2.  Unregistered sales of equity securities and use of
proceeds.





Issuer
Purchases of Equity Securities





During
the period covered by this report, the Company did not sell any equity
securities that were not registered under the Securities Act of 1933, as
amended.




21





The
following table sets forth information regarding the Company's purchases of its
common stock on a monthly basis during the first quarter of 2008.





Period
              
              Total
      Number of Shares Purchased
              
              
              Average
      Price Paid Per Share
              
              
              Total
      Number of Shares (or Units) Purchased as Part of Publicly Announced Plans
      or Programs 1
              
              
              Maximum
      Number (or Appropriate Dollar Value) of Shares (or Units) that May Yet Be
      Purchased Under the Plans or ProgramsJanuary
      1 through January 31, 2008
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0February
      1 through February 28, 2008
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0March
      1 through March 31, 2008
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0Total
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              0





(1)
            During
      the third quarter of 2007, the Habersham Bancorp Board of Directors
      approved a program to repurchase up to 150,000 shares of the Company's
      outstanding common stock.  The Company repurchased all of the
      150,000 shares in October of 2007 through a privately negotiated
      transaction.





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.


None





Item
5.  Other information.


None





Item
6.  Exhibits





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





31.1
              Certification
      of Chief Executive Officer Pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002.31.2
              Certification
      of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.32
              Certification
      of Chief Executive Officer and Chief Financial Officer Pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002.
  22


SIGNATURES





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





HABERSHAM
BANCORP


(Registrant)








Date
      May 15, 2008
            /s/ Annette
      BanksChief
      Financial Officer(for
      the Registrant and as theRegistrant's
      principal financial andaccounting
      officer)






23