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. Employer
incorporation 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 o
Non-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.

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Item. 1   Financial Statements

HABERSHAM BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

	JUNE 30, 2009			DECEMBER 31, 2008
ASSETS	(unaudited)			(audited)
Cash and due from banks	$	21,353		$	13,640
Federal funds sold		20,101			620
Total cash and cash equivalents		41,454			14,260
Investment securities available for sale		94,143			97,278
Investment securities held to maturity (estimated fair value of $1,042 at June 30, 2009 and $1,053 at December 31, 2008)		1,020			1,025
Other investments		2,598			3,334
Loans held for sale		620			-
Loans		307,726			322,775
Less allowance for loan losses		(7,517	)		(12,168	)
Loans, net		300,209			310,607
Premises and equipment, net		18,991			19,479
Other real estate owned		34,834			27,337
Cash surrender value of life insurance		10,114			9,936
Accrued interest receivable		2,008			2,222
Income tax receivable		2,386			2,504
Other assets		9,845			6,887
TOTAL ASSETS	$	518,222		$	494,869
LIABILITIES
Noninterest-bearing deposits	$	34,712		$	29,664
Money market and NOW accounts		76,471			77,638
Savings		42,297			43,180
Time deposits, $100,000 and over		113,185			102,391
Other time deposits		152,752			140,015
Total deposits		419,417			392,888
Short-term borrowings		765			760
Federal funds purchased and securities sold under repurchase agreements		15,224			16,384
Federal Home Loan Bank advances		38,000			38,000
Accrued interest payable		3,177			2,805
Other liabilities		2,302			2,034
TOTAL LIABILITIES		478,885			452,871
Commitments
STOCKHOLDERS’ EQUITY
Preferred 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		-			2,978
Preferred 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			2,819
Additional paid-in capital		13,490			13,490
Retained earnings		19,172			22,518
Accumulated other comprehensive income (loss)		(107	)		193
TOTAL STOCKHOLDERS’ EQUITY		39,337			41,998
TOTAL 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 ended
	2009			2008			2009			2008
INTEREST INCOME
Loan interest and fees on loans	$	4,218		$	5,653		$	8,734		$	11,964
Taxable investment securities		953			853			1,967			1,711
Tax exempt investment securities		141			266			288			553
Federal funds sold		6			11			13			79
Other		5			52			9			131
TOTAL INTEREST INCOME		5,323			6,835			11,011			14,438
INTEREST EXPENSE
Time deposits, $100,000 and over		1,041			1,177			2,093			2,634
Other deposits		1,660			1,768			3,341			3,629
Short-term and other borrowings, primarily FHLB advances		460			620			946			1,310
TOTAL INTEREST EXPENSE		3,161			3,565			6,380			7,573
NET INTEREST INCOME		2,162			3,270			4,631			6,865
Provision for loan losses		1,300			654			3,080			1,077
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		862			2,616			1,551			5,788
NONINTEREST INCOME
Mortgage origination income		51			135			93			315
Service charges on deposits		246			251			499			498
Other service charges and commissions		63			70			121			140
Gain on sale of investment securities available for sale		256			161			314			289
Gain on sale and impairment of other investments, net		20			-			20			-
Other income		413			517			926			1,049
Total noninterest income		1,049			1,134			1,973			2,291
NONINTEREST EXPENSE
Salary and employee benefits		1,846			2,553			3,904			4,934
Occupancy		678			587			1,394			1,188
Other real estate expense		388			162			681			294
Computer services		147			123			319			268
Telephone		122			115			235			234
Leased equipment		118			115			246			235
General and administrative expense		1,306			991			2,290			1,959
Total noninterest expense		4,605			4,646			9,069			9,112
LOSS BEFORE INCOME TAXES		(2,694	)		(896	)		(5,545	)		(1,033	)
Income tax benefit		1,094			521			2,290			717
NET 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			2,818,593
Weighted average number of common and common equivalent shares outstanding		2,818,593			2,818,593			2,818,593			2,818,593
Dividends 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 ended
	2009			2008			2009			2008
NET 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			661
Unrealized holding (gains) losses on derivative financial instruments classified as cash flow hedges, arising during the period		(13	)		(25	)		(23	)		16
Reclassification adjustment for realized gains on investment securities available for sale		87			55			107			98
Total income taxes related to other comprehensive loss		340			881			155			775
Total 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			2008
CASH FLOWS PROVIDED BY (USED BY) OPERATING ACTIVITIES:	$	(1,928	)	$	1,218
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment securities available for sale:
Proceeds from maturity		6,500			6,538
Proceeds from sales and calls		18,677			35,519
Purchases		(22,414	)		(45,448	)
Investment securities held to maturity:
Proceeds from maturity		5			8
Proceeds from call		-			1,103
Other investments:
Proceeds from sale		758			75
Purchases		(2	)		-
Net (decrease) increase in loans		(7,889	)		4,378
Proceeds 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			1,097
Net cash provided by investing activities		2,853			302
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits		26,529			(18,322	)
Net increase in short-term borrowings		5			19
Net (decrease) increase in federal funds purchased and securities sold under repurchase agreements		(1,159	)		9,548
Proceeds from FHLB advances		7,000			7,000
Repayment 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			22,385
CASH AND CASH EQUIVALENTS:  END OF PERIOD	$	41,454		$	14,586
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Other real estate acquired through loan foreclosures	$	9,237		$	6,096
Change 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.

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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, 2008
Net 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			2,818,593
Loss per share:
Basic	$	(.58	)	$	(.13	)	$	(1.19	)	$	(.11	)
Diluted	$	(.58	)	$	(.13	)	$	(1.19	)	$	(.11	)

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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 Value
U.S. government-sponsored enterprises	$	26,761		109		289		26,581
Mortgage-backed securities		54,474		918		99		55,293
State and political subdivisions		12,835		13		764		12,084
Equity securities		209		-		24		185
Total	$	94,279		1,040		1,176		94,143
December 31, 2008	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. government-sponsored enterprises	$	26,698		451		16		27,133
Mortgage-backed securities		55,391		1,066		45		56,412
State and political subdivisions		14,592		31		1,075		13,548
Equity securities		209		-		24		185
Total	$	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.

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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, 2008
	No.		Estimated Fair Value		Unrealized Losses		No.		Estimated Fair Value		Unrealized Losses
Unrealized loss for less than 12 months:
U.S. government-sponsored enterprises		22	$	16,839		287		1	$	859		14
Mortgage-backed securities		18		12,188		98		15		2,622		13
State and political subdivisions		27		7,850		583		32		9,974		860
		67		36,877		968		48		13,455		887
Unrealized loss for greater than 12 months:
U.S. government-sponsored enterprises		1		56		2		1		60		2
Mortgage-backed securities		1		420		1		14		4,600		33
State and political subdivisions		8		2,813		181		5		1,520		214
Equity securities		1		185		24		1		185		24
		11		3,474		208		21		6,365		273
		78	$	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 Value
Due in one year or less	$	148		148		84		84
Due after one year through five years		2,374		2,355		2,324		2,325
Due after five years through ten years		10,132		10,271		16,584		16,809
Due after ten years		81,416		81,184		77,689		77,875
Total	$	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 Value
Mortgage-backed securities	$	22		1		-		23
State and political subdivisions		998		21		-		1,019
Total	$	1,020		22		-		1,042
December 31, 2008	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Mortgage-backed securities	$	27		1		-		28
State and political subdivisions		998		27		-		1,025
Total	$	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 Value
Due in one year or less	$	135		136		135		137
Due after one year through five years		556		566		562		569
Due after five years through ten years		324		336		324		342
Due after ten years		5		4		4		5
Total	$	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, 2008
Accruing loans 90 days past due	$	-	$	802
Nonaccrual loans		50,912		56,055
Other real estate		34,834		27,337
Restructured 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.

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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.

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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.

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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.

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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 3
Investment 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 3
Investment 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 3
Other 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 3
Other real estate owned	$	27,337		-		27,337		-
Loans		58,660		-		58,660		-
Total	$	85,997		-		85,997		-

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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, 2008
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Cash and cash equivalents	$	41,454		41,454		14,260		14,260
Investment securities available for sale		94,143		94,143		97,278		97,278
Investment securities held to maturity		1,020		1,042		1,025		1,053
Other investments		2,598		2,598		3,334		3,334
Loans held for sale		620		620		-		-
Loans, net		300,209		300,266		310,607		311,010
Cash surrender value of  life insurance		10,114		10,114		9,936		9,936
Liabilities:
Deposits	$	419,417		422,482		392,888		396,813
Short-term borrowings		765		765		760		760
Federal funds purchased and securities sold under repurchase agreements		15,224		15,224		16,384		16,384
FHLB advances		38,000		39,102		38,000		39,280
Interest 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.

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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.

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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.

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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.

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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.

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	Three Months ended June 30						Six Months ended June 30
	2009			2008			2009			2008
INTEREST 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.

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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.

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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, 2008
Charge-offs:
Commercial		5	$	398		2	$	53
Real Estate		24		7,191		15		695
Consumer		30		232		29		69
Total Charge-offs		59		7,821		46		817
Recoveries:
Commercial				3				1
Real Estate				60				-
Consumer				27				29
Total Recoveries				90				30
Net Charge-offs			$	7,731			$	787

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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, 2008
Accruing loans 90 days past due	$	-	$	802
Nonaccrual loans		50,912		56,055
Other real estate		34,834		27,337
Restructured 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	$	802
New loans classified to 90 days past due status		126
Payments 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, 2008
Real estate secured construction loans	$	-	$	25
Residential loans		-		772
Consumer loans		-		5
Balance 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	$	56,055
Loans reclassified to nonaccrual status in 2009		19,495
Advances		371
Payments 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

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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, 2009
Real Estate – construction & development loans	27	$	17,016
Real Estate – residential loans	19		1,453
Real Estate – commercial	5		506
Commercial loans	7		353
Consumer loans	15		167
Total  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, 2008
Real Estate – construction & development loans		55	$	47,103		50	$	52,443
Real Estate – residential loans		14		486		11		313
Real Estate – commercial		6		2,998		4		2,689
Commercial loans		5		253		4		459
Consumer loans		11		72		23		151
Total 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, 2008
Residential properties – spec houses		36	$	15,645		41	$	15,715
Commercial properties		3		1,423		2		673
Vacant lots		212		16,869		207		10,786
Mobile home and lot		1		52		-		-
Residential construction properties		2		845		1		163
Total 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	$	27,337
Foreclosed property		9,237
Additions to complete		680
Sales 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.

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

(dollars in thousands)	June 30, 2009		December 31, 2008
Real 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 Available
Federal discount window	$	9,830		24,630
Federal funds line		10,000		10,000
Retail repurchase agreement		22,516		921
Retail 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, 2008
Liquidity as a percent of deposits		21.23	%		16.70	%
Liquidity as a percent of total liabilities		18.67	%		14.72	%

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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	Habersham
	Bank	Bancorp
Tier 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 Withheld
Edward D. Ariail	2,123,890	65,647
Thomas A. Arrendale, III	2,183,138	6,399
Bonnie C. Bowling	2,179,408	10,129
Ben F. Cheek, III	2,183,353	6,184
Michael C. Martin	2,183,853	5,684
Michael L. Owen	2,123,890	65,647
James A. Stapleton, Jr.	2,183,353	6,184
David D. Stovall	2,179,623	9,914
Calvin 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.

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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 Banks
	Chief Financial Officer (for the Registrant and as the Registrant’s principal financial and accounting officer)

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