For the fiscal year ended: December 31, 2006.
Filed as a part of this report on Form 11-K are the audited financial statements of the Plan as of and for the year ended December 31, 2006.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Plan Administrator
Habersham Bancorp 401(k) Plan
Cornelia, Georgia
We have audited the accompanying statements of net assets available for benefits of the Habersham Bancorp 401(k) Plan (the “Plan”) as of December 31, 2006 and 2005, and the related statement of changes in net assets available for benefits for the year ended December 31, 2006 and the supplemental schedule as of December 31, 2006. These financial statements and supplemental schedule are the responsibility of the Plan’s administrator. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Habersham Bancorp 401(k) Plan as of December 31, 2006 and 2005, and the changes in net assets available for benefits for the year ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information included in the accompanying supplemental schedule is presented for purposes of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan’s administrator. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
| | /s/ Porter Keadle Moore, LLP |
Atlanta, Georgia
June 27, 2007
HABERSHAM BANCORP 401(K) PLAN
Statements of Net Assets Available for Benefits
December 31, 2006 and 2005
| Assets: | | 2006 | | 2005 | |
| Cash | | $ | 57,242 | | | 5,037 | |
| Accounts receivable for rollover contribution | | | - | | | 5,734 | |
| Investments: | | | | | | | |
| Money market accounts | | | 753,313 | | | 807,808 | |
| Mutual funds | | | 4,928,646 | | | 4,766,023 | |
| Common stock of Habersham Bancorp | | | 1,162,622 | | | 1,091,189 | |
| Common stock - other | | | 45,025 | | | - | |
| Participant loans | | | 75,515 | | | 72,333 | |
| Total investments | | | 6,965,121 | | | 6,737,353 | |
| Total assets | | | 7,022,363 | | | 6,748,124 | |
| Liabilities - excess contributions due to participants | | | - | | | 821 | |
| Net assets available for benefits | | $ | 7,022,363 | | | 6,747,303 | |
See accompanying notes to financial statements.
HABERSHAM BANCORP 401(K) PLAN
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 2006
| Additions to net assets attributed to: | | | |
| Contributions: | | | |
| Employer | | $ | 173,227 | |
| Employee | | | 415,349 | |
| Rollover | | | 35,754 | |
| Total contributions | | | 624,330 | |
| Investment income: | | | | |
| Interest | | | 35,659 | |
| Dividends | | | 172,930 | |
| Net increase in fair value of investments | | | 279,081 | |
| Total investment income | | | 487,670 | |
| Total additions | | | 1,112,000 | |
| Deductions from net assets attributed to: | | | | |
| Benefit distributions to participants | | | 836,839 | |
| Administrative fees | | | 101 | |
| Total deductions | | | 836,940 | |
| Increase in net assets available for benefits | | | 275,060 | |
| Net assets available for benefits: | | | | |
| Beginning of year | | | 6,747,303 | |
| End of year | | $ | 7,022,363 | |
See accompanying notes to financial statements.
HABERSHAM BANCORP 401(K) PLAN
Notes to Financial Statements
(1) | Description of the Plan |
General
The following description of Habersham Bancorp 401(k) Plan (the “Plan”) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions.
The Plan, which commenced on July 1, 1985, is a defined contribution plan covering all eligible employees of Habersham Bancorp and subsidiaries (the “Company”). Full-time employees become eligible to participate after the attainment of 21 years of age. Enrollment in the Plan is available twice annually on January 1 and July 1. Full-time employees are eligible for Company matching contributions immediately. The Plan is subject to certain provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Contributions
Participants may contribute from 1% to 50% of their pretax earnings up to a maximum of $15,000 in 2006 and $5,000 catch-up if age 50 by December 31, 2007. Rollover contributions from other qualified plans are permitted. At its discretion, the Company may make matching contributions in an amount not to exceed 100% of each participant’s first 3% of compensation contributed as elective deferrals.
Vesting
Participants are immediately vested in their voluntary contributions to the Plan. Participants vest in the Company’s contributions according to the following schedule:
| Years of Service | | Percentage | |
| Less than 1 | | | 0 | % |
| 1 | | | 0 | % |
| 2 | | | 25 | % |
| 3 | | | 50 | % |
| 4 | | | 75 | % |
| More than 4 | | | 100 | % |
Participants automatically become 100% vested upon death or disability while still an active employee of the Company. Upon termination of employment, amounts not vested will be forfeited with such forfeitures reducing the Company’s future matching contributions. No forfeitures were used to reduce the Company’s contributions during 2006. Forfeitures of $14,873 were available at December 31, 2006 to reduce the Company’s future contributions.
Payment of Benefits
Upon retirement, a participant is entitled to receive 100% of his vested account balance in a lump-sum distribution or periodic payments over a predetermined period. Upon the death of a participant, the designated beneficiary is entitled to receive 100% of the participant’s vested account balance in a lump-sum distribution or periodic payments over a predetermined period. In addition, disabled participants are entitled to 100% of their vested account balance. Plan participants who are terminated for reasons other than retirement, death or disability are entitled to receive only the vested portion of their account. The Plan also allows for certain hardship withdrawals prior to termination of employment.
HABERSHAM BANCORP 401(K) PLAN
Notes to Financial Statements, continued
(1) | Description of the Plan, continued |
Participant Loans
Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum of $50,000 or 50% of their vested account balance, whichever is less. The loans are secured by the balance in the participant’s account and bear interest at rates that range from 5% to 8.25%, which are commensurate with local prevailing rates as determined quarterly by the Plan administrator.
Administrative Expenses
Significant costs of administering the Plan are paid by the Company. These costs include legal, administrative and accounting fees.
Plan Termination
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. The participants affected by the termination or discontinuance of contributions will immediately become 100% vested in their accounts.
(2) | Summary of Significant Accounting Policies |
Basis of Accounting
The accompanying financial statements have been prepared on the accrual basis of accounting and present the net assets available for benefits and changes in those assets of the Plan. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of net assets available for benefits and changes therein, and disclosure of contingent assets and liabilities. Accordingly, actual results may differ from those estimates.
Investment Valuation
The Plan’s investments are stated at fair value. The Company’s stock trades on the NASDAQ exchange, and the value of Habersham Bancorp stock is based on a quoted market price. Investments in mutual funds are valued at fair value based on quoted market prices of the underlying fund securities. Participant loans are stated at cost, which approximates fair value.
The Plan provides for investments in various investment securities, which are exposed to various risks such as interest rate, credit and overall market volatility risks. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statements of net assets available for benefits.
The net gain/(loss) from investment activity includes realized and unrealized gains and losses from investment activity as well as earnings on investments. Unrealized gains/(losses) are calculated as the difference between the current value of securities as of the end of the plan year and either the current value at the end of the preceding year or the actual cost if such investments were purchased during the current year. Realized gains or losses on sales of investments are calculated as the difference between sales proceeds and the current value of investments at the beginning of the year or the actual cost if such investments were purchased during the year. Earnings on investments include interest and dividends received on the Company’s common stock and mutual fund shares.
Securities transactions are recorded on the trade date. Dividend income is recorded on the ex-dividend date.
HABERSHAM BANCORP 401(K) PLAN
Notes to Financial Statements, continued
(2) | Summary of Significant Accounting Policies, continued |
Recent Accounting Pronouncements
As of December 31, 2006, the Plan adopted the Financial Accounting Standards Board (FASB) Staff Position FSP AAG INV-1 and Statement of Position No. 94-4-1, “Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans” (the FSP). The FSP requires the statement of net assets available for benefits to present the fair value of the Plan’s investments as well as the adjustment from fair value to contract value for the fully benefit-responsive investment contracts. Implementation of this FSP had no impact on net assets of the Plan and will only affect the presentation of the investments within the Plan’s statement of net assets available for benefits and the presentation of net realized and unrealized appreciation in fair value of investments within the Plan’s statements of changes in net assets available for benefits. The implementation of the FSP did not have a material impact on the Plan’s financial statements.
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurement” (FAS 157), which establishes a framework for measuring fair value under generally accepted accounting principles and expands disclosure about fair value measurements. FAS 157 is effective for financial statements issued with fiscal years beginning after November 15, 2007. The Plan’s management does not believe that the adoption of FAS 157 will have a material impact on the Plan’s financial statements.
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (FAS 159). The fair value option established by FAS 159 permits entities to choose to measure eligible items at fair value at specified election dates. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each subsequent reporting date. FAS 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Plan’s management does not believe that the adoption of FAS 159 will have a material impact on the Plan’s financial statements.
The following table represents investments at December 31, 2006 and 2005:
| | | 2006 | | 2005 | |
| Money market accounts: | | | | | |
| Money Market Fund | | $ | 753,313 | | | 807,808 | |
| Mutual funds: | | | | | | | |
| AllianceBerstein Global | | | 77,881 | | | - | |
| AMCAP Fund | | | 3,899 | | | - | |
| Alliance Bernstein Technical Fund | | | - | | | 97,036 | |
| American Balanced Fund | | | 14,997 | | | 8,331 | |
| Blackrock Core Total Return | | | 620,763 | | | 637,633 | |
| Bond Fund of America | | | 1,467 | | | - | |
| Calamos Growth Fund | | | 139,733 | | | 106,004 | |
| Capital World Growth & Income | | | 26,301 | | | - | |
| Davis New York Venture Fund | | | 129,134 | | | 137,649 | |
| Delaware International Value Equity Fund | | | 34,542 | | | 23,947 | |
| Euro Pacific Growth Fund | | | 1,182 | | | - | |
| Federated Government Income | | | 303,143 | | | 294,374 | |
