Appalachian Bancshares, Inc. Reports Third Quarter Results

Assets Grow to $898 Million


ELLIJAY, Ga., Oct. 26, 2007 (PRIME NEWSWIRE) -- Appalachian Bancshares, Inc. (Nasdaq:APAB), holding company for Appalachian Community Bank and Appalachian Community Bank, F.S.B., today announced that total assets grew to $898.0 million, as of September 30, 2007, compared to $742.8 million on September 30, 2006, an increase of 20.9%. Total loans, net of allowance, were $744.0 million, an increase of $158.6 million, or 27.1%, when compared with $585.4 million on September 30, 2006. Deposits grew to $766.7 million as of September 30, 2007, an increase of $167.4 million, or 27.9%, when compared to $599.3 million on September 30, 2006.

Tracy Newton, President and Chief Executive Officer, stated that, "We continue to see exceptional growth in our balance sheet, with our total assets approaching $900 million. Also, we continue to see benefits from our investment in expanding our network of branches, which has helped us to increase, both, deposits and total loans, by over 27% since last year."

Net income for the first nine months of 2007 was $4,467,000, or $0.85 per diluted share, a 2.4% increase in net income when compared to $4,362,000, or $0.83 per diluted share, for the same period in 2006. Net income for the third quarter of 2007 was $1,407,000, or $0.27 per diluted share, a 1.4% increase in net income when compared to $1,388,000, or $0.26 per diluted share, for the same period in 2006.

Annualized return on average shareholders' equity was 8.62% for the nine months ended September 30, 2007, compared to 9.44% for the nine months ended September 30, 2006. Annualized return on average assets was 0.71% for the nine months ended September 30, 2007, compared to 0.92% for the nine months ended September 30, 2006.

Mr. Newton commented that, "Given the current market environment, we are pleased with the returns we have seen through the third quarter. As is the case throughout much of the banking industry, we have experienced a year-over-year increase in our non-performing loans. Our board of directors and management continue to review and analyze the economic circumstances in each of our markets and our related loan portfolios, and we will continue to closely monitor our loan concentrations and our relevant lending policies and procedures. With this proactive approach to date, we feel confident that our loan loss reserves remain adequate."

Mr. Newton commented further that, "We also are excited about the recent appointment of Danny Dukes as our new Chief Financial Officer. Danny's background and experience will be a very valuable addition to our management team, and we believe that we have the right team in place to handle any changing market conditions and to capitalize on our expanded network of branches."

The net interest margin was 4.76% for the nine months ended September 30, 2007, compared to 5.09% for the same period a year ago.

Total revenue, net of interest expense, was $10.9 million and $31.8 million for the quarter and nine-month period ended September 30, 2007, respectively. This represented increases of 21% and 26.3% over the same periods in 2006.

Book value per share stood at $13.66 at September 30, 2007, compared to $12.54 per share at September 30, 2006, an increase of approximately 8.9%.

Conference Call

The Company will hold a conference call on Friday, October 26, 2007, at 11:00 a.m. ET, to discuss its financial results and strategic initiatives and to entertain questions. Listeners will be able to participate in the question-and-answer session. The telephone number for the conference call is 1-877-407-9210. The conference call also will be available by webcast, through the Company's website, www.apab.com, by clicking on the Investor Relations' section. A replay of the call will be archived on the Company's website for one year.

About Appalachian Bancshares, Inc.

The Company is based in Ellijay, Georgia, and is the holding company of Appalachian Community Bank, a Georgia state-chartered bank, and Appalachian Community Bank, F.S.B., a federally-chartered thrift. The Company, through Appalachian Community Bank (which also operates in Gilmer County, Georgia, under the trade name of Gilmer County Bank, and in Whitfield County, Georgia, under the trade name of Banco Fuerza) and Appalachian Community Bank, F.S.B., provides a full range of community banking services to individuals and to small and medium-sized businesses, through its thirteen banking offices, located in Ellijay, East Ellijay, Blue Ridge, Blairsville, Chatsworth, Dawsonville, McCaysville, Dahlonega and Dalton, Georgia, and in Ducktown, Tennessee, and Murphy, North Carolina. The Company's common stock trades on the NASDAQ Global Market under the symbol APAB. For more information, please visit the Company's website at www.apab.com.

Certain statements in this news release contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to future plans and expectations, and are thus prospective. These forward-looking statements are subject to risks and uncertainties, including, but not limited to, economic conditions, competition, interest rate sensitivity and exposure to regulatory and legislative changes, and other risks and uncertainties described in our company's filings with the Securities and Exchange Commission. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Therefore, we can give no assurance that the results contemplated in the forward-looking statements will be realized. The inclusion of this forward-looking information should not be construed as a representation by our company or any person that the future events, plans, or expectations contemplated by our company will be achieved. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.



             APPALACHIAN BANCSHARES, INC. AND SUBSIDIARIES
                  SELECTED CONSOLIDATED FINANCIAL DATA
                               (Unaudited)
              (Dollars in thousands, except per share data)


                        Three Months Ended        Nine Months Ended 
                          September 30,              September 30,
                     -----------------------   -----------------------
                        2007         2006         2007         2006
                     ----------   ----------   ----------   ----------
 Summary Results
  of Operations
  Data:
    Interest
     income          $   18,529   $   14,124   $   53,059   $   37,699
    Interest
     expense              9,154        6,188       25,380       15,350
                     ----------   ----------   ----------   ----------
    Net interest
     income               9,375        7,936       27,679       22,349
    Provision for
     loan losses            677          751        2,260        2,459
                     ----------   ----------   ----------   ----------
    Net interest
     income after
     provision
     for loan
     losses               8,698        7,185       25,419       19,890
    Noninterest
     income               1,499        1,049        4,131        2,846
    Noninterest
     expense              8,085        6,355       22,817       16,266
                     ----------   ----------   ----------   ----------
    Income before
     taxes                2,112        1,879        6,733        6,470
    Income tax
     expense                705          491        2,266        2,108
                     ----------   ----------   ----------   ----------
    Net income       $    1,407   $    1,388   $    4,467   $    4,362
                     ==========   ==========   ==========   ==========

 Per Share Data:
    Net income,
     basic           $     0.27   $     0.27   $     0.85   $     0.85
    Net income,
     diluted               0.27         0.26         0.85         0.83
    Book value            13.66        12.54        13.66        12.54

 Weighted average
  number of shares
  outstanding:
    Basic             5,298,509    5,169,202    5,256,568    5,160,226
    Diluted           5,298,509    5,290,563    5,270,801    5,282,110

 Performance
  Ratios:
    Return on
     average
     assets(1)             0.63%        0.80%        0.71%        0.92%
    Return on
     average
     equity(1)             7.84%        8.70%        8.62%        9.44%
    Net interest
     margin(1)(2)          4.58%        4.96%        4.76%        5.09%
    Efficiency
     ratio(3)             74.35%       70.73%       71.73%       64.56%

 Growth Ratios and
  Other Data:
    Percentage
     change in
     net income            1.37%                     2.41%            
    Percentage
     change in
     diluted net
     income per
     share                 3.85%                     2.41% 



                                                 At September 30,
                                              --------------------
                                                2007         2006
                                              --------    --------
 Summary Balance Sheet Data:
   Assets                                     $898,027    $742,786
   Average earning assets QTD                  820,311     640,065
   Average earning assets YTD                  784,442     592,156
   Investment securities                        78,768      71,983
   Mortgage loans held for sale                  4,187          --
   Loans, net of unearned income               752,988     592,618
   Allowance for loan losses                     8,966       7,172
   Deposits                                    766,726     599,348
   Short-term borrowings                         9,125      42,514
   Accrued interest                              1,979       1,202
   Federal Home Loan Bank advances              37,450      25,500
   Subordinated long-term capital notes          6,186       6,186
   Other liabilities                             4,266       3,150
   Shareholders' equity                         72,295      64,886

 Asset Quality Ratios:
   Nonperforming loans to total loans             0.77%       0.44%
   Nonperforming assets to total assets           0.82%       0.39%
   Net charge-offs to average total loans         0.14%       0.26%
   Allowance for loan losses to 
    nonperforming loans                         154.08%     277.98%
   Allowance for loan losses to total loans       1.19%       1.21%

 Growth Ratios and Other Data:
   Percentage change in assets                   20.90%
   Percentage change in loans                    27.06%
   Percentage change in deposits                 27.93%
   Percentage change in equity                   11.42%
   Loans to deposits ratio                       98.21%
                                              ---------------------
 (1) Annualized.
 (2) Taxable equivalent.
 (3) Computed by dividing noninterest expense by the sum of the 
     net interest income and noninterest income.  
   

             APPALACHIAN BANCSHARES, INC. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF INCOME
                              (Unaudited)
             (Dollars in thousands, except per share data)

                          Three Months Ended       Nine Months Ended
                            September 30,            September 30,
                       ----------------------  ----------------------
                          2007         2006        2007        2006
                       ----------  ----------  ----------  ----------

 Interest Income
  Interest and
   fees on loans       $   17,546  $   13,305  $   50,152  $   35,235
  Interest on
   securities:
    Taxable
     securities               719         584       2,116       1,683
    Nontaxable
     securities               165         161         475         508
  Interest on
   deposits with
   other banks                  9           6          73          24
  Interest on
   federal funds
   sold                        90          68         243         249
                       ----------  ----------  ----------  ----------
    Total
     Interest
     Income                18,529      14,124      53,059      37,699
                       ----------  ----------  ----------  ----------

 Interest Expense
  Interest on
   deposits                 8,553       5,592      23,659      13,793
  Interest on
   federal
   funds
   purchased,
   short-term
   notes
   and securities
   sold under
   agreements to
   repurchase                  79         187         191         343
  Interest on
   Federal Home
   Loan Bank
   advances                   389         275       1,129         848
  Interest on
   subordinated
   long-term
   capital notes              133         134         401         366
                       ----------  ----------  ----------  ----------
    Total
     Interest
     Expense                9,154       6,188      25,380      15,350
                       ----------  ----------  ----------  ----------

 Net Interest Income        9,375       7,936      27,679      22,349
  Provision for
   loan losses                677         751       2,260       2,459
                       ----------  ----------  ----------  ----------

 Net Interest Income
  After Provision
  for Loan Losses           8,698       7,185      25,419      19,890
                       ----------  ----------  ----------  ----------

 Noninterest Income
  Customer
   service fees               586         413       1,647       1,200
  Mortgage
   origination
   commissions                483         391       1,476         942
  Other
   operating
   income                     430         245       1,008         704
                       ----------  ----------  ----------  ----------
    Total
     Noninterest
     Income                 1,499       1,049       4,131       2,846
                       ----------  ----------  ----------  ----------

 Noninterest
  Expenses
  Salaries and
   employee
   benefits                 4,870       3,820      13,808       9,690
  Occupancy,
   furniture
   and equipment
   expense                    937         733       2,700       1,900
  Other
   operating
   expenses                 2,278       1,802       6,309       4,676
                       ----------  ----------  ----------  ----------
    Total
     Noninterest
     expense                8,085       6,355      22,817      16,266
                       ----------  ----------  ----------  ----------

 Income before
  income taxes              2,112       1,879       6,733       6,470
 Income tax
  expense                     705         491       2,266       2,108
                       ----------  ----------  ----------  ----------

 Net Income            $    1,407  $    1,388  $    4,467  $    4,362
                       ==========  ==========  ==========  ==========

 Earnings Per
  Common Share
   Basic                     0.27        0.27        0.85        0.85
   Diluted                   0.27        0.26        0.85        0.83

 Cash Dividends
  Declared Per
  Common Share                 --          --          --          --

 Weighted Average
  Shares
  Outstanding
   Basic                5,298,509   5,169,202   5,256,568   5,160,226
   Diluted              5,298,509   5,290,563   5,270,801   5,282,110 

 

            APPALACHIAN BANCSHARES, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                              (Unaudited)
                        (Dollars in thousands)

                                  September     December     September
                                      30,          31,          30,
                                     2007         2006         2006
                                  ---------    ---------    ---------
 Assets
  Cash and due from banks         $  11,280    $   7,940    $  28,403
  Interest-bearing deposits
   with other banks                     509          541        5,058
  Federal funds sold                    728        3,107        8,583
                                  ---------    ---------    ---------
    Cash and Cash Equivalents        12,517       11,588       42,044

  Securities available-for-sale      78,768       74,725       71,983

  Mortgage loans held for
   sale                               4,187           --           --

  Loans, net of unearned
   income                           752,988      631,786      592,618
  Allowance for loan losses          (8,966)      (7,670)      (7,172)
                                  ---------    ---------    ---------
    Net Loans                       744,022      624,116      585,446

  Premises and equipment, net        31,868       23,412       22,562
  Accrued interest                    9,666        8,157        6,587
  Cash surrender value on
   life insurance                     8,690        8,438        8,361
  Intangibles, net                    2,315        2,197        2,228
  Other assets                        5,994        5,581        3,575
                                  ---------    ---------    ---------

    Total Assets                  $ 898,027    $ 758,214    $ 742,786
                                  =========    =========    =========


 Liabilities and
  Shareholders' Equity

 Liabilities
  Noninterest-bearing deposits    $  62,877    $  53,422    $  57,509
  Interest-bearing deposits         703,849      597,712      541,839
                                  ---------    ---------    ---------
    Total Deposits                  766,726      651,134      599,348

  Short-term borrowings               9,125        4,738       42,514
  Accrued interest                    1,979        1,454        1,202
  Federal Home Loan Bank
   advances                          37,450       25,050       25,500
  Subordinated long-term
   capital notes                      6,186        6,186        6,186
  Other liabilities                   4,266        2,889        3,150
                                  ---------    ---------    ---------
    Total Liabilities               825,732      691,451      677,900
                                  ---------    ---------    ---------

 Shareholders' Equity
  Preferred Stock, 20,000,000
   shares authorized, none
   issued                                --           --           --
  Common stock, par value
   $0.01 per share,
   20,000,000 shares
   authorized, 5,294,026
   shares issued at September
   30, 2007, 5,280,497 shares
   issued at December 31,
   2006 and 5,252,197 shares
   issued at September 30, 2006          53           53           53
  Paid-in capital                    44,039       43,870       43,722
  Retained earnings                  28,228       23,761       22,118
  Accumulated other
   comprehensive loss                   (25)        (221)        (307)
  Treasury stock, at cost
   (-0- shares at September 30,
   2007, 75,973 shares at
   December 31, 2006 and
   September 30, 2006)                   --         (700)        (700)
                                  ---------    ---------    ---------
 Total Shareholders' Equity          72,295       66,763       64,886
                                  ---------    ---------    ---------

    Total Liabilities and
     Shareholders' Equity         $ 898,027    $ 758,214    $ 742,786
                                  =========    =========    =========   


            

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