Appalachian Bancshares, Inc. Reports Fourth Quarter Results

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| Source: Appalachian Bancshares, Inc.


 - Assets Grow to $971 Million during 2007
 - Non-Performing Assets Drop to $6.2 Million from $7.3 Million
 - Net Income Comes in at $5.6 Million or $1.06 per Diluted Share
 - Net Interest Margin Remains Above Peer Levels at 4.68% for 2007
 - Newly Expanded Branches Drive Core Deposit Growth of 19.8%

ELLIJAY, Ga. Jan. 31, 2008 (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 $971.2 million, as of December 31, 2007, compared to $758.2 million on December 31, 2006, an increase of 28.1%. Total loans, net of allowance, were $797.7 million, an increase of $174.3 million, or 28.0%, when compared with $623.4 million on December 31, 2006. Deposits grew to $807.6 million as of December 31, 2007, an increase of $156.5 million, or 24.0%, when compared to $651.1 million on December 31, 2006.

Tracy Newton, President and Chief Executive Officer, stated that, "The fourth quarter was certainly one that will be long remembered both from the effects of a slower real estate and housing market and the way the market is viewing the value of the assets of our company. We have leveraged the specialized talents of real estate lenders during the quarter to pinpoint potential credit issues and to deal with them quickly and efficiently as shown in our operating results."

Net income for 2007 was $5,570,000, or $1.06 per diluted share, a 7.2% decrease in net income when compared to $6,004,000, or $1.14 per diluted share, for 2006. Net income for the fourth quarter of 2007 was $1,103,000, or $0.21 per diluted share, a 32.8% decrease in net income when compared to $1,642,000, or $0.31 per diluted share, for the same period in 2006.

Return on average shareholders' equity was 7.93% for 2007, compared to 9.57 % for 2006. Return on average assets was 0.65% for 2007, compared to 0.91% for 2006.

Mr. Newton commented that, "In spite of a continued weakness in the residential housing market and one of the most challenging quarters that I can remember, our outstanding staff did a superb job finishing up the year. During the fourth quarter, our non-performing assets to total assets decreased 22.0% from 0.82% at September 30, 2007 to 0.64% at December 31, 2007. Compared to the end of 2006, our non-performing assets to total assets only increased 3.2% to 0.64% from 0.62%. Likewise, our non-performing loans to total loans decreased 26.0% to 0.57% at year end from 0.77% at the end of the third quarter. Since the end of 2006, our non-performing loans to total loans ratio only increased 3.6% to 0.57% from 0.55%. Our net charge-offs for 2007 were 0.36% compared with 0.30% in 2006, only a slight increase during deteriorating economic conditions. Additionally, we feel confident that our loan loss reserves remain adequate at 1.21% of gross loans outstanding."

For the quarter ended, net interest margin was 4.47% compared with 4.84% the same quarter a year ago. The net interest margin was 4.68% for 2007, compared to 5.04 % for 2006.

Total revenue, net of interest expense, was $42.8 million for 2007 and $11.0 million for the fourth quarter compared with $34.7 million for 2006 and $9.5 million for the same quarter a year ago. This represented increases of 23.6% and 16.5% for the same periods respectively.

Book value per share stood at $13.94 at December 31, 2007, compared to $12.83 per share at the end of 2006, an increase of approximately 8.7%.

Conference Call

The Company will hold a conference call on Thursday, January 31, 2008, 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 1-800-860-2442. 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)
                 (in thousands, except per share data)

                          Three Months Ended          Year Ended
                              December 31,            December 31,
                         ---------------------   ---------------------
                            2007        2006        2007        2006
                         ---------   ---------   ---------   ---------
 Summary Results of
  Operations Data:
   Interest income       $  19,068   $  15,494   $  72,127   $  53,193
   Interest expense          9,420       7,144      34,800      22,494
                         ---------   ---------   ---------   ---------
  Net interest income        9,648       8,350      37,327      30,699
  Provision for loan
   losses                    2,466         794       4,726       3,253
                         ---------   ---------   ---------   ---------
  Net interest income
   after provision loan
   losses                    7,182       7,556      32,601      27,446
  Noninterest income         1,387       1,125       5,518       3,971
  Noninterest expense        6,969       6,295      29,786      22,561
                         ---------   ---------   ---------   ---------
  Income before taxes        1,600       2,386       8,333       8,856
  Income tax expense           497         744       2,763       2,852
                         ---------   ---------   ---------   ---------
  Net income             $   1,103   $   1,642   $   5,570   $   6,004
                         =========   =========   =========   =========

 Per Share Data:
  Net income, basic      $    0.21   $    0.32   $    1.06   $    1.16
  Net income, diluted         0.21        0.31        1.06        1.14
  Book value                 13.94       12.83       13.94       12.83

 Weighted average number
  of shares outstanding:
   Basic                 5,293,571   5,201,562   5,265,555   5,170,687
   Diluted               5,293,571   5,268,005   5,276,200   5,278,711

 Performance Ratios:
  Return on average
   assets(1)                  0.47%       0.88%       0.65%       0.91%
  Return on average
   equity(1)                  5.99%       9.93%       7.93%       9.57%
  Net interest
   margin(1)(2)               4.47%       4.84%       4.68%       5.04%
  Efficiency ratio(3)        63.19%      66.44%      69.53%      65.07%

 Growth Ratios and
  Other Data:
   Percentage change in
    net income              -32.83%                  -7.23%
   Percentage change in
    diluted net income
    per share               -32.26%                  -7.02%


                                                 At December 31,
                                               --------------------
                                                 2007        2006
                                               --------    --------
 Summary Balance Sheet Data:
  Assets                                       $971,200    $758,214
  Average earning assets (quarter-to-date)      865,235     692,895
  Average earning assets (year-to-date)         804,865     617,595
  Investment securities                          80,510      74,725
  Loans, held for sale                            6,503         733
  Loans                                         807,522     631,053
  Allowance for loan losses                       9,808       7,670
  Deposits                                      807,597     651,134
  Short-term borrowings                          21,048       4,738
  Accrued interest                                2,059       1,454
  Federal Home Loan Bank advances                57,350      25,050
  Subordinated long-term capital notes            6,186       6,186
  Other liabilities                               3,297       2,889
  Shareholders' equity                           73,663      66,763

 Asset Quality :
  Asset Quality Ratios
   Nonperforming loans to total loans              0.57%       0.55%
   Nonperforming assets to total assets            0.64%       0.62%
   Allowance for loan losses to
    nonperforming loans                          212.52%     220.21%
   Allowance for loan losses to total loans        1.21%       1.21%

                                          At December 31,
                           --------------------------------------------
                                    2007                   2006
                           ---------------------  ---------------------
                                        % of                  % of
                            Amount   Total Loans   Amount   Total Loans
                           --------  -----------  --------  -----------
 Loans by Category

 Real estate - acquisition
  & development(4)         $389,695     48.26%    $320,406     50.77%
 Real estate - commercial   154,663     19.15%     125,560     19.90%
 Real estate - residential  178,193     22.07%     115,276     18.27%
 Commercial business         48,749      6.04%      40,491      6.42%
 Other loans                 36,222      4.49%      29,320      4.65%
                           --------               --------
   Total Loans             $807,522               $631,053
                           ========               ========


                                         At December 31,
                         ---------------------------------------------
                                  2007                    2006
                         ---------------------   ---------------------
                                  % of Total              % of Total
                         Amount  Nonperforming   Amount  Nonperforming
                         ------  -------------   ------  -------------
 Nonperforming assets
  by category:

  Loans
   Real estate - acquisi-
    tion & development   $3,302     53.36%       $  521     11.08%
   Real estate
    - commercial             --      0.00%        1,436     30.55%
   Real estate
    - residential           839     13.56%          545     11.59%
   Commercial business      412      6.66%          720     15.32%
   Other loans               62      1.00%          261      5.55%
  Other Real Estate
   Real estate - acquisi-
    tion & development      363      5.87%          771     16.40%
   Real estate
    - commercial            206      3.33%          145      3.08%
   Real estate
    - residential           935     15.11%          302      6.42%
  Other Repossessed
   Property
    Other loans              69      1.12%           --      0.00%
                         ------                  ------
    Total Nonperforming
     Assets              $6,188                  $4,701
                         ======                  ======

                                         At December 31,
                         ---------------------------------------------
                                  2007                    2006
                         ---------------------   ---------------------
                                  % of Total              % of Total
                         Amount  Average Loans   Amount  Average Loans
                         ------  -------------   ------  -------------
 Quarterly Net Charge-Offs
  by Category

   Real estate - acquisi-
    tion & development   $  940      0.12%       $  115      0.02%
   Real estate
    - commercial             --      0.00%           --      0.00%
   Real estate
    - residential           495      0.06%          142      0.02%
   Commercial business       40      0.01%           13      0.00%
   Other loans              149      0.02%           26      0.00%
                         ------                  ------
    Total Net Charge-
     Offs                $1,624      0.21%       $  296      0.05%
                         ======                  ======

 Year-to-Date Net Charge-
  Offs by Category

   Real estate - acquisi-
    tion & development   $1,230      0.17%       $  386      0.07%
   Real estate
    - commercial            145      0.02%           --      0.00%
   Real estate
    - residential           671      0.09%          316      0.06%
   Commercial business      114      0.02%          784      0.15%
   Other loans              428      0.06%          156      0.03%
                         ------                  ------
    Total Net Charge-
     Offs                $2,588      0.36%       $1,642      0.30%
                         ======                  ======

                                        At December 31,
 Growth Ratios and Other Data:               2007
                                        --------------
 Percentage change in assets                28.09%
 Percentage change in loans                 27.96%
 Percentage change in deposits              24.03%
 Percentage change in equity                10.34%
 Loans to deposits ratio                    99.99%

 ---------------------------------------------------------------------
 (1) Annualized.

 (2) Taxable equivalent.

 (3) Computed by dividing noninterest expense by the sum of the net
     interest income and noninterest income.

 (4) Residential loans amounted to $311.1 million or 79.8% of the Real
     Estate - Acquisition & Development category at December 31, 2007
     and $274.7 million or 43.5% at December 31, 2006.


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

                          Three Months Ended          Year Ended
                              December 31,            December 31,
                         ---------------------   ---------------------
                            2007        2006        2007        2006
                         ---------   ---------   ---------   ---------
 Interest Income
  Interest and fees
   on loans              $  18,061   $  14,608   $  68,213   $  49,843
  Interest on securities:
   Taxable securities          743         618       2,859       2,301
   Nontaxable securities       164         160         639         668
  Interest on deposits
   with other banks              5           6          78          30
  Interest on federal
   funds sold                   95         102         338         351
                         ---------   ---------   ---------   ---------
    Total Interest Income   19,068      15,494      72,127      53,193
                         ---------   ---------   ---------   ---------

 Interest Expense
  Interest on deposits       8,708       6,558      32,367      20,351
  Interest on federal funds
   purchased, short-term
   notes and securities
   sold under agreements
   to repurchase                92         129         283         472
  Interest on Federal Home
   Loan Bank  advances         500         332       1,629       1,180
  Interest on subordinated
   long-term capital notes     120         125         521         491
                         ---------   ---------   ---------   ---------
   Total Interest Expense    9,420       7,144      34,800      22,494
                         ---------   ---------   ---------   ---------

 Net Interest Income         9,648       8,350      37,327      30,699
  Provision for loan
   losses                    2,466         794       4,726       3,253
                         ---------   ---------   ---------   ---------
 Net Interest Income
  After Provision for
  Loan Losses                7,182       7,556      32,601      27,446
                         ---------   ---------   ---------   ---------
 Noninterest Income
  Customer service fees        588         450       2,235       1,650
  Mortgage origination
   commissions                 512         406       1,988       1,348
  Net gains on sales of
   securities                    7          --           7          --
  Other operating income       280         269       1,288         973
                         ---------   ---------   ---------   ---------
   Total Noninterest
    Income                   1,387       1,125       5,518       3,971
                         ---------   ---------   ---------   ---------

 Noninterest Expenses
  Salaries and employee
   benefits                  3,702       3,651      17,510      13,341
  Occupancy, furniture and
   equipment expense           978         785       3,678       2,685
  Other operating expenses   2,289       1,859       8,598       6,535
                         ---------   ---------   ---------   ---------
   Total Noninterest
    expense                  6,969       6,295      29,786      22,561
                         ---------   ---------   ---------   ---------
 Income before income
  taxes                      1,600       2,386       8,333       8,856
 Income tax expense            497         744       2,763       2,852
                         ---------   ---------   ---------   ---------
 Net Income              $   1,103   $   1,642   $   5,570   $   6,004
                         =========   =========   =========   =========

 Earnings Per Common Share
   Basic                 $    0.21   $    0.32   $    1.06   $    1.16
   Diluted                    0.21        0.31        1.06        1.14

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

 Weighted Average Shares
  Outstanding
   Basic                 5,293,571   5,201,562   5,265,555   5,170,687
   Diluted               5,293,571   5,268,005   5,276,200   5,278,711


             APPALACHIAN BANCSHARES, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                              (Unaudited)
                        (Dollars in thousands)
                                                     December 31,
                                                 --------------------
                                                   2007        2006
                                                 --------    --------
 Assets
  Cash and due from banks                        $ 13,392    $  7,940
  Interest-bearing deposits with other banks          310         541
  Federal funds sold                               12,797       3,107
                                                 --------    --------
    Cash and Cash Equivalents                      26,499      11,588

 Securities available-for-sale                     80,510      74,725

 Loans, held for sale                               6,503         733

 Loans, net of unearned income                    807,522     631,053
 Allowance for loan losses                         (9,808)     (7,670)
                                                 --------    --------
    Net Loans                                     797,714     623,383

 Premises and equipment, net                       32,966      23,412
 Accrued interest                                   9,797       8,157
 Cash surrender value on life insurance             8,778       8,438
 Intangibles, net                                   2,179       2,197
 Other assets                                       6,254       5,581
                                                 --------    --------
    Total Assets                                 $971,200    $758,214
                                                 ========    ========

 Liabilities and Shareholders' Equity

 Liabilities
  Noninterest-bearing deposits                   $ 56,559    $ 53,422
  Interest-bearing deposits                       751,038     597,712
                                                 --------    --------
    Total Deposits                                807,597     651,134

 Short-term borrowings                             21,048       4,738
 Accrued interest                                   2,059       1,454
 Federal Home Loan Bank advances                   57,350      25,050
 Subordinated long-term capital notes               6,186       6,186
 Other liabilities                                  3,297       2,889
                                                 --------    --------
    Total Liabilities                             897,537     691,451
                                                 --------    --------
 Shareholders' Equity
  Preferred Stock, 20,000,000 shares
   authorized, none issued                             --          --
  Common stock, par value $0.01 per
   share, 20,000,000 shares authorized,
   5,285,026 shares issued at December 31,
   2007, and 5,280,497 shares issued at
   December 31, 2006                                   53          53
  Paid-in capital                                  43,998      43,870
  Retained earnings                                29,331      23,761
  Accumulated other comprehensive income (loss)       281        (221)
  Treasury stock, at cost (-0- shares at
   December 31, 2007 and 75,973 shares at
   December 31, 2006)                                  --        (700)
                                                 --------    --------
    Total Shareholders' Equity                     73,663      66,763
                                                 --------    --------
    Total Liabilities and Shareholders' Equity   $971,200    $758,214
                                                 ========    ========
Appalachian Bancshares, Inc.
Tracy Newton, President and Chief Executive Officer
Danny Dukes, Chief Financial Officer
(706) 276-8160