Appalachian Bancshares, Inc. Reports Second Quarter Earnings

ELLIJAY, Ga., July 23, 2008 (PRIME NEWSWIRE) -- Appalachian Bancshares, Inc.
(Nasdaq:APAB), holding company for Appalachian Community Bank and Appalachian
Community Bank, F.S.B., reported consolidated total assets of $1.1 billion, as
of June 30, 2008, compared to $873.6 million on June 30, 2007, an increase of
21.3%. Total gross loans were $869.6 million, an increase of $144.7 million, or
20.0%, when compared with $724.9 million on June 30, 2007. Deposits grew to
$903.1 million as of June 30, 2008, an increase of $156.9 million, or 21.0%,
when compared to $746.2 million on June 30, 2007.

Tracy Newton, President and Chief Executive Officer, stated that, "The macro
effects of the relentless publicity questioning the strength of financial
institutions continues to impact our business and the perceived value of our
company. The economic environment in our general market area continues to be
weaker than we would like. However, we are seeing some signs of increased
interest from consumers and investors wishing to take advantage of discounted
real estate opportunities.

"We continue to be focused on cleansing real and perceived risks from our
balance sheet. We are being very aggressive in dealing with problem assets and
the results of our approach will likely affect our business for the remainder of
the year.

"In spite of this economic downturn, we are determined to continue to implement
our strategic business plan by continuing to aggressively seek out core deposits
in our expansion markets. We are also committed to redouble our efforts to go
"above and beyond" normal customer expectations through our attitudes, services
and products."

Net income for second quarter 2008 was $701 thousand, or $0.13 per diluted
share, a 55.2% decrease in net income per diluted share when compared to $1.5
million, or $0.29 per diluted share, for the same quarter in 2007. Net income
for the second quarter of 2008 decreased $400 thousand compared with the net
income for the first quarter of 2008, which was $1.1 million, or $0.21 per
diluted share. Net income for the first six months of 2008 was $1.8 million, or
$0.34 per diluted share, a 41.38% decrease per diluted share compared to $3.1
million, or $0.58 per diluted share, for the same period in 2007. Our decrease
in net income for the quarter and the first six months was primarily due to our
provision for loan losses of $1.5 million and $2.5 million, respectively, which
represents an increase of $549 thousand and $868 thousand from the same periods
in 2007.

Return on average shareholders' equity was 3.70% annualized for second quarter
2008, compared to 8.68% for the same period in 2007. For the first six months of
2008, return on average shareholders' equity was 4.89% annualized compared to
9.04% for the same period in 2007. Return on average assets was 0.28% annualized
for the second quarter 2008, compared to 0.71% for the same period in 2007. For
the first six months of 2008, return on average assets was 0.37% annualized
compared to 0.75% for this period in 2007.

Mr. Newton commented that, "Consistent with our previous efforts, we continue to
quickly identify and address our problem assets. Although our non-performing
assets to total assets ratio increased to 0.87% from 0.59% at March 31, 2008,
0.64% at December 31, 2007 and 0.73% at June 30, 2007, our non-performing loans
to total loans ratio was 0.60%, which is 0.03% less than the same ratio at June
30, 2007. This non-performing loan ratio comparison together with decreasing
30-89 past due loans is clear evidence that we are dealing with our loan issues
proactively and not prolonging collection efforts. However, this approach does
punish earnings. Our 30-89 day past due loan totals have decreased from $16.9
million at March 31, 2008 to $13.4 million at June 30, 2008, an improvement of
20.7% during the recent quarter. When you annualize our net charge-off ratio for
the recent six month period, it is 0.38% which is comparable to the 2007 net
charge-off ratio of 0.36%. Additionally, we feel confident that our loan loss
reserves remain adequate at 1.22% of gross loans outstanding, which is
consistent with the same ratio at June 30, 2007 and slightly more than at March
31, 2008. If conditions should warrant, additional loan loss reserve provisions
will be provided."

For the quarter ended, net interest margin was 4.07% compared with 4.83% the
same quarter a year ago and 4.29% during the first quarter of 2008. During the
first six months of 2008, our net interest margin was 4.18% compared to 4.86%
for the same period in 2007.

Total revenue, net of interest expense, was $10.9 million for second quarter
2008 and $10.7 million for the second quarter 2007. This represented an increase
of 1.7%. First quarter 2008 was consistent with the current quarter at $11.0
million. During the first six months, total revenue, net of interest expense,
was $21.9 million compared to $20.9 million for the same period in 2007, an
increase of 4.4%. Total revenue, net of interest expense, increased during the
second quarter and the first six months of 2008 compared to the same periods in
2007 despite the decrease in our net interest margin due to the increased volume
of our loans and deposits.

Book value per share stood at $14.13 at June 30, 2008, compared to $13.30 per
share at June 30, 2007, an increase of approximately 6.2%. At December 31, 2007
our book value per share was $13.94.

Conference Call

The Company will hold a conference call on Wednesday July 23, 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)
(Dollars in thousands, except shares and per share data)

Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2008 2007 2008 2007
--------- --------- --------- --------
Summary Results of
Operations Data:
Interest income $ 17,400 $ 17,966 $ 36,043 $ 34,530
Interest expense 7,864 8,532 16,793 16,226
--------- --------- --------- --------
Net interest income 9,536 9,434 19,250 18,304
Provision for loan
losses 1,496 947 2,451 1,583
--------- --------- --------- --------
Net interest income
after provision
for loan losses 8,040 8,487 16,799 16,721
Noninterest income 1,342 1,260 2,607 2,632
Noninterest expense 8,426 7,435 16,788 14,732
--------- --------- --------- --------
Income before taxes 956 2,312 2,618 4,621
Income tax expense 255 811 780 1,561
--------- --------- --------- --------
Net income $ 701 $ 1,501 $ 1,838 $ 3,060
========= ========= ========= ========

Per Share Data:
Net income, basic $ 0.13 $ 0.29 $ 0.34 $ 0.58
Net income, diluted 0.13 0.29 0.34 0.58
Book value 14.13 13.30 14.13 13.30

Weighted average number
of shares outstanding:
Basic 5,372,505 5,255,507 5,360,747 5,235,250
Diluted 5,372,505 5,256,001 5,360,747 5,256,717

Performance Ratios:
Return on average
assets(1) 0.28% 0.71% 0.37% 0.75%
Return on average
equity(1) 3.70% 8.68% 4.89% 9.04%
Net interest
margin(1)(2) 4.07% 4.83% 4.18% 4.86%
Efficiency ratio(3) 77.46% 69.52% 76.84% 70.37%

Growth Ratios and
Other Data:
Percentage change
in net income -53.30% -39.93%
Percentage change
in diluted net
income per share -55.17% -41.38%

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

At June 30,
-------------------------
2008 2007
----------- ----------
Summary Balance Sheet Data:
Assets $ 1,059,880 $ 873,576
Average earning assets QTD 951,717 791,258
Average earning assets YTD 935,092 766,388
Investment securities 80,718 76,974
Loans held for sale 3,967 4,932
Loans 869,595 724,898
Allowance for loan losses 10,644 8,880
Deposits 903,053 746,172
Short-term borrowings 11,803 5,965
Accrued interest 1,871 1,841
Federal Home Loan Bank advances 57,150 39,600
Subordinated long-term capital notes 6,186 6,186
Other liabilities 3,884 3,236
Shareholders' equity 75,933 70,576

Asset Quality Ratios:
Nonperforming loans to total loans 0.60% 0.63%
Nonperforming assets to total assets 0.87% 0.73%
Net charge-offs to average total loans 0.19% 0.05%
Allowance for loan losses to
nonperforming loans 202.67% 193.76%
Allowance for loan losses to total
loans 1.22% 1.22%

At June 30,
---------------------------------------------
2008 2007
---------------------- --------------------
% of % of
Total Total
Loans by Category Amount Loans Amount Loans
--------- ------ --------- ------
Real estate -
acquisition &
development $ 399,520 45.94% $ 382,705 52.79%
Real estate -
commercial 168,717 19.40% 139,301 19.22%
Real estate -
residential 197,707 22.74% 123,000 16.97%
Commercial
business 66,030 7.59% 48,042 6.63%
Other loans 37,621 4.33% 31,850 4.39%
--------- ---------
Total Loans $ 869,595 $ 724,898
========= =========

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

At June 30,
---------------------------------------------
2008 2007
-------------------- ---------------------
% of % of
Total Total
Nonperforming assets Non- Non-
by category: Amount performing Amount performing
-------- ---------- -------- ----------
Loans
Real estate -
acquisition &
development $ 2,175 23.61% $ 2,168 34.05%
Real estate -
commercial 682 7.40% -- 0.00%
Real estate -
residential 1,465 15.90% 1,862 29.24%
Commercial
business 706 7.66% 251 3.94%
Other loans 224 2.44% 302 4.74%
Other Real Estate
Real estate -
acquisition &
development 1,559 16.92% 1,275 20.02%
Real estate -
commercial 206 2.24% 345 5.42%
Real estate -
residential 2,144 23.27% 165 2.59%
Other Repossessed
Property
Other loans 51 0.56% -- 0.00%
-------- --------
Total
Nonperforming
Assets $ 9,212 $ 6,368
======== ========

At June 30,
-------------------------------------------
2008 2007
-------------------- -------------------
% of % of
Quarter-to-Date Total Total
Net Charge-Offs Average Average
by Category Amount Loans Amount Loans
-------- ------- -------- -------
Real estate -
acquisition &
development $ 762 0.09% $ 52 0.01%
Real estate -
commercial -- 0.00% 90 0.01%
Real estate -
residential 211 0.02% -- 0.00%
Commercial
business 29 0.00% 17 0.00%
Other loans 104 0.02% 52 0.01%
-------- --------
Total Net
Charge-Offs $ 1,106 0.13% $ 211 0.03%
======== ========

2008 2007
-------------------- -------------------
% of % of
Year-to-Date Total Total
Net Charge-Offs Average Average
by Category Amount Loans Amount Loans
-------- ------- -------- -------
Real estate -
acquisition &
development $ 1,073 0.13% $ 54 0.01%
Real estate -
commercial 7 0.00% 90 0.01%
Real estate -
residential 256 0.03% 55 0.01%
Commercial
business 57 0.01% 29 0.00%
Other loans 222 0.02% 145 0.02%
-------- --------
Total Net
Charge-Offs $ 1,615 0.19% $ 373 0.05%
======== ========

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

Growth Ratios and Other Data:
Percentage change in assets 21.33%
Percentage change in loans 19.96%
Percentage change in deposits 21.02%
Percentage change in equity 7.59%
Loans to deposits ratio 96.30%
--------------------------------------------------------------------
(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 Six Months Ended
June 30, June 30,
------------------- -------------------
2008 2007 2008 2007
-------- -------- -------- --------
Interest Income
Interest and fees on
loans $ 16,379 $ 17,021 $ 34,038 $ 32,606
Interest on securities: --
Taxable securities 802 706 1,581 1,397
Nontaxable securities 158 153 318 310
Interest on deposits
with other banks 6 18 8 64
Interest on federal
funds sold 55 68 98 153
-------- -------- -------- --------
Total Interest Income 17,400 17,966 36,043 34,530
-------- -------- -------- --------

Interest Expense
Interest on deposits 7,142 7,895 15,258 15,106
Interest on short-term
borrowings 121 84 245 112
Interest on Federal Home
Loan Bank advances 504 419 1,084 740
Interest on subordinated
long-term capital notes 97 134 206 268
-------- -------- -------- --------
Total Interest Expense 7,864 8,532 16,793 16,226
-------- -------- -------- --------

Net Interest Income 9,536 9,434 19,250 18,304
Provision for loan losses 1,496 947 2,451 1,583
-------- -------- -------- --------

Net Interest Income After
Provision for Loan Losses 8,040 8,487 16,799 16,721
-------- -------- -------- --------

Noninterest Income
Customer service fees 660 548 1,224 1,061
Mortgage origination
commissions 418 513 864 993
Net gains on sales of
securities -- -- 9 --
Other operating income 264 199 510 578
-------- -------- -------- --------
Total Noninterest Income 1,342 1,260 2,607 2,632
-------- -------- -------- --------

Noninterest Expenses
Salaries and employee
benefits 5,044 4,523 10,035 8,938
Occupancy, furniture and
equipment expense 1,020 909 2,102 1,763
Other operating expenses 2,362 2,003 4,651 4,031
-------- -------- -------- --------
Total Noninterest
expense 8,426 7,435 16,788 14,732
-------- -------- -------- --------

Income before income taxes 956 2,312 2,618 4,621
Income tax expense 255 811 780 1,561
-------- -------- -------- --------
Net Income $ 701 $ 1,501 $ 1,838 $ 3,060
======== ======== ======== ========

Earnings Per Common Share
Basic $ 0.13 $ 0.29 $ 0.34 $ 0.58
Diluted 0.13 0.29 0.34 0.58

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

Weighted Average Shares
Outstanding
Basic 5,372,505 5,255,507 5,360,747 5,235,250
Diluted 5,372,505 5,256,001 5,360,747 5,256,717

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

June 30, December 31, June 30,
2008 2007 2007
----------- ---------- ----------
Assets
Cash and due from banks $ 22,076 $ 13,392 $ 17,641
Interest-bearing deposits
with other banks 5,896 310 314
Federal funds sold 23,787 12,797 2,163
----------- ---------- ----------
Cash and Cash Equivalents 51,759 26,499 20,118

Securities available-for-sale 80,718 80,510 76,974

Loans, held for sale 3,967 6,503 4,932

Loans, net of unearned income 869,595 807,522 724,898
Allowance for loan losses (10,644) (9,808) (8,880)
----------- ---------- ----------
Net Loans 858,951 797,714 716,018

Premises and equipment, net 35,311 32,966 28,531
Accrued interest 9,210 9,797 8,757
Cash surrender value on
life insurance 8,967 8,778 8,604
Intangibles, net 21 2,179 2,135
Other assets 10,976 6,254 7,507
----------- ---------- ----------

Total Assets $ 1,059,880 $ 971,200 $ 873,576
=========== ========== ==========

Liabilities and Shareholders'
Equity

Liabilities
Noninterest-bearing deposits $ 53,095 $ 56,559 $ 55,679
Interest-bearing deposits 849,958 751,038 690,493
----------- ---------- ----------
Total Deposits 903,053 807,597 746,172

Short-term borrowings 11,803 21,048 5,965
Accrued interest 1,871 2,059 1,841
Federal Home Loan Bank
advances 57,150 57,350 39,600
Subordinated long-term
capital notes 6,186 6,186 6,186
Other liabilities 3,884 3,297 3,236
----------- ---------- ----------
Total Liabilities 983,947 897,537 803,000
----------- ---------- ----------

Shareholders' Equity
Preferred Stock, 20,000,000
shares authorized, none
issued -- -- --
Common stock, par value $0.01
per share, 20,000,000 shares
authorized, 5,372,505 shares
issued at June 30, 2008,
5,285,026 shares issued at
December 31, 2007 and
5,304,726 shares issued at
June 30, 2007 54 53 53
Paid-in capital 44,841 43,998 44,233
Retained earnings 31,169 29,331 26,821
Accumulated other
comprehensive income (loss) (131) 281 (531)
----------- ---------- ----------
Total Shareholders' Equity 75,933 73,663 70,576
----------- ---------- ----------

Total Liabilities and
Shareholders' Equity $ 1,059,880 $ 971,200 $ 873,576
=========== ========== ==========
-0-
CONTACT: Appalachian Bancshares Inc.
Cathy Murphy
706-276-8160
CAMurphy@apab.com