Appalachian Bancshares, Inc. Reports Increases in Net Income of 34% and 42% for the Three and Nine Months (Respectively) Ended S

Appalachian Bancshares, Inc. Reports Increases in Net Income of
34% and 42% for the Three and Nine Months (Respectively) Ended September 30,
2004 


ELLIJAY, Ga., Oct. 26  /PRNewswire-FirstCall/ -- Appalachian Bancshares, Inc.
(the "Company") (Other OTC: APAB.PK), today announced that net income for the
quarter ended September 30, 2004, was $1,068,102, compared to net income of
$796,853 for the quarter ended September 30, 2003, which represents an increase
of $271,249, or 34.0%.  Basic earnings per share were $0.29 and $0.22 for the
quarters ended September 30, 2004 and 2003, respectively, an increase of 31.8%.
 Diluted earnings per share were $0.27 and $0.21 for the quarters ended
September 30, 2004, and 2003, respectively, an increase of 28.6%.

Net income for the nine months ended September 30, 2004, was $2,944,359,
compared to net income of $2,069,983 for the nine months ended September 30,
2003, which represents an increase of $874,376, or 42.2%.  Basic earnings per
share were $0.79 and $0.58 for the nine months ended September 30, 2004 and
2003, respectively, an increase of 36.2%.  Diluted earnings per share were
$0.76 and $0.55 for the nine months ended September 30, 2004, and 2003,
respectively, an increase of 38.2%.

Net interest income increased from $3,830,317 to $4,609,087, or 20.3%, from the
quarter ended September 30, 2003, to the quarter ended September 30, 2004.  The
provision for loan loss was $274,000 for the quarter ended September 30, 2004,
compared to $385,000 for the quarter ended September 30, 2003.  The ratio of
loan loss reserves to total loans increased from 1.09% to 1.15% for the
quarters ended September 30, 2003, and 2004, respectively.  Non- interest
expense increased $502,278, from $3,005,630 to $3,507,908, from the quarter
ended September 30, 2003, to the quarter ended September 30, 2004. This
increase was related primarily to expenses associated with the increase in the
staff of Appalachian Community Bank, the Company's wholly-owned subsidiary (the
"Bank"), which was necessary in order to accommodate the growth that the Bank
has experienced, as well as the opening, during the second quarter, of a new
9,000-square-foot branch office in Blue Ridge, Georgia, with a
3,500-square-foot community building, in order to better service the Bank's
Blue Ridge market.

Net interest income increased from $10,672,185 to $13,362,281, or 25.2%, from
the nine months ended September 30, 2003, to the nine months ended September
30, 2004.  The provision for loan loss was $925,107 for the nine months ended
September 30, 2004, compared to $1,105,000 for the nine months ended September
30, 2003.  The ratio of loan loss reserves to total loans increased from 1.09%
to 1.15%, for the nine months ended September 30, 2003, and 2004, respectively.
 Non-interest expenses increased $1,560,798, from $8,662,540 to $10,223,338,
for the nine months ended September 30, 2003, to the nine months ended
September 30, 2004.

Tracy R. Newton, President and Chief Executive Officer of the Company, stated
that, "Our primary financial goal is to achieve sustainable growth in our
earnings per share, in the range of 11% to 15% per year.  The hard work and
skill of our dedicated staff of directors, officers, and employees have made
these excellent results a reality.  Our long-term commitment to enhancing
shareholder value remains at the forefront of all our strategic planning."

Mr. Newton also stated that, "Site preparation has been started for a new
Gilmer County Bank branch office in the rapidly expanding Highlands Shopping
Center in East Ellijay.  Grading is also underway for a new corporate office
facility on Industrial Blvd in Ellijay.  When complete, these new facilities
will allow us to more conveniently serve our customers and consolidate our
operations."

Appalachian Bancshares, Inc., is a bank holding company that owns all of the
outstanding shares of capital stock of Appalachian Community Bank.  The
Company, through Appalachian Community Bank, engages in a full range of banking
services in northern Georgia, through banking offices located in Ellijay, East
Ellijay, Blue Ridge and Blairsville, Georgia.  The main banking office of the
Company, which is located in Ellijay, Georgia, is operated under the trade name
"Gilmer County Bank."

Certain statements in the release contain "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995, which
statements can generally be identified by the use of forward-looking
terminology, such as "may," "will," "expect," "estimate," "anticipate,"
"believe," "target," "plan," "project," "continue," or the negatives thereof,
or other variations thereon or similar terminology, and are made on the basis
of management's plans and current analyses of the Company, its business and the
industry as a whole.  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. 
The above factors, in some cases, have affected, and in the future could
affect, the Company's financial performance and could cause actual results for
2004 and beyond to differ materially from those expressed or implied in such
forward-looking statements, even if experience or future changes make it clear
that any projected results expressed or implied therein will not be realized.

                APPALACHIAN BANCSHARES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
             September 30, 2004 (Unaudited) and December 31, 2003

                                         September 30,
                                            2004      December 31,
                                         (Unaudited)      2003      % Change
  Assets
    Cash and due from banks              $7,154,144    $6,530,984     9.54%
    Interest-bearing deposits with
     other banks                          9,720,789       273,841  3449.79%
    Federal funds sold                    1,790,000       586,000   205.46%
        Cash and Cash Equivalents        18,664,933     7,390,825   152.54%

  Securities available-for-sale          56,198,872    55,363,327     1.51%

  Loans, net of unearned income         370,062,492   332,306,446    11.36%
  Allowance for loan losses              (4,256,628)   (3,609,794)   17.92%
        Net Loans                       365,805,864   328,696,652    11.29%

  Premises and equipment, net            12,923,619     9,161,652    41.06%
  Accrued interest                        2,522,125     2,289,994    10.14%
  Cash surrender value on life insurance  7,753,072     2,592,416   199.07%
  Intangibles, net                        2,125,058     2,157,433    -1.50%
  Other assets                            1,379,917     1,965,179   -29.78%

        Total Assets                   $467,373,460  $409,617,478    14.10%

  Liabilities and Shareholders' Equity

  Liabilities
    Deposits:
      Noninterest-bearing               $31,780,016   $23,795,787    33.55%
      Interest-bearing                  339,285,086   309,123,161     9.76%
        Total Deposits                  371,065,102   332,918,948    11.46%

  Short-term borrowings                  13,018,035     7,085,992    83.72%
  Accrued interest                          586,151       670,614   -12.59%
  Long-term debt                         40,371,429    30,692,858    31.53%
  Guaranteed preferred beneficial
   interest in the Company's
   subordinated debentures                6,186,000     6,186,000     0.00%
  Other liabilities                       1,549,953       980,713    58.04%
        Total Liabilities               432,776,670   378,535,125    14.33%

  Shareholders' Equity

  Preferred Stock, 20,000,000 shares
   authorized, none issued                        -             -     0.00%
  Common stock, par value $0.01 per
   share, 20,000,000 shares
   authorized, 3,812,052 shares issued
   at June 30, 2004 and
   3,734,686 shares issued at
   December 31, 2003                         38,121        37,347     2.07%
  Paid-in capital                        23,170,052    22,727,208     1.95%
  Retained earnings                      11,532,519     8,588,160    34.28%
  Accumulated other comprehensive
   income:  net unrealized
   holding  gains on securities
   available-for-sale, net of deferred
   income tax                               555,894       429,434    29.45%
  Treasury stock, at cost (75,973
   shares at June 30, 2004 and at
   December 31, 2003)                      (699,796)     (699,796)    0.00%
        Total Shareholders' Equity       34,596,790    31,082,353    11.31%

        Total Liabilities and
         Shareholders' Equity          $467,373,460  $409,617,478    14.10%


                APPALACHIAN BANCSHARES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF INCOME
                                 (Unaudited)

                                                 Three Months Ended
                                                    September 30,
                                            2004         2003      % Change

  Interest Income
    Interest and fees on loans           $6,028,139   $5,357,283    12.52%
    Interest on investment securities:
      Taxable securities                    335,412      182,740    83.55%
      Nontaxable securities                 162,881      182,017   -10.51%
      Interest on deposits in other banks       623          104   499.04%
      Interest on federal funds sold          8,589        5,261    63.26%
        Total Interest Income             6,535,644    5,727,405    14.11%

  Interest Expense
    Interest on deposits                  1,585,469    1,572,091     0.85%
    Interest on federal funds purchased
     and securities sold under
     agreements to repurchase                35,884       20,443    75.53%
    Interest on long-term debt              235,204      283,254   -16.96%
    Interest on subordinated debentures      70,000       21,300   228.64%
        Total Interest Expense            1,926,557    1,897,088     1.55%

  Net Interest Income                     4,609,087    3,830,317    20.33%
    Provision for loan losses               274,000      385,000   -28.83%

  Net Interest Income After Provision
   For Loan Losses                        4,335,087    3,445,317    25.83%

  Noninterest Income
    Customer services fees                  312,051      207,362    50.49%
    Insurance commissions                    12,736        8,507    49.71%
    Mortgage origination fees               196,357      358,585   -45.24%
    Other operating income                  204,779      147,712    38.63%
    Investment securities gains (losses)          -            -     0.00%
        Total Noninterest Income            725,923      722,166     0.52%

  Noninterest Expenses
    Salaries and employee benefits        1,786,710    1,467,070    21.79%
    Occupancy expense                       229,557      149,708    53.34%
    Furniture and equipment expense         301,597      236,636    27.45%
    Other operating expenses              1,190,044    1,152,216     3.28%
        Total Noninterest expense         3,507,908    3,005,630    16.71%

  Income before income taxes              1,553,102    1,161,853    33.67%
  Income tax expense                        485,000      365,000    32.88%

  Net Income                             $1,068,102     $796,853    34.04%

  Earnings Per Common Share
    Basic                                     $0.29        $0.22    31.82%
    Diluted                                    0.27         0.21    28.57%

  Cash Dividends Declared Per Common Share       $-           $-     0.00%

  Weighted Average Shares Outstanding
    Basic                                 3,736,079    3,660,485     2.07%
    Diluted                               3,894,699    3,822,959     1.88%


                APPALACHIAN BANCSHARES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF INCOME
                                 (Unaudited)
                                                    Nine Months Ended
                                                      September 30,
                                              2004         2003    % Change
  Interest Income
    Interest and fees on loans            $17,309,728  $15,909,412    8.80%
    Interest on investment securities:
      Taxable securities                    1,006,195      707,463   42.23%
      Nontaxable securities                   487,847      539,051   -9.50%
      Interest on deposits in other banks       2,073       28,816  -92.81%
      Interest on federal funds sold           15,789       34,384  -54.08%
        Total Interest Income              18,821,632   17,219,126    9.31%

  Interest Expense
    Interest on deposits                    4,508,485    5,516,094  -18.27%
    Interest on federal funds purchased
     and securities sold under agreements
     to repurchase                             76,850       64,338   19.45%
    Interest on long-term debt                675,616      945,209  -28.52%
    Interest on subordinated debentures       198,400       21,300  831.46%
        Total Interest Expense              5,459,351    6,546,941  -16.61%

  Net Interest Income                      13,362,281   10,672,185   25.21%
    Provision for loan losses                 925,107    1,105,000  -16.28%

  Net Interest Income After Provision For
   Loan Losses                             12,437,174    9,567,185   30.00%

  Noninterest Income
    Customer services fees                    887,375      598,120   48.36%
    Insurance commissions                      39,067       55,219  -29.25%
    Mortgage origination fees                 640,273    1,060,205  -39.61%
    Other operating income                    540,141      380,772   41.85%
    Investment securities gains (losses)      (22,633)     (16,978) -33.31%
        Total Noninterest Income            2,084,223    2,077,338    0.33%

  Noninterest Expenses
    Salaries and employee benefits          5,029,721    4,161,198   20.87%
    Occupancy expense                         604,176      464,317   30.12%
    Furniture and equipment expense           844,484      724,569   16.55%
    Other operating expenses                3,744,957    3,312,456   13.06%
        Total Noninterest expense          10,223,338    8,662,540   18.02%

  Income before income taxes                4,298,059    2,981,983   44.13%
  Income tax expense                        1,353,700      912,000   48.43%

  Net Income                               $2,944,359   $2,069,983   42.24%

  Earnings Per Common Share
    Basic                                       $0.79        $0.58   36.21%
    Diluted                                      0.76         0.55   38.18%

  Cash Dividends Declared Per Common Share         $-           $-    0.00%

  Weighted Average Shares Outstanding
    Basic                                   3,719,312    3,599,384    3.33%
    Diluted                                 3,879,415    3,771,632    2.86%


                APPALACHIAN BANCSHARES, INC. AND SUBSIDIARIES
                             FINANCIAL HIGHLIGHTS
                                 (Unaudited)

                                           Three Months  Three Months
                                               Ended        Ended
                                             Sept. 30,     Sept. 30,
                                                2004         2003   % Change
  Earnings Summary
  (amounts in thousands)
    Net income for period                      $1,068         $797    34.00%
    Net interest income                         4,609        3,830    20.34%
    Net interest income
     (tax equivalent)                           4,695        3,938    19.22%
    Noninterest expense                         3,508        3,006    16.70%

  Select Average Balances
  (amounts in thousands)
    Loans                                    $368,005     $320,035    14.99%
    Allowance for loan losses                   4,228        3,485    21.32%
    Investment securities                      55,890       53,208     5.04%
    Earning assets                            426,915      375,523    13.69%
    Total assets                              455,254      396,177    14.91%
    Deposits                                  368,605      322,201    14.40%
    Shareholders' equity                       33,318       29,435    13.19%

  Per Common Share
    Net income - basic                           0.29         0.22    31.82%
    Net income - diluted                         0.27         0.21    28.57%
    Book value                                   9.26         8.16    13.48%
    End of period shares outstanding        3,736,079    3,658,713     2.11%
    Weighted average shares outstanding:
      Basic                                 3,736,079    3,660,485     2.07%
      Diluted                               3,894,699    3,822,959     1.88%

  Ratios
    Return on average assets                    0.94%        0.80%
    Return on average equity                   12.82%       10.83%
    Average earning assets
     to average total assets                   93.78%       94.79%
    Average loans as percentage
     of average deposits                       99.84%       99.33%
    Net interest margin (tax equivalent)        4.40%        4.19%
    Average equity to average assets            7.32%        7.43%
    Efficiency ratio                           76.11%       78.49%
    Loan loss reserve to total loans            1.15%        1.09%


                APPALACHIAN BANCSHARES, INC. AND SUBSIDIARIES
                             FINANCIAL HIGHLIGHTS
                                 (Unaudited)

                                           Nine Months   Nine Months
                                               Ended        Ended
                                             Sept. 30,     Sept. 30,
                                                2004         2003   % Change
  Earnings Summary
  (amounts in thousands)
    Net income for period                      $2,944       $2,070    42.22%
    Net interest income                        13,362       10,672    25.21%
    Net interest income
     (tax equivalent)                          13,632       10,992    24.02%
    Noninterest expense                        10,223        8,663    18.01%

  Select Average Balances
  (amounts in thousands)
    Loans                                    $355,250     $311,963    13.88%
    Allowance for loan losses                   4,037        3,384    19.30%
    Investment securities                      55,993       48,424    15.63%
    Earning assets                            413,421      366,456    12.82%
    Total assets                              438,972      389,149    12.80%
    Deposits                                  357,087      318,198    12.22%
    Shareholders' equity                       32,472       27,923    16.29%

  Per Common Share
    Net income - basic                           0.79         0.58    36.21%
    Net income - diluted                         0.76         0.55    38.18%
    Book value                                   9.26         8.16    13.48%
    End of period shares outstanding        3,736,079    3,658,713     2.11%
    Weighted average shares outstanding:
      Basic                                 3,719,312    3,599,384     3.33%
      Diluted                               3,879,415    3,771,632     2.86%

  Ratios
    Return on average assets                    0.89%        0.71%
    Return on average equity                   12.09%        9.88%
    Average earning assets
     to average total assets                   94.18%       94.17%
    Average loans as percentage
     of average deposits                       99.49%       98.04%
    Net interest margin (tax
     equivalent)                                4.40%        4.00%
    Average equity to
     average assets                             7.40%        7.18%
    Efficiency ratio                           76.51%       81.18%
    Loan loss reserve to total loans            1.15%        1.09%


DATASOURCE: Appalachian Bancshares, Inc.



CONTACT:  Tracy R. Newton, Chief Executive Officer, or Darren M. Cantlay,

Chief Financial Officer, of Appalachian Bancshares, Inc., [phone]



Web site:  http://www.appalachianbancshares.com/ 

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