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                                                                    EXHIBIT 10.9

                         LOAN AND STOCK PLEDGE AGREEMENT

         THIS LOAN AND STOCK PLEDGE AGREEMENT (the "Agreement"), entered into as
of April 3, 2000, between APPALACHIAN BANCSHARES, INC., a Georgia corporation
(the "Borrower"), and Crescent Bank and Trust Company, a Georgia banking
corporation (the "Lender").

         On the date hereof the Borrower is borrowing the principal amount of
$4,600,000 from the Lender (the "Loan"), which will be evidenced by the Note.
The Leader is willing to make the Loan to the Borrower on the terms and
conditions described below. The Borrower and Lender agree that the payment and
performance of all obligations relating to the Loan will be secured through the
pledge to the Lender of all the issued and outstanding shares of capital stock
owned or hereafter acquired by the Borrower (the "Stock") in GILMER COUNTY BANK,
having its main office at 829 Industrial Boulevard, Ellijay, Georgia 30540
("Gilmer"), and APPALACHIAN COMMUNITY BANK, having its main office at 236
Highway 515, Blairsville, Georgia 30512 ("Appalachian"). Certain capitalized
terms used in this Agreement are defined in Section 22 of this Agreement.

         In consideration of the premises and the mutual agreements and
representations in this Agreement, the Lender and the Borrower agree as follows:

         1.       Security Interest.

                  (a)      The Borrower hereby unconditionally grants and
assigns to the Lender and its successors and assigns a continuing security
interest in and security title to the Stock. The Borrower hereby delivers to the
Lender all of its right, title and interest in and to the Stock, together with
certificates representing the Stock and stock powers endorsed in blank, as
security for (i) all obligations of the Borrower to the Lender hereunder, and
(ii) payment and performance of all obligations of the Borrower to the Leader
under the Note, whether direct or indirect, absolute or contingent, now or
hereafter existing, or due or to become due. If the Borrower receives, for any
reason whatsoever, any additional shares of the capital stock of the Bank, such
shares shall thereupon constitute Stock to be held by the Lender under the terms
of this Agreement and the Borrower shall immediately deliver such shares to the
Lender, together with stock powers endorsed in blank by the Borrower. Beneficial
ownership of the Stock, including all voting, consensual and dividend rights,
shall remain in the Borrower until the occurrence of a Default.

                  (b)      If, prior to repayment in full of the Loan, the
aggregate book value of the Stock becomes less than 200% of the outstanding Loan
balance, the Borrower shall promptly deliver to the Lender on demand additional
collateral of a type and value acceptable to the Lender (and the Lender's
judgment in valuing same shall be conclusive) so that the sum of the value of
such additional collateral plus the aggregate book value of the Stock is equal
to or in excess of 200% of the outstanding Loan balance. The Borrower shall also
execute any security documents the Lender may request to evidence and perfect
the Lender's rights in such additional collateral. If


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at any time such additional collateral is no longer required pursuant to this
Section 1(b), the Lender shall release its security interest in such additional
collateral upon the request of the Borrower.

         2.       Representations and Warranties. The Borrower represents and
warrants to the Lender as follows:

                  (a)      The Borrower is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Georgia and is
qualified to do business in all jurisdictions where such qualification is
necessary. The Borrower is registered as a bank holding company with the Board
of Governors of the Federal Reserve System and the Georgia Department of Banking
and Finance. The chief executive office of the Borrower and the principal place
of business of the Borrower where the records of the Borrower are located at 829
Industrial Boulevard, Ellijay, Georgia 30540 (Gilmer County), and the Borrower's
U.S. employer identification number is 58-2242407.

                  (b)      The Bank is a banking corporation duly organized,
validly existing, and in good standing under the laws of the State of Georgia.
The Borrower owns all the Stock (consisting of 586,000 shares of Gilmer and
75,000 shares of Appalachian) and there are no other outstanding shares of
capital stork and no outstanding options, warrants or other rights which can be
converted into shards of capital stock of the Bank. The Bank has all requisite
corporate power and authority and possesses all licenses, permits and
authorizations necessary for it to own its properties and conduct its business
as presently conducted.

                  (c)      Each financial statement of the Borrower or any
Subsidiary which has been delivered to the Lender presents fairly the financial
condition of the Borrower or such Subsidiary as of the date indicated therein
and the results of its operations for the periods shown therein. There has been
no material adverse change, either existing or threatened, in the financial
condition or operations of the Borrower or any Subsidiary since the date of such
financial statement.

                  (d)      The Borrower has full power and authority to execute
and perform the Financing Documents. The execution, delivery, and performance by
the Borrower of the Financing Documents (i) have been duly authorized by all
requisite action by the Borrower, (ii) do not violate any provision of law, and
(iii) do not result in a breach of or constitute a default under any agreement
or other instrument to which the Borrower or any Subsidiary is a party or which
the Borrower or any Subsidiary is bound. Each of the Financing Documents
constitutes the legal, valid, and binding obligation of the Borrower enforceable
in accordance with its terms.

                  (e)      Except for the security interest created by this
Agreement, the Borrower owns the Stock free and clear of all liens, charges, and
encumbrances, except as may be retired through the proceeds of this transaction.
The Stock is duly issued, fully paid and non-assessable, and the Borrower has
the unencumbered right to pledge the Stock.

                  (f)      There is no action, arbitration, or other proceeding
at law or in equity, or by or before any court, agency, or arbitrator, nor is
there any judgment, order, or other decree pending, anticipated, or threatened
against the Borrower or any Subsidiary or against any of their properties

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or assets which might have a material adverse effect on the Borrower, any
Subsidiary, or their respective properties or assets, or which might call into
question the validity or enforceability of the Financing Documents, or which
might involve the alleged violation by the Borrower or any Subsidiary of any
law, rule or regulation.

                  (g)      No consent or other authorization or filing with or
of any governmental authority or other public body on the part of the Borrower
or any Subsidiary is required in connection with the Borrower's execution,
delivery, or performance of the Financing Documents; or if required, all such
prerequisites have been fully satisfied.

                  (h)      None of the transactions contemplated in this
Agreement (including, without limitation, the use of the proceeds of the Loan)
will violate or result in a violation, of Section 7 of the Securities Exchange
Act of 1934, or any regulations issued pursuant thereto.

                  (i)      The following documents have been presented under
separate cover as exhibits hereto: true, correct and complete copies of (i) the
Borrower's, Gilmer's and Appalachian's articles of incorporation as in effect as
of the data hereof ; (if) the bylaws of the Borrower in effect immediately prior
to the adoption of the resolutions referred to below (and such bylaws have not
been further altered or amended and have been in full force and effect at all
times since the adoption of such resolutions through the date hereof); (iii) the
bylaws of Gilmer and of Appalachian as of the date hereof; (iv) resolutions (the
"Resolutions") of the Board of Directors of the Borrower (x)duly adopted at a
meeting duly called at which a quorum was present or (y) by unanimous written
consent, and the Resolutions have been since adoption and are now in full force
and effect and have not been modified in any respect. There have been no further
amendments or other documents affecting or altering the Borrower's, Gilmer's or
Appalachian's articles of incorporation since the date of the certifications
referred to above through the date hereof, and the Borrower, Gilmer and
Appalachian have remained in valid existence under the laws of the State of
Georgia since such dates.

         3.       Affirmative Covenants. The Borrower agrees that so long as the
Note is outstanding or this Agreement is in effect:

                  (a)      The Borrow shall promptly furnish to the Lender: (i)
not later than 120 days after the end of each fiscal year, audited consolidated
financial statements of the Borrower prepared in accordance with generally
accepted accounting principles ("GAAP") and certified by an independent
accounting firm acceptable to the Lender; (ii) not later than 45 days after each
of the first three quartets of each fiscal year, unaudited consolidated
financial statements of the Borrower, prepared in accordance with GAAP (subject
to changes resulting from normal year-end adjustments and without notes thereto)
and certified by the chief financial officer of the Borrower; (iii) not later
than 30 days after the end of each of the first three quarters of each year,
copies of the Report of Condition and the Report of Income and Dividends of each
of the Bank Subsidiaries; (iv) immediately after the occurrence of a material
adverse change in the business, properties, condition or prospects (financial or
otherwise) of the Borrower or its Subsidiaries, taken as a whole, including
without limitation, any material adverse change arising out of imposition of any
letter agreement, memorandum of understanding, cease and desist order, or other
similar regulatory action involving

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the Borrower or any Subsidiary, a statement of the Borrower's chief executive
officer or chief financial officer setting forth in reasonable detail such
change and the action which the Borrower or any Subsidiary proposes to take with
respect thereto; and (v) from time to time upon request of the Lender, such
other information relating to the operations, business, condition, management,
properties, or prospects of the Borrower or any Subsidiary as the Lender may
reasonably request (including meetings with the Borrower's or Subsidiary's
officers and employees).

                  (b)      The Borrower and each Subsidiary shall punctually pay
and discharge, all taxes, assessments and other governmental charges or levies
imposed upon it or upon its income or upon any of its property unless contested
in good faith and for which reserves have been established in accordance with
GAAP.

                  (c)      The Borrower and each Subsidiary shall comply in all
material respects with all requirements of constitutions, statutes, rules,
regulations, and orders and all orders and decrees of courts and arbitrators
applicable to it or its properties except where the failure to comply could not
reasonably be expected to have a material adverse effect.

                  (d)      The Borrower shall promptly notify the Lender of any
material change in management.

         4.       Negative Covenants. The Borrower agrees that so long as the
Note is outstanding or this Agreement is in effect:

                  (a)      The Borrower shall not permit its Capital as of the
end of any fiscal quarter during the term of this Agreement to be less than
$10,000,000.

                  (b)      The Borrower shall not permit the ratio of Tier 1
Capital to average total assets (the Tier 1 Leverage Ratio) of any of the Bank
Subsidiaries as of the end of any fiscal quarter to be less than 5.0%.

                  (c)      The Borrower shall not, and shall not permit any of
the Bank Subsidiaries to, fail to comply with any minimum capital requirement
imposed by any of their federal or state regulators.

                  (d)      The Borrower shall not permit its Weighted Average
Return on Assets for each fiscal year to be less than 0.85% and shall not permit
the Weighted Average Return on Assets of any Bank Subsidiary for each fiscal
year to be less than 0.85 %.

                  (e)      The Borrower shall not permit the allowance for loan
and lease losses of any of the Bank Subsidiaries to be less than 1.00% of its
gross loans for each fiscal quarter.

                  (f)      The Borrower shall not incur or permit to exist any
indebtedness or liability for borrowed money in access of 25% of Capital other
than to the Lender or a wholly-owned Subsidiary of the Borrower without prior
Lender approval, except that this covenant shall not apply



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to deposits, repurchase agents, federal finds borrowings, overdrafts, and other
banking transactions entered into by a Subsidiary in the ordinary course of its
business.

                  (g)      The Borrower shall not, directly or indirectly,
become a guarantor of any obligation of, or an endorser of, or otherwise assume
or become liable upon any notes, obligations, or other indebtedness of any other
Person (other than a Subsidiary) except in connection with the depositing of
checks in the normal and ordinary course of business.

                  (h)      The Borrower shall not, nor permit any Bank
Subsidiary to, transfer all or substantially all of its assets to or consolidate
or merge with any other Person, or acquire all or substantially all of the
properties or capital stock of any other Person.

                  (i)      The Borrower shall not permit any Bank Subsidiary to
issue, sell or otherwise dispose or part with control of any shares of any class
of its stock (other than directors' qualifying shares) except to the Borrower or
a wholly-owned Subsidiary of the Borrower.

                  (j)      The Borrower shall not sell or otherwise dispose or
part with control of any of the Stock or any other securities or indebtedness of
any Bank Subsidiary, and the Borrower shall not pledge or otherwise transfer or
grant a security interest in any of the capital stock or other securities of any
of its Bank Subsidiaries.

         5.       Advances Under the Loan. The Lender shall not be obligated to
make any advance of the Loan to the Borrower unless:

                  (a)      All representations and warranties of the Borrower
contained in this Agreement or the Note shall be true in all material respects
on and as of the date of each advance of the Loan.

                  (b)      The Borrower and each Subsidiary shall have performed
in all material respects all their agreements and obligations required by the
Financing Documents.

                  (c)      No adverse change shall have occurred in the
condition (financial or otherwise) of the Borrower and its Subsidiaries, taken
as a whole, or in the business, properties, assets, liabilities or prospects of
the Borrower and its Subsidiaries, taken as a whole, since the date of this
Agreement.

                  (d)      No Default or event which, with the giving of notice
or passage of time (or both), would constitute a default under the terms of this
Agreement shall have occurred.

         6.       Default. A "Default" shall exist if any of the following
occurs:

                  (a)      Failure of the Borrower punctually to make any
payment of any amount payable, whether principal or interest or other amount, on
any of the Liabilities, whether at maturity, or at a date fixed for any
prepayment or partial prepayment, or by acceleration, or otherwise, within 3
business days of the date such payment becomes due.



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                  (b)      Any statement, representation, or warranty of the
Borrower made in any of the Financing Documents or at any time furnished by or
on behalf of the Borrower to the Lender shall be false or misleading in any
material respect as of the date made.

                  (c)      Failure of the Borrower punctually and fully to
comply with (i) any of the covenants in Section 4 of this Agreement or (ii) any
of the other covenants set forth in this Agreement if such failure under this
clause (ii) is not remedied within fifteen (15) business days after notice from
the Lender to the Borrower.

                  (d)      The occurrence of a default under any other agreement
to which the Borrower and the Lender are parties or under any other instrument
executed by the Borrower in favor of the Lender.

                  (e)      If the Borrower or any Subsidiary becomes insolvent
as defined in the Georgia Uniform Commercial Code or makes an assignment for the
benefit of creditors; or if any action is brought by the Borrower or any
Subsidiary seeking dissolution of the Borrower or such Subsidiary or liquidation
of its assets or seeking the appointment of a trustee, interim trustee,
receiver, or other custodian for any of its property; or if the Borrower or any
Subsidiary commences a voluntary case under the Federal Bankruptcy Code; or if
any reorganization or arrangement proceeding is instituted by the Borrower or
any Subsidiary for the settlement, readjustment, composition or extension of any
of its debts upon any teams; or if any action or petition is otherwise brought
by the Borrower or any Subsidiary seeking similar relief or alleging that it is
insolvent or unable to pay its debts as they mature.

                  (f)      Any action is brought against the Borrower or any
Subsidiary seeking dissolution of the Borrower or such Subsidiary or liquidation
of any of its assets or seeking the appointment of a trustee, interim trustee,
receiver, or other custodian for any of its property, and such action is
consented to or acquiesced in by the Borrower or such Subsidiary or is not
dismissed within 60 days of the date upon which it was instituted; or any
proceeding under the Federal Bankruptcy Code is instituted against the Borrower
or any Subsidiary and (i) an order for relief is entered in such proceeding or
(ii) such proceeding is consented to or acquiesced in by the Borrower or such
Subsidiary or is not dismissed within 60 days of the date upon which it was
instituted; or any reorganization or arrangement proceeding is instituted
against the Borrower or any Subsidiary for the settlement, readjustment,
composition, or extension of any of its debts upon any terms, and such
proceeding is consented to or acquiesced in by the Borrower or such Subsidiary
or is not dismissed within 60 days of the date upon which it was instituted; or
any action or petition is otherwise brought against the Borrower or any
Subsidiary seeking similar relief or alleging that it is insolvent, unable to
pay its debts as they mature, or generally not paying its debts as they become
due, and such action or petition is consented to or acquiesced in by the
Borrower or such Subsidiary or is not dismissed within 60 days of the date upon
which it was brought.

                  (g)      The Borrower or any Subsidiary is in default (or an
event has occurred which, with the giving of notice or passage of time, or both,
will cause the Borrower or any Subsidiary to be in default) on indebtedness to
another Person, and the amount of such



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indebtedness exceeds $25,000 or the acceleration of the maturity of such
indebtedness would have a material adverse effect upon the Borrower or such
Subsidiary.

                  (h)      Any other material adverse change occurs in the
Borrower's financial condition or means or ability to pay the Liabilities.

                  (i)      Any cease and desist or other order has been
threatened in writing, noticed, or entered against the Borrower or any
Subsidiary by any bank or bank holding company regulatory agency or body, or the
Borrower or any subsidiary enters into any form of memorandum of understanding,
plan of corrective action, or letter agreement with any such regulatory agency
or body, or any other successful regulatory enforcement action is taken against
the Borrower or any Subsidiary relating to the capitalization, management, or
operation of the Borrower or any Subsidiary.

                  (j)      The Borrower or any Subsidiary is indicted or
convicted or pleads guilty or nolo contendere to any charge that the Borrower or
such Subsidiary has violated any drug, controlled substances, money laundering,
currency reporting, racketeering, or racketeering-influenced-and-corrupt-
organization statute or regulations other forfeiture statute.

                  (k)      The Borrower ceases to own 100% of the issued and
outstanding capital stock of the Bank or ceases to control any of the other Bank
Subsidiaries.

         7.       Remedies Upon Default. Upon the continuation of a Default, the
Lender shall be entitled, without limitation, to exercise the following rights
at any time and from time to time, which the Borrower hereby agrees to be
commercially reasonable:

                  (a)      declare any of the Liabilities due and payable,
whereupon they immediately will become due and payable (notwithstanding any
provisions to the contrary, and without penalty, demand, notice or protest of
any kind (all of which are expressly waived by the Borrower));

                  (b)      (i) receive all amounts payable in respect of the
Collateral otherwise payable to the Borrower; (ii) settle all accounts, claims,
and controversies relating to the Collateral; (iii) transfer all or any part of
the Collateral into the Lender's or any nominee's name; and (iv) execute all
agreements and other instruments; bring, defend and abandon all actions and
other proceedings; and take all actions in relation to the Collateral as the
Lender in its sole discretion may determine;

                  (c)      enforce the payment of the Stock and exercise all of
the tights, powers and remedies of the Borrower thereunder, including the
exercise of all voting Rights and other ownership or consensual rights of the
Stock (but the Lender is not hereby obligated to exercise such rights), and in
connection therewith the Borrower hereby appoints the Lender to be the
Borrower's true and lawful attorney-in-fact and IRREVOCABLE PROXY to vote the
Stock in any manner the Lender deems advisable for or against all matters
submitted to a vote of shareholders, and such power-of-attorney is coupled with
an interest and irrevocable;



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                  (d)      sell, assign and deliver, or grant options to
purchase, all or any part of or interest in, the Collateral in one or more
parcels, at any public or private sale at any exchange, any of the Lender's
offices, or elsewhere, without demand of performance, advertisement, or notice
of intention to sell or of the time or place of sale or adjournment thereof or
to redeem or otherwise (all of which are hereby expressly and irrevocably waived
by the Borrower), for cash, on credit, or for other property, for immediate or
future delivery without any assumption of credit risk, and for such price and on
such terms as the Lender in its sole discretion may determine; the Borrower
agrees that to the extent that notice of sale shall be required by law that at
least five business days' notice to the Borrower of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification; the Leader shall not be obligated to make
any sale of Collateral regardless of notice of sale having been given; the
Lender may adjourn any public or private sale from time to time by announcement
at the time and place fixed, therefor, and any such sale may, without further
notice, be made at the time and place to which it was so adjourned; the Borrower
hereby waives and releases to the fullest extent permitted by law any right or
equity of redemption with respect to the Collateral, whether before or after
sale hereunder, and all rights, if any, of marshalling the Collateral and any
other security for the Loan or otherwise; at any such sale, unless prohibited by
applicable law, the Lender may bid for and purchase all or any part of the
Collateral so sold free from any such right or equity of redemption; and the
Lender shall not be liable for failure to collect or realize upon any or all of
the Collateral or for any delay in so doing nor shall any of them be under any
obligation to take any action whatsoever with regard thereto;

                  (e)      appoint and dismiss managers or other agents for any
of the purposes mentioned in the foregoing provisions of this Section 7, all as
the Leader in its sole discretion may determine; and

                  (f)      generally, take all such other action as the Lender
in its sole discretion may determine as incidental or conducive to any of the
matters or powers mentioned in this Section 7 and which the Lender may or can do
lawfully and use the name of the Borrower for such purposes and in any
proceedings arising therefrom.

         8.       Application of Proceeds. The proceeds of the public or private
sale or other disposition of any Collateral hereunder shall be applied to (i)
the costs incurred in connection with the sale, expressly including, without
limitation, any costs under Section 11(a) hereof; (ii) any unpaid interest, fees
or other amounts which may have accrued on any obligations secured hereby; and
(iii) any unpaid principal on any obligations secured hereby; in such order as
the Lender may determine, and any remaining proceeds shall be paid over to the
Borrower or others as by law provided. If the proceeds of the sale or other
disposition of the Stock are insufficient to pay all such amounts, the Borrower
shall remain liable to the Lender for the deficiency.

         9.       Additional Rights of Secured Parties. In addition to its other
rights and privileges under this Agreement, the Lender may exercise from time to
time any and all other rights and remedies available to a secured party when a
debtor is in default under a security agreement as provided in the Uniform
Commercial Code of Georgia, or available to the Lender under any other
applicable law or in equity, including without limitation the right to any
deficiency remaining after


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disposition of the Collateral. The Borrower shall pay all of the reasonable
costs and expenses (including reasonable attorneys' fees) incurred by the Lender
in enforcing its rights under this Agreement.

         10.      Return of Stock to Borrower. Upon payment in fill of all
principal and interest on the Note and full performance by the Borrower of all
covenants and other obligations under this Agreement, the Lender shall return to
the Borrower (i) all of the then remaining Stock and (ii) all rights received by
the Lender as agent for the Borrower as a result of its possessory interest in
the Stock.

         11.      Disposition of Stock by Lender. The Stock is not registered
under the various federal or state securities laws and disposition thereof after
default may be subject to prior regulatory approval and may be restricted to one
or morn private (instead of public) sales in view of the lack of such
registration. The Borrower acknowledges that upon such disposition, the Lender
may approach only a restricted number of potential purchasers and that a sale
under such circumstances may yield a lower price for the Stock than if the Stock
were registered pursuant to federal and state securities laws and sold on the
open market. The Borrower, therefore, agrees that:

                  (a)      if the Lender shall, pursuant to the terms of this
Agreement, sell or cause any of the Stock to be sold at a private sale, the
Lender shall have the right to rely upon the advice and opinion of any national
brokerage or investment firm having recognized expertise and experience in
connection with shares of companies in the banking industry (but shall not be
obligated to seek such advice and the failure to do so shall not be considered
in determining the commercial reasonableness of the Lender's action) as to the
best manner in which to expose the Stock for sale and as to the best price
reasonably obtainable at the private sale thereof; and

                  (b)      such reliance shall be conclusive evidence that the
Lender has handled such disposition in a commercially reasonable manner.

         12.      Borrower's Obligations Absolute. The obligations of the
Borrower under this Agreement shall be direct and immediate and not conditional
or contingent upon the pursuit of any other remedies against the Borrower or any
other Person, nor against other security or liens available to the Lender or its
successors, assigns or agents. The Borrower hereby waives any right to require
that an action be brought against any other Person or require that resort be had
to any security or to any balance of any deposit account or credit on the books
of the Lender in favor of any other Person prior to any exercise of rights or
remedies hereunder, or to require resort to rights or remedies of the Lender in
connection with the Loan.

         13.      Notices. Except as provided otherwise in this Agreement all
notices and other communications under this Agreement are to be in writing and
are to be deemed to have been duly given and to be effective upon delivery to
the party to whom they are directed. If sent by U.S. mail, first class,
certified, return receipt requested, postage prepaid, and addressed to the
Lender or to the Borrower at their respective addressees set forth below, such
communications are deemed to have been delivered on the second business day
after being so posted.


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If to the Lender:                   Crescent Bank and Trust Company
                                    251 Hwy. 515 S.
                                    P.O. Box 668
                                    Jasper, Georgia 30143
                                    Attn: Gary Reece, Executive Vice-President

If to the Borrower:                 Appalachian Bancshares, Inc.
                                    829 Industrial Boulevard
                                    P.O. Box G
                                    Ellijay, GA 30540
                                    Attn: Kent Sanford, Executive Vice-President


         Either the Lender or the Borrower may, by written notice to the other,
designate a different address for receiving notices under this Agreement;
provided, however, that no such change of address will be effective until
written notice thereof is actually received by the party to whom such change of
address is sent.

         14.      Binding Agreement. The provisions of this Agreement shall be
construed and interpreted, and all rights and obligations of the parties hereto
determined, in accordance with the laws of the State of Georgia. This Agreement,
together with all documents referred to herein, constitutes the Agreement
between the Borrower and the Lender with respect to the matters addressed herein
and may not be modified except by a writing executed by the Lender and delivered
by the Lender to the Borrower. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which, taken
together, shall constitute one and the same instrument.

         15.      Participations. The Lender may at any time grant
participations in or sell, assign, or otherwise dispose of all or any portion of
the indebtedness of the Borrower outstanding pursuant to the Financing
Documents. The Borrower hereby agrees that any holder of a participation in, and
any assignee or transferee of, all or any portion of any amount owed by the
Borrower under the Financing Documents (i) shall be entitled to the benefits of
the provisions of this Agreement as the Lender hereunder and (ii) may exercise
any and all rights of the banker's lien, setoff or counterclaim with respect to
any and all amounts owed by the Borrower to such assignee, transferee or holder
as fully as if such assignee, transferee or holder had made the Loan in the
amount of the obligation in which it holds a participation or which is assigned
or transferred to it.

         16.      Expenses. All reports and other documents or information
furnished to the Lender under this Agreement shall be supplied by the Borrower
without cost to the Lender. Further, the Borrower shall reimburse the Lender on
demand for all reasonable out-of-pocket costs and expenses (including reasonable
legal fees) incurred by the Lender in connection with the preparation,
interpretation, operation, and enforcement of the Financing Documents or the
protection or preservation of any right or claim of the Lender with respect to
such agreements. The Borrower will pay all taxes (if any) in connection with the
Financing Documents. The obligations


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of the Borrower under this section shall survive the payment of the Liabilities
and the termination of this Agreement.

         17.      Indemnification. In addition to any other amounts payable by
the Borrower under this Agreement, the Borrower shall pay and indemnify the
Lender from and against all claims, liabilities, losses, costs, and expenses
(including, without limitation, reasonable attorneys' fees and expenses) which
the Lender may (other than as a result of the gross negligence or willful
misconduct of the Lender) incur or be subject to as a consequence, directly or
indirectly, of (i) any breach by the Borrower of any warranty, term or condition
in, or the occurrence of any default under, any of the Financing Documents,
including all fees or expenses resulting from the settlement or defense of any
claims or liabilities arising as a result of any such breach or default, (ii)
the Lender's making, holding, or administering the Loan or the Collateral, (iii)
allegations of participation or interference by the Lender in the management,
contractual relations or other affairs of the Borrower or any Subsidiary, (iv)
allegations that the Lender has joint liability with the Borrower or any
Subsidiary for any reason, and (v) any suit, investigation, or proceeding as to
which the Lender or such participant is involved as a consequence, directly or
indirectly, of its execution of any of the Financing Documents, or any other
event or transaction contemplated by any of the foregoing. The obligations of
Borrower under this Section 17 shall survive the termination of this Agreement.

         18.      Right to Set-Off. Upon the occurrence of a Default hereunder,
the Lender, without notice or demand of any kind, may hold and set off against
such of the Liabilities (whether matured or unmatured) as the Lender may elect
any balance or amount to the credit of the Borrower in any deposit, agency,
reserve, holdback or other account of any nature whatsoever maintained by or on
behalf of the Borrower with the Lender at any of its offices, regardless of
whether such accounts are general or special and regardless of whether such
accounts are individual or joint. Any Person purchasing an interest in debt
obligations under this Agreement held by the Lender may exercise all rights of
offset with respect to such interest as fully as if such Person were a holder of
debt obligations hereunder in the amount of such interest.

         19.      Further Assurance. If at any time the Lender upon advice of
its counsel shall determine that any further document shall be required to give
effect to this Agreement and the transactions and other agreements contemplated
thereby, the Borrower shall, and shall cause its Subsidiaries to, execute and
deliver such document and otherwise carry out the purposes of this Agreement.

         20.      Severability. If any paragraph or part thereof shall for any
reason be held or adjudged to be invalid, illegal, or unenforceable by any court
of competent jurisdiction, such paragraph or part thereof shall be deemed
separate, distinct, and independent, and the remainder of this Agreement shall
remain in full force and effect and shall not be affected by such holding or
adjudication.

         21.      Binding Effect. All rights of the Lender under the Financing
Documents shall inure to the benefit of its transferees, successors and assigns.
All obligations of the Borrower under the Financing Documents shall bind its
heirs, legal representatives, successors and assigns.



                                       11
<PAGE>   12

         22.      Definitions.

                  (a)      "Assessment Risk Classification" means the assessment
risk classification assigned to each of the Bank Subsidiaries for purposes of
assessment of premiums by the Federal Deposit Insurance Corporation for deposit
insurance pursuant to 12 C.F.R. ss. 327.3(d) or the corresponding assessment
risk classification, as determined by the Lender, pursuant to any successor
assessment risk classification system.

                  (b)      "Bank Subsidiaries" means each banking Subsidiary of
Borrower, now or hereafter in existence, including but not limited to Gilmer or
Appalachian.

                  (c)      "Capital" means all capital or all components of
capital, other than any allowance for loan and lease losses and net of any
intangible assets, as defined from time to time by the primary federal regulator
of the Borrower, the Bank, or each of the other Bank Subsidiaries (as the case
may be).

                  (d)      "Collateral" means and includes all property assigned
or pledged to the Lender or in which the Lender has bean granted security
interest or to which the Lender has been granted security title, whether under
any of the Financing Documents or any other agreement, instrument, or document,
and the proceeds thereof.

                  (e)      "Financing Documents" means and includes this
Agreement, the Note, and all other associated loan and collateral documents
including, without limitation, all guaranties, suretyship agreements, stock
powers, security agreements, security deeds, subordination agreements, exhibits,
schedules, attachments, financing statements, notices, consents, waivers,
opinions, letters, reports, records, assignments, documents, instruments,
information and other writings related thereto, or furnished by the Borrower to
the Lender in connection therewith or in connection with any of the Collateral,
and any amendments, extensions, renewals, modifications or substitutions thereof
or therefor.

                  (f)      "Liabilities" means all indebtedness, liabilities,
and obligations of the Borrower arising under the Financing Documents of nay
nature whatsoever which the Lender may now or hereafter have, own or hold, and
which are now or hereafter owing to the Lender regardless of however and
whenever created, arising or evidenced, whether now, heretofore or hereafter
incurred, whether now, heretofore or hereafter due and payable, whether alone or
together with another or others, whether direct or indirect, primary or
secondary, absolute or contingent, or joint or several, and whether as
principal, maker, endorser, guarantor, surety or otherwise, and also regardless
of whether such Liabilities are from time to time reduced and thereafter
increased or entirely extinguished and thereafter reinsured, including without
limitation the Note and any amendments, extensions modifications, renewals,
modifications or substitutions thereof or therefor.

                  (g)      "Note" shall mean the promissory note dated the date
hereof in the principal amount of $4,600,000 and any amendments, extensions,
renewals, modifications, or substitutions thereof or therefor in effect at any
particular time.



                                       12
<PAGE>   13

                  (h)      "Person" means any individual, corporation,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.

                  (i)      "Subsidiary" means each of the Bank Subsidiaries and
each other corporation for which the Borrower has the power, directly or
indirectly, to direct its management or policies or to vote 25% or more of any
class of its voting securities.

                  (j)      "Tier 1 Capital" means Tier 1 capital as defined by
the capital maintenance regulations of the primary federal bank regulatory
agency of the relevant Bank Subsidiary.

                  (k)      "Weighted Average Return on Assets" means (i) with
respect to the Borrower, its net income for the previous calendar year plus the
amount of any interest payments by it on the Loan during the previous calendar
year, divided by its average assets during the previous calendar year, and (ii)
with respect to each Bank Subsidiary, its net income for the previous calendar
year divided by its average assets during the previous calendar year.

                  (l)      All accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with GAAP.

         IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
affixed their seals by and through their duly authorized officers, as of the day
and year first above written.

BORROWER:

APPALACHIAN BANCSHARES, INC.

By:      /s/ Kent Sanford
   --------------------------------------------
         Kent Sanford, Executive Vice-President

Attest:  /s/ Alan May
       ----------------------------------------
Name:             Alan May
     ------------------------------------------
Title:            C.F.O.
      -----------------------------------------
[CORPORATE SEAL]


LENDER:

CRESCENT BANK & TRUST COMPANY

By:      /s/ Gary Reece
   --------------------------------------------
         Gary Reece, Executive Vice-President

[BANK SEAL]


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