<PAGE>   1




                                                                    EXHIBIT 10.7


                         LOAN AND STOCK PLEDGE AGREEMENT


         THIS LOAN AND STOCK PLEDGE AGREEMENT (the "Agreement"), entered into as
of November 30, 1998, between APPALACHIAN BANCSHARES, INC., a Georgia
corporation (the "Borrower"), and THE BANKERS BANK, a Georgia banking
corporation (the "Lender").

         On the date hereof the Borrower is borrowing the principal amount of
Three Million Six Hundred Thousand and No/100 Dollars ($3,600,000.00) from the
Lender (the "Loan"), which will be evidenced by the Note. The Lender 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 FIRST NATIONAL BANK OF UNION COUNTY, having its main office at 236 Highway
515, Blairsville, Georgia 30512 ("First National") (collectively, the "Banks").
Also on the date hereof, Community Financial Services, Inc. ("CFSI"), the parent
company of the Lender, is purchasing $1,000,000 of the common stock of Borrower
(the "Borrower Common Stock") pursuant to that certain Subscription Agreement,
dated as of the date hereof, between CFSI and Borrower and the related Call
Option Agreement and Registration Rights Agreement. 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 Lender 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 Banks, 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 Seven Million Two Hundred Thousand and
No/100 Dollars ($7,200,000.00), the Borrower shall promptly deliver to the
Lender on written demand additional collateral of a 


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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 not less than of Seven
Million Two Hundred Thousand and No/100 Dollars ($7,200,000.00). The Borrower
shall also execute any security documents the Lender may reasonably request to
evidence and perfect the Lender's rights in such additional collateral. If 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 kept are
located at 829 Industrial Boulevard, Ellijay, Georgia 30540, and the Borrower's
U.S. employer identification number is 58-2242407.

                  (b)      Gilmer is a banking corporation duly organized, 
validly existing, and in good standing under the laws of the State of Georgia.
First National is a national bank duly organized, validly existing and in good
standing under the laws of the United States. Subject, in the case of First
National, to the closing of its acquisition by the Borrower from Century South
Banks, Inc. simultaneously with the funding of the Loan, the Borrower owns all
the Stock (consisting of 568,000 shares of Gilmer and 75,000 shares of First
National) and there are no other outstanding shares of capital stock and no
outstanding options, warrants or other rights which can be converted into shares
of capital stock of the Banks. The Banks have all requisite corporate power and
authority and possesses all licenses, permits and authorizations necessary for
them to own their properties and conduct their business as presently conducted.

                  (c)      Each financial statement of the Borrower or any 
Subsidiary which has been delivered to the Lender presents fairly in all
material respects 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 except as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally.

                  (e)      Except for the security interest created by this
Agreement, and subject, in the case of First National, to the closing of its
acquisition by the Borrower from Century South


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Banks, Inc. simultaneously with the funding of the Loan, the Borrower owns the
Stock free and clear of all liens, charges, and encumbrances. 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 or threatened in writing
against the Borrower or any Subsidiary or against any of their properties or
assets which might have a material adverse effect on the Borrower, any
Subsidiary, or their respective properties or assets, taken as a whole, 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 if such violation could have a
material adverse effect on the Borrower, and Subsidiary, or their respective
property or assets.

                  (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 are attached as exhibits hereto: true,
correct and complete copies of (i) the Borrower's and Gilmer's articles of
incorporation as in effect as of the date here; (ii) First National's Articles
of Association and Charter; (iii) 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); (iv) the bylaws of Gilmer and the bylaws of First National as of the
date hereof; (v) resolutions (the "Resolutions") of the Board of Directors of
the Borrower duly adopted at a meeting duly called and held on November 30,
1998. A quorum for the transaction of business was present and acting throughout
the meeting at which the Resolutions were adopted, 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 or Gilmer's articles of incorporation or
First National's Articles of Association and Charter since the date of such
copies above through the date hereof, and the Borrower and Gilmer have remained
in valid existence under the laws of Georgia and First National has remained in
valid existence under the laws of the United States, respectively, since such
dates. Borrower shall provide within sixty (60) days of the date hereof (x)
copies of the documents in item (i) certified by the Georgia Secretary of State
as of a recent date, (y) copies of the documents in item (ii) certified by the
Office of Comptroller of the Currency as of a recent date and (z) certificates
of existence for the Borrower and Gilmer issued by the Georgia Secretary of
State as of a recent date, and for First National issued by the Office of
Comptroller of the Currency as of a recent date.

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

                  (a)      The Borrower 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

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an independent accounting firm reasonably acceptable to the Lender; (ii) not
later than 45 days after each of the first three quarters 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 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, management, or
prospects (financial or otherwise) of the Borrower or any Subsidiary taken as a
whole, including, without limitation, imposition of any letter agreement,
memorandum of understanding, cease and desist order, or other similar regulatory
action involving 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 executive officers).

                  (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, except to the
extent such taxes, assessments, charges or taxes are being appealed or contented
in good faith.

                  (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.

                  (d)      The Borrower shall promptly notify the Lender of any
significant change in executive management of Borrower or material change in the
beneficial ownership of the Borrower's stock by any officer, director or 25% or
greater shareholder of the Borrower.

         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 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 year to be less than 5.0%.

                  (c)      The Borrower shall not permit the Total Risk - Based
Capital Ratio of any of the Bank Subsidiaries as of the end of any fiscal
quarter during the term of this Agreement to be less than 10.0%.

                  (d)      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.


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                  (e)      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 of the Bank Subsidiaries for
each fiscal year to be less than 0.85%.

                  (f)      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.

                  (g)      The Borrower shall not permit any of the Bank 
Subsidiaries to maintain an Assessment Risk Classification other than either (i)
Group 1, Subgroup A; (ii) Group 1, Subgroup B; or (iii) Group 2, Subgroup A.

                  (h)      The Borrower shall not receive a composite BOPEC 
rating, and shall not permit any of the Bank Subsidiaries to receive a composite
CAMEL rating, from any of their respective regulators, other than two or better;
provided that First National shall be required only to maintain a composite
CAMEL rating of three or better until two years after the date of this
Agreement.

                  (i)      The Borrower shall not incur or permit to exist any
indebtedness or liability for borrowed money in an aggregate excess of
$100,000.00 other than to the Lender or a wholly-owned Subsidiary of the
Borrower without prior Lender approval, except that this covenant shall not
apply to deposits, repurchase agreements, federal funds borrowings, overdrafts,
and other banking transactions entered into by a Subsidiary in the ordinary
course of its business.

                  (j)      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.

                  (k)      The Borrower shall not, nor permit any 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, or create any Subsidiary or enter into any
partnership or joint venture.

                  (l)      The Borrower shall not permit any 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.

                  (m)      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 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 Subsidiaries.

         5.       ADVANCES UNDER THE LOAN. The Lender shall make advances under 
the Loan to Borrower if, but 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 respects on and as
of the date of each advance of the Loan.



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                  (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 
Borrower's or any Subsidiary's condition (financial or otherwise), or in the
business, properties, assets, liabilities, prospects, or management of the
Borrower or any Subsidiary 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.

                  (e)      All other matters incidental to the Loan shall be
satisfactory to the Lender.

         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 if such
failure is not remedied within five (5) days after notice of the default is sent
from the Lender to the Borrower.

                  (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 in writing 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) days after notice of the default
is sent from the Lender to the Borrower.

                  (d)      The occurrence of a default under the Note, the Call
Agreement and the Registration Rights Agreement to which the Borrower and the
Lender are parties.

                  (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 terms; 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 30 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


<PAGE>   7

Borrower or such Subsidiary or is not dismissed within 30 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 30 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 30 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 indebtedness exceeds $100,000 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 noticed,
or entered against the Borrower or any Subsidiary by any bank or bank holding
company regulatory agency or body, other than the Securities and Exchange
Commission, 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 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 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 Banks or ceases to control any of the other
Bank Subsidiaries.

         7.       REMEDIES UPON DEFAULT. Upon the occurrence 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 presentment, 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


<PAGE>   8

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 rights, 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;

                  (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 Lender 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 marshaling 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 Lender 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 which
may have accrued on any obligations secured hereby; (iii) any unpaid principal
on any obligations secured hereby; and (iv) costs of collection and reasonable
attorney's fees, 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 

<PAGE>   9

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 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 full of all 
principal, interest and other amounts owed by the Borrower under the Note and
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 AGENT. 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 more 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


<PAGE>   10

Lender or to the Borrower at their respective addressees set forth below, such
communications are deemed to have been delivered when received.

         If to the Lender:         The Bankers Bank
                                   2410 Paces Ferry Road
                                   600 Paces Summit
                                   Atlanta, Georgia 30339
                                   Attn:  Ken Vassey, Senior Vice President

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

         With a copy to:           Troutman Sanders LLP
                                   600 Peachtree Street, N.E.
                                   Suite 5200
                                   Atlanta, Georgia  30308
                                   Attn:  Walter E. Jospin

         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 entire 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, transfer 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, set-off 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 out-of-pocket costs and expenses (including reasonable legal fees
not to exceed $7,500 with respect to the preparation of the Loan Documents)
incurred by the Lender in connection with the preparation and enforcement 

<PAGE>   11

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 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 ASSURANCES. If at any time the Lender upon advice of 
its counsel shall determine that any further document shall be reasonably
required to effect 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.

         22.      DEFINITIONS.


<PAGE>   12

                  (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 the Banks.

                  (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 Banks, 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 been 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, the Pledge Agreement, 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 of any nature whatsoever which the Lender may
now or hereafter have, own or hold, and which are now or hereafter owing to the
Lender arising out of this Agreement, the Note, the Call Agreement or the
Registration Rights Agreement, and any amendments, extensions, renewals,
modifications or substitutions thereof or therefor.

                  (g)      "Note" shall mean the promissory note dated the date
hereof in the principal amount of Three Million Six Hundred Thousand and No/100
Dollars ($3,600,000.00) and any amendments, extensions, renewals, modifications,
or substitutions thereof or therefor in effect at any particular time.

                  (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.


<PAGE>   13

                  (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)      "Total Risk Based Capital Ratio" means the Total risk
based capital ratio as defined by the Capital Maintenance Regulations of the
primary federal bank regulatory agency of the Borrower.

                  (l)      "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.

                  (m)      All accounting terms not otherwise defined herein 
have the meanings assigned to them in accordance with generally accepted
accounting principles in effect from time to time.


<PAGE>   14

         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/ Tracy R. Newton  
                                               ---------------------------------
                                                 Name:  Tracy R. Newton  
                                                      --------------------------
                                                 Title: President and CEO    
                                                       -------------------------

                                                        [CORPORATE SEAL]


                                   LENDER:

                                        THE BANKERS BANK


                                        By:  /s/ Kenneth T. Vassey   SVP
                                           -------------------------------------
                                                 Kenneth T. Vassey
                                                 Senior Vice President

                                                        [BANK SEAL]