THIRD MODIFICATION TO PROMISSORY NOTE

Exhibit 10.1

THIRD MODIFICATION TO PROMISSORY NOTE

THIS THIRD MODIFICATION TO PROMISSORY NOTE (this “Third Note Modification”) is made and entered into on the day and year last below written by and between APPALACHIAN BANCSHARES, INC., a Georgia corporation (“Borrower”), and THE PARK AVENUE BANK, a Georgia banking corporation (“Lender”).

W I T N E S S E T H:

WHEREAS, Borrower is the maker under that certain Promissory Note made payable to the order of Lender, dated November 21, 2007, as amended by that certain First Modification to Promissory Note, dated November 21, 2008 and that certain Second Modification to Promissory Note, dated May 20, 2009 (collectively, the “Note”), which Note evidences a loan from Lender to Borrower in the current principal amount of FOUR MILLION NINE HUNDRED SIXTY TWO THOUSAND ONE HUNDRED FIVE AND 63/100 DOLLARS ($4,962,105.63) (“Loan”); and

WHEREAS, the Loan is further evidenced and secured by that certain Loan and Stock Pledge Agreement dated November 21, 2007 between Borrower and Lender, as amended by that certain First Amendment to Loan and Stock Pledge Agreement, dated November 21, 2008, that certain Second Amendment to Loan and Stock Pledge Agreement, dated as May 20, 2009 and that certain Third Amendment and Restatement of Loan and Stock Pledge Agreement, dated as of the date hereof (collectively, the “Pledge Agreement”), and by certain other documents and instruments executed and delivered in connection with the Loan transaction to further evidence and/or secure the Loan (the Note, the Pledge Agreement and said other documents and instruments being hereinafter referred to collectively as the “Loan Documents”); and

WHEREAS, Lender is the current holder of the Note, the Pledge Agreement and the other Loan Documents; and

WHEREAS, Borrower and Lender are desirous of entering into this Third Note Modification for the purpose of (i) extending the Maturity Date of the Note to July 30, 2010; and (ii) amending and modifying certain of the other terms and provisions of the Note.

NOW, THEREFORE, for and in consideration of the sum of TEN AND NO/100 DOLLARS ($10.00), the premises and covenants herein contained, and other good and valuable consideration in hand received by each party from the other, the receipt, adequacy and sufficiency of which is hereby acknowledged, Borrower and Lender hereby covenant and agree as follows:

1. The Note is hereby amended and modified as follows:

“Subject to the terms and conditions of the Loan Agreement, the Lender will make advances of the principal am