We discuss the particle heating of magnetic atmospheres in AM Her stars. For small accretion rates cyclotron losses can balance the energy input due to Coulomb encounters within one mean free path of the infalling protons and no shock forms. We solve the radiative transfer in the target atmosphere and present for the first time temperature structure and cyclotron spectra of a particle heated atmosphere as solution of an LTE stellar atmosphere code. We find temperature inversions between the heated outer layers and the photosphere up to three orders of magnitude depending on the accretion rate, the white dwarf mass and the magnetic field strength. The spectra show strong cyclotron line emission in the optical/IR, an optically thick continuum in the UV/XUV regime and a weak, optically thin bremsstrahlung component at X-ray energies. Passing through the colder outer parts of the atmosphere, the cyclotron lines develop strong self absorption in the first two or three harmonics generating strongly deformed line profiles, clearly different from those in previous isothermal models.