Citizens South Banking 8-K Citizens South Banking Corporation Announces Commencement of $30 Million Common Stock Offering

Exhibit 99.2

INFORMATION FROM PRE-EFFECTIVE AMENDMENT NO. 1 TO THE

FORM S-1 REGISTRATION STATEMENT

Our Strategies

We have developed a community banking strategy that focuses on providing responsive and personalized service to our customers. We intend to prudently grow our business, increase profitability and build stockholder value by focusing on the following objectives:

Deliver superior community banking service. We emphasize to our employees the importance of delivering superior customer service and seeking opportunities to strengthen relationships both with customers and in the communities we serve. We retain key executives in each of our markets with local expertise and strong ties to the community. We seek to develop broad customer relationships based on service and convenience while maintaining our conservative approach to lending and strong asset quality.

Pursue select bank acquisitions, including failed banks and branch purchases. We are focused on expansion opportunities in markets with favorable growth characteristics and in which we have identified experienced bankers to help execute our strategy. We believe there will be opportunities in and around our core markets to acquire failed banks from the Federal Deposit Insurance Corporation at attractive terms. From January 1, 2009, through October 23, 2009, over 100 banking institutions have failed in the United States. We believe that the failure of institutions in our market area, together with organic growth as described below, will potentially allow us to double our asset size over the course of the next three years.

Maintain strong asset quality. We strive to maintain a high-quality loan portfolio and maintain the quality of our assets. While our credit quality ratios currently remain at levels above our historical averages, we believe that the current level of non-performing assets remains manageable and continues to compare favorably with industry peers. As of June 30, 2009, our non-performing assets (non-accruing loans, loans past 90 days or more due, and other real estate owned) as a percentage of total assets was 1.49%, compared to 2.00% for all North Carolina-headquartered commercial banks and thrifts with assets between $100 million and $1 billion, based on data derived from the Federal Deposit Insurance Corporation Call Reports as of June 30, 2009 (the latest date for which data is available).

Build our core deposit base. A key aspect of our ability to grow our balance sheet has been and will continue to be a stable base of core deposits. As of September 30, 2009, approximately 46% of our deposits were comprised of checking accounts, money market deposit accounts and savings accounts. We continue to build broad customer relationships and shift our deposit mix from time deposits to lower cost transaction accounts. Through the first nine months of this year, non-time core deposits grew by $37.8 million or 21.3% annualized. We do not rely on brokered time deposits to fund our growth and we had essentially no wholesale deposits at September 30, 2009.

Capitalize on organic growth opportunities. Due to the recent consolidation of financial institutions in our markets, we believe there is a significant opportunity for a community-focused bank to provide a full range of financial services to small and middle-market commercial and retail customers. In addition, consolidation has dislocated experienced and talented management and lending personnel. As a result, we believe we have a substantial opportunity to attract experienced management, loan officers and banking customers both within our current markets and in potential new markets in which we might expand.

Increase core profitability. Over the course of the next three years, we believe we will be able to increase the profitability of our franchise to levels in excess of our historical levels of profitability, as we continue to grow in our markets. Our emphasis on lower cost core deposits will help expand the margin we maintain on our interest earning assets. In addition, we actively manage our expense base in relation to our strategic goals. In late 2008 and early 2009 we instituted several initiatives that equate to approximately $2.0 million in annual expense savings when fully implemented.

1

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following is our selected consolidated financial information at the dates and for the periods indicated. The information at December 31, 2008 and 2007 and for the years ended December 31, 2008, 2007 and 2006 is derived in part from, and should be read together with our audited consolidated financial statements and notes thereto incorporated by reference into this prospectus. The information at December 31, 2006, 2005 and 2004 and for the years ended December 31, 2005 and 2004 is derived in part from our audited consolidated financial statements that are not incorporated by reference into this prospectus. The information at September 30, 2009 and 2008 and for the nine months ended September 30, 2009 and 2008 is unaudited. The results of operations for the nine months ended September 30, 2009 are not necessarily indicative of the results to be achieved for the year ending December 31, 2009. Ratios for the nine months ended September 30, 2009 and 2008 are annualized, where appropriate.

	At September 30, 2009		At December 31,
			2008		2007		2006		2005		2004
	(In thousands)
Selected Balance Sheet Data:
Total assets	$	820,608	$	817,213	$	779,140	$	743,370	$	701,094	$	508,961
Loans receivable, net of deferred fees		616,793		626,688		559,956		515,402		473,336		317,156
Mortgage-backed and related securities		48,883		80,275		69,893		60,691		70,236		81,169
Investment securities		41,291		28,905		46,519		65,326		53,429		52,407
Intangible assets		30,282		30,525		31,037		31,666		32,424		7,560
Deposits		601,614		581,488		590,765		562,802		517,544		374,744
Borrowings		110,711		124,365		96,284		85,964		91,342		55,772
Common stockholders’ equity		83,421		84,213		84,033		85,961		84,258		72,394
Total stockholders’ equity		103,990		104,720		84,033		85,961		84,258		72,394

	At or For the Nine Months Ended September 30,					At or For the Years Ended December 31,
	2009			2008		2008		2007		2006		2005		2004
	(Dollars in thousands, except Per Share Data)
Income Statement Data:
Interest income	$	28,845		$	32,261	$	42,608	$	46,735	$	42,919	$	26,948	$	21,110
Interest expense		12,995			17,180		22,406		26,500		22,279		11,469		7,943
Net interest income		15,850			15,081		20,202		20,235		20,640		15,479		13,167
Provision for loan losses		6,825			1,815		3,275		1,290		1,165		985		330
Net interest income after provision for loan losses		9,025			13,266		16,927		18,945		19,475		14,494		12,837
Noninterest income		5,766			4,765		6,019		6,562		6,141		4,441		4,824
Noninterest expense		15,405			14,730		19,226		17,895		17,544		14,339		13,629
Income (loss) before income taxes		(614	)		3,301		3,720		7,612		8,072		4,596		4,032
Income tax expense (benefit)		(887	)		647		639		1,947		2,617		1,323		1,077
Net income		273			2,654		3,081		5,665		5,455		3,273		2,955
Dividends on preferred stock		774			—		—		—		—		—		—
Net income (loss) available to common stockholders	$	(501	)	$	2,654	$	3,081	$	5,665	$	5,455	$	3,273	$	2,955

2

	At or For the Nine Months Ended September 30,						At or For the Years Ended December 31,
	2009			2008			2008			2007			2006			2005			2004
	(Dollars in thousands, except Per Share Data)
Per Common Share Data:
Net income (loss) available to common stockholders, basic	$	(0.07	)	$	0.36		$	0.42		$	0.74		$	0.68		$	0.45		$	0.39
Net income (loss) available to common stockholders, diluted		(0.07	)		0.36			0.42			0.73			0.67			0.45			0.38
Cash dividends declared		0.165			0.255			0.34			0.32			0.30			0.28			0.26
Period-end book value		11.08			11.02			11.21			11.05			10.61			10.16			9.74
Tangible book value per share (1)		7.06			6.84			7.15			6.96			6.69			6.25			8.72
Basic weighted average shares outstanding		7,405,199			7,380,236			7,374,051			7,688,022			8,017,956			7,207,368			7,611,022
Diluted weighted average shares outstanding		7,405,199			7,414,274			7,392,472			7,753,940			8,096,276			7,298,219			7,712,670
Selected Performance Ratios:
Return on average assets		(0.08	)%		0.45	%		0.39	%		0.75	%		0.76	%		0.60	%		0.59	%
Return on average common equity		(0.80	)		4.25			3.62			6.68			6.42			4.40			3.78
Dividend payout ratio		(235.71	)		70.83			80.95			43.24			44.12			62.22			66.67
Efficiency ratio		71.27			74.22			73.32			66.78			65.51			71.98			74.13
Net interest margin		2.85			2.88			2.85			3.06			3.30			3.23			2.98
Asset Quality Ratios:
Allowance for loan losses to total loans		1.54	%		1.12	%		1.28	%		1.10	%		1.12	%		1.08	%		0.95	%
Allowance for loan losses to nonperforming loans		88.79			210.74			264.71			339.07			191.43			200.08			320.19
Net charge-offs to average loans								0.23			0.17			0.10			0.12			0.09
Nonperforming loans to total loans		1.73			0.53			0.48			0.32			0.58			0.54			0.30
Nonperforming assets to total assets		1.72			0.55			0.69			0.30			0.42			0.53			0.34
Nonperforming assets to total loans and other real estate owned		2.28			0.72			0.89			0.42			0.61			0.78			0.55
Capital Ratios:
Tangible equity to tangible assets at period end (1)		9.33	%		6.59	%		9.43	%		7.08	%		7.63	%		7.75	%		12.93	%
Tangible common equity to tangible assets at period end (2)		6.72			6.59			6.83			7.08			7.63			7.75			12.93
Bank-only Regulatory Capital Ratios:
Tier 1 leverage ratio		10.53	%		8.41	%		10.40	%		8.74	%		9.11	%		9.47	%		11.95	%
Tier 1 risk-based ratio		13.26			9.76			12.01			10.25			10.81			11.18			16.30
Total risk-based ratio		14.41			10.79			13.07			11.21			11.81			12.08			17.12

(1) Tangible equity is defined as total stockholders’ equity less recorded goodwill and other intangible assets. Tangible equity was $73.7 million, $52.2 million, $74.2 million, $53.0 million, $54.3 million, $51.8 million and $64.8 million at September 30, 2009 and 2008 and December 31, 2008, 2007, 2006, 2005 and 2004, respectively.

(2) Until December 2008, tangible common equity equaled tangible equity. Reflects preferred equity of $20.6 million and $20.5 million at September 30, 2009 and December 31, 2008, respectively.

3

RECENT DEVELOPMENTS

On October 19, 2009, we announced our third quarter financial results. During the third quarter and nine months ended September 30, 2009, we actively reduced our exposure in our residential construction and land acquisition and development loan portfolio and strengthened our balance sheet by increasing our provisions for loan losses. As a result of these actions and the current economic environment, we recorded a net loss of $759,000, or $0.10 per diluted share, for the third quarter ended September 30, 2009, compared to net income of $822,000, or $0.11 per diluted share, for the third quarter ended September 30, 2008 and net income of $55,000, at $0.01 per diluted share, for the second quarter ended June 30, 2009.

Loan Portfolio

Outstanding loans decreased during the nine months ended September 30, 2009 by $9.9 million to $616.8 million, caused primarily by a decrease in construction loans. The table set forth below provides detail on our loan portfolio.

Category	As of September 30, 2009
	(In thousands)
One- to four-family residential permanent	$	85,591
Construction		29,663
Commercial real estate		344,987
Commercial business		39,824
Consumer		116,682
Other		46
Total	$	616,793

As of September 30, 2009, construction loans were only 4.8% of total loans. Within construction loans, One- to four-family non-owner occupied loans were only 2.8% of total loans.

Construction	As of September 30, 2009
	(In millions)
One- to four-family residential owner-occupied	$	1.0
One- to four-family residential speculative		17.1
Commercial construction		11.6
Total	$	29.7

4

During the nine months ended September 30, 2009, we reduced our exposure to acquisition and development loans such that as of September 30, 2009, acquisition and development loans were 11.7% of total commercial real estate loans and only 6.5% of total loans. The table set forth below provides detail on our commercial real estate loans.

Commercial Real Estate	As of September 30, 2009
	(In millions)
Office space	$	95.7
Retail shopping		46.6
Commercial land		43.7
Acquisition and development		40.3
Commercial one- to four-family (rental)		29.4
Churches		24.6
Industrial / warehouse		20.4
Multifamily (5+ residential properties)		20.0
Other real estate		16.0
Restaurant		7.3
Hotel / motel		1.0
Total	$	345.0

We expect to continue our efforts to reduce our exposure to acquisition and development loans for the remainder of 2009. However, we expect to gain market share in selective loan categories as a result of market disruptions stemming from a number of recently completed and announced mergers in the Charlotte market and with our expansion directly into the Mecklenburg County, North Carolina market.

Credit Quality

The continued softening in the Charlotte regional economic environment has resulted in increased levels of delinquent loans resulting in credit quality ratios that remain above our historical averages. However, the ratios continue to compare favorably to our peers. During the third quarter of 2009, nonperforming assets, which include nonperforming loans and other real estate owned, increased by $1.6 million to $14.1 million, or 1.72% of total assets at September 30, 2009, as compared to $12.5 million, or 1.49% of total assets, at June 30, 2009, and $4.5 million, or 0.55% of total assets at September 30, 2008. We are confident that our levels of nonperforming assets are manageable.

The table below sets forth our nonperforming loans by type:

Nonperforming Loans	As of September 30, 2009
	(In thousands)
One- to four- family residential permanent	$	345
Construction		1,554
Commercial real estate		7,591
Commercial business		107
Consumer		1,101
Other		—
Total	$	10,698

5

In addition, our nonperforming commercial real estate loans are broken down further in the table below:

Nonperforming Commercial Real Estate	As of September 30, 2009
	(In thousands)
Office space	$	700
Retail shopping		385
Commercial land		1,884
Acquisition and development		3,510
Commercial one- to four- family (Rental)		—
Churches		—
Industrial / warehouse		—
Multifamily (5+ residential properties)		—
Other real estate		1,112
Restaurant		—
Hotel / motel		—
Total	$	7,591

Due to the continuing general weakness in the economy and an increase in our nonperforming loans, we increased our provision for loan losses during the third quarter of 2009 to $4.0 million as compared to $2.0 million during the second quarter of 2009 and $720,000 during the third quarter of 2008. At September 30, 2009, our allowance for loan losses amounted to $9.5 million, or 1.54% of total loans, as compared to $8.7 million, or 1.38% of total loans at June 30, 2009, and $7.0 million, or 1.12% of total loans at September 30, 2008. Net charge-offs for the third quarter totaled $3.2 million, or 0.51% of average loans.

Deposits

Total deposits increased by $20.1 million, or 3.5%, during the first nine months of 2009 to $601.6 million at September 30, 2009. This growth was driven by demand deposit accounts, which increased by $25.1 million, or 20.43%, to $147.8 million at September 30, 2009. This strong growth was caused in part by positive publicity that we received during the first quarter of 2009 relating to our nationally recognized program for utilization of TARP funds for low interest mortgage loans. The strong growth was also partly attributable to retail and commercial demand deposit account incentives, enhanced treasury management services, and increased market share due to merger disruptions of our competitors.

Investment Securities

The following table provides a breakout of our securities portfolio. As of September 30, 2009 we had investment securities available for sale of $79.1 million and investment securities held-to-maturity of $11.1 million.

Securities	As of September 30, 2009
	(In thousands)
U.S. Agencies	$	17,037
Municipal bonds		21,338
Corporate bonds		1,563
Trust preferred		241
Equity		1,113
Government agency mortgage-backed securities		48,882
Total	$	90,174

6

Capital

Despite the weak economic conditions that our industry is facing, our capital position continues to be a source of strength during these uncertain times. Citizen South Bank’s capital ratios continue to exceed all regulatory measures and Citizens South Bank is considered “well-capitalized” for regulatory purposes. Citizens South Bank’s total risk-based capital ratio was 14.41% as of September 30, 2009, as compared to 10.79% as of September 30, 2008.

Net Interest Margin

Our net interest margin was 2.96% for the third quarter of 2009, as compared to 2.85% for the second quarter of 2009. This 11 basis point increase in the linked-quarter net interest margin was largely due to a 24 basis point decrease in our cost of funds. We have been focused on increasing core checking accounts, which has contributed to this decrease in cost of funds. In addition, higher-costing time deposits that matured during the third quarter repriced at lower rates and contributed to the lower cost of funds. Our interest-bearing deposit rates declined by 28 basis points from 2.33% for the quarter ended June 30, 2009, to 1.95% for the third quarter 2009.

Noninterest Income and Noninterest Expense

Noninterest income for the third quarter of 2009 increased $1.0 million, or 67.62%, as compared to the third quarter of 2008, primarily as a result of a $972,000 net gain on the sale of $26.4 million of investment securities during the third quarter of 2009, as compared to a net gain of $13,000 during the third quarter of 2008. In addition, we experienced a $46,000 increase in mortgage banking income and a $57,000 increase in service charges on deposits. Mortgage banking activity increased, primarily due to a higher level of refinancings as a result of lower market rates for mortgage loans. Service charges on deposits increased due to the growth in the number and amount of core checking accounts.

Noninterest income for the third quarter of 2009 also reflected a $333,000 other-than-temporary impairment charge on a $1.0 million trust preferred collateralized debt obligation. The carrying balance on this security has been reduced to $199,000.

Noninterest expense increased by $84,000, or 1.63%, during the comparable third quarter period. This increase was primarily due to a $207,000 increase in our Federal Deposit Insurance Corporation deposit insurance expense. The increase in Federal Deposit Insurance Corporation insurance premiums was due to the fact that the Federal Deposit Insurance Corporation revised the formula for calculating deposit insurance premiums in an effort to replenish the deposit insurance fund, resulting in higher deposit insurance premiums.

7