Citizens South Banking 8-K Citizens South Banking Corporation Announces a 27% Increase In Third Quarter Earnings Per Share

Exhibit 99

FOR IMMEDIATE RELEASE
For more information:	Gary F. Hoskins, CFO
	(704) 884-2263
	gary.hoskins@citizenssouth.com

CITIZENS SOUTH BANKING CORPORATION ANNOUNCES A
27% INCREASE IN THIRD QUARTER EARNINGS PER SHARE

          GASTONIA, NC, October 17, 2005 --- Citizens South Banking Corporation (Nasdaq: CSBC), the holding company for Citizens South Bank, announced earnings for the quarter ended September 30, 2005, of $964,000, or $0.14 per diluted share, compared to $770,000, or $0.11 per diluted share, for the quarter ended September 30, 2004.  This represents a 27.3% increase in diluted earnings per share from the third quarter of 2004.  Net operating income, which excludes the tax-adjusted effects of any gains and losses on sales of assets, was $953,000, or $0.14 per diluted share, for the quarter ended September 30, 2005, compared to $776,000, or $0.11 per diluted share, for the quarter ended September 30, 2004.

          Net income for the nine months ended September 30, 2005, was $2.8 million, or $0.39 per diluted share, compared to $2.7 million, or $0.34 per diluted share, for the nine months ended September 30, 2004, representing a 14.7% increase in earnings per share.  Net operating income amounted to $2.7 million, or $0.38 per diluted share, for the nine-month period ended September 30, 2005, compared to $2.4 million, or $0.31 per diluted share, for the comparable period in 2004.  This represents an increase of $0.07 per diluted share, or a 22.6% improvement in net operating income from the comparable nine-month period.

          Net interest income increased by $449,000, or 13.8%, during the third quarter of 2005 compared to the third quarter of 2004 as a result of margin expansion, loan growth, and a change in asset mix.  Net interest margin increased from 2.87% during the third quarter of 2004 to 3.30% during the third quarter of 2005, an increase of 43 basis points. 

          During 2005, outstanding loans increased from $317.2 million at December 31, 2004, to $344.8 million at September 30, 2005, an increase of $27.6 million, or 8.7% during the nine-month period.  Nonperforming assets totaled $2.2 million, or 0.42% of total assets, at September 30, 2005, compared to $1.8 million, or 0.35% of total assets, at December 31, 2004. Escalating energy prices and rising interest rates are beginning to show some signs of stress on borrowers.  However, our asset quality measures continue to compare favorably with our peer banks and we expect this to remain the case.

          Also during 2005, demand deposits increased by $5.2 million, or 9.9%, to $57.9 million at September 30, 2005, from $52.7 million at December 31, 2004, as a result of a continued focus on growing our lower-cost deposit products.  Total deposits decreased by $1.5 million, or 0.4%, primarily due to aggressive time deposit pricing competition.  This change in the liability mix is a contributing factor in our margin expansion.

          Noninterest income increased by $40,000, or 3.7%, to $1.1 million for the quarter ended September 30, 2005, compared to the quarter ended September 30, 2004.  This increase is primarily due to an increase in fees generated from mortgage banking activities.

          Noninterest expense increased by $39,000, or 1.2%, to $3.3 million for the quarter ended September 30, 2005, compared to the third quarter 2004.  The Company experienced decreases in occupancy and equipment expense, professional services, and other noninterest expenses.  However, these decreases were more than offset by increases in compensation and benefits resulting from staffing a loan production office and the hiring of additional commercial loan officers.

          Kim S. Price, President and CEO, commented, “We are pleased and encouraged by our loan growth and the changing mix of both assets and liabilities.  The results of these efforts are contributing to better margins and improved profitability as we continue to expand our community banking franchise.”

          Citizens South Bank, headquartered in Gastonia, North Carolina, was founded in 1904.  The Bank operates eleven full-service offices located in three North Carolina counties – Gaston, Rowan, and Iredell – and a loan production office in Mecklenburg County, North Carolina.

Please see the tables that follow for a calculation of the Company’s net operating income.

This news release contains certain forward-looking statements, which are subject to risks and uncertainties.  A number of factors could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements.  The Company’s reports filed from time to time with the Securities and Exchange Commission, including the Company’s Form 10-K for the year ended December 31, 2004, describe some of these factors.  Forward-looking statements speak only as of the date they are made and the Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date of the forward-looking statements or to reflect the occurrence of unanticipated events.

(Tables Follow)
# # #

Citizens South Banking Corporation
Selected Financial Information
(dollars in thousands, except per share data)

	Quarter ended September 30, 2005			Quarter ended September 30, 2004			Nine Months ended September 30, 2005			Nine Months ended September 30, 2004
Reconciliation of GAAP to non-GAAP Measures:
Net income, as reported (GAAP)	$	964		$	770		$	2,767		$	2,679
Nonoperating items:
(Gain) / Loss on sale of assets, net		(19	)		10			(82	)		(460	)
Related income taxes (39%)		8			(4	)		33			179
Net Operating Income	$	953		$	776		$	2,718		$	2,398
Add: Amortization of intangible assets		78			104			249			320
Related income taxes (39%)		(31	)		(41	)		(99	)		(125	)
Net Cash Operating Income	$	1,000		$	839		$	2,868		$	2,593
Per Share Data:
Average common shares outstanding, basic		6,965,159			7,213,577			7,005,823			7,755,483
Basic net income – GAAP	$	0.14		$	0.11		$	0.40		$	0.35
Basic net income – Operating		0.14			0.11			0.39			0.31
Basic net income – Cash		0.14			0.12			0.41			0.33
Average common shares outstanding, diluted		7,058,123			7,323,021			7,096,249			7,854,010
Diluted net income – GAAP	$	0.14		$	0.11		$	0.39		$	0.34
Diluted net income – Operating		0.14			0.11			0.38			0.31
Diluted net income – Cash		0.14			0.12			0.40			0.33
Cash dividends declared	$	0.07		$	0.065		$	0.21		$	0.195
Period-end book value		9.77			9.75			9.77			9.75
Financial Ratios:
Return on average stockholders’ equity – GAAP		5.49	%		4.25	%		5.23	%		4.48	%
Return on average stockholders’ equity – Operating		5.51			4.29			5.13			4.01
Return on average stockholders’ equity – Cash		5.80			4.64			5.42			4.34
Return on average assets – GAAP		0.76	%		0.60	%		0.73	%		0.72	%
Return on average assets – Operating		0.76			0.61			0.71			0.64
Return on average assets – Cash		0.80			0.66			0.75			0.70
Efficiency ratio – GAAP		68.45	%		70.29	%		69.49	%		70.66	%
Efficiency ratio – Operating		68.57			74.99			69.68			73.17
Efficiency ratio – Cash		66.94			72.57			67.92			70.65
Net interest margin		3.30	%		2.87	%		3.26	%		2.89	%
Average equity to average assets		13.81			14.20			13.89			16.04
Asset Quality Data:
Allowance for loan losses	$	3,369		$	2,916		$	3,369		$	2,916
Nonperforming loans		1,503			1,570			1,503			1,570
Nonperforming assets		2,157			1,797			2,157			1,797
Net charge-offs		38			46			71			173
Allowance for loan losses to total loans		0.98	%		0.94	%		0.98	%		0.94	%
Nonperforming loans to total loans		0.44			0.50			0.44			0.50
Nonperforming assets to total assets		0.42			0.35			0.42			0.35
Average Balances:
Total assets	$	513,347		$	505,665		$	510,732		$	498,020
Loans receivable, net of unearned income		330,718			300,163			324,471			294,749
Interest-earning assets		449,235			451,040			450,847			443,218
Deposits		371,448			374,464			371,053			358,714
Interest-bearing liabilities		410,882			409,363			410,339			395,973
Stockholders’ equity		70,882			71,789			70,940			79,871
At Period End:
Total assets	$	518,942		$	506,786		$	518,942		$	506,786
Loans receivable, net		341,406			311,380			341,406			311,380
Interest-earning assets		459,335			452,905			459,335			452,905
Deposits		373,230			371,604			373,231			371,604
Interest-bearing liabilities		442,504			408,630			442,504			408,630
Stockholders’ equity		70,527			72,670			70,527			72,670

Citizens South Banking Corporation
Consolidated Statements of Financial Condition
(dollars in thousands)

	September 30, 2005			December 31, 2004
	(unaudited)
ASSETS
Cash and due from banks	$	7,298		$	5,800
Interest-earning bank balances		13,632			5,790
Cash and cash equivalents		20,930			11,590
Investment securities available-for-sale, at fair value		45,241			52,407
Mortgage-backed securities available-for-sale, at fair value		61,159			81,169
Loans receivable, net unearned income		344,775			317,156
Allowance for loan losses		(3,369	)		(3,029	)
Loans receivable, net		341,406			314,127
Real estate acquired through foreclosure, net		655			806
Accrued interest receivable		1,813			1,662
Premises and equipment, net		17,124			17,363
Federal Home Loan Bank stock, at cost		3,827			3,461
Bank owned life insurance		13,312			12,885
Intangible assets		7,310			7,560
Other assets		6,165			5,931
Total assets	$	518,942		$	508,961
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Demand deposit accounts	$	57,872		$	52,684
Money market deposit accounts		70,637			77,924
Savings accounts		24,200			29,174
Time deposits		220,521			214,962
Total deposits		373,230			374,744
Borrowed money		69,273			55,772
Deferred compensation		5,376			5,850
Other liabilities		536			201
Total liabilities		448,415			436,567
Stockholders’ Equity:
Common stock issued and outstanding, $0.01 par value, 20,000,000 shares authorized, 9,062,727 issued and outstanding in 2005 and 2004		91			91
Additional paid-in-capital		68,381			68,381
Unallocated common stock held by Employee Stock Ownership Plan		(1,659	)		(1,796	)
Unearned compensation related to Recognition and Retention Plan		(1,489	)		(1,699	)
Retained earnings, substantially restricted		31,054			29,766
Accumulated unrealized gain on securities available-for-sale, net of tax		(959	)		(419	)
Treasury stock of 1,846,512 shares at September 30, 2005, and 1,630,683 shares at December 31, 2004		(24,892	)		(21,930	)
Total stockholders’ equity		70,527			72,394
Total liabilities and stockholders’ equity	$	518,942		$	508,961

Citizens South Banking Corporation
Consolidated Statements of Operations (unaudited)
(in thousands, except per share data)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2005		2004		2005		2004
Interest income
Loans	$	5,368	$	4,044	$	14,960	$	11,752
Investment securities		387		490		1,157		1,447
Interest-bearing deposits		107		47		260		113
Mortgage-backed and related securities		621		737		2,034		2,156
Total interest income		6,483		5,318		18,411		15,468
Interest Expense
Deposits		2,220		1,591		5,862		4,478
Borrowed funds		554		467		1,547		1,362
Total interest expense		2,774		2,058		7,409		5,840
Net interest income		3,709		3,260		11,002		9,628
Provision for loan losses		140		60		410		120
Net interest income after provision for loan losses		3,569		3,200		10,592		9,508
Noninterest Income
Fee income on deposit accounts		634		644		1,789		1,801
Fee income on mortgage banking and lending activities		159		140		400		427
Dividends on FHLB stock		31		24		109		69
Gain on sale of assets		40		13		178		483
Fair value adjustment on deferred compensation assets		26		46		57		80
Other noninterest income		226		209		758		707
Total noninterest income		1,116		1,076		3,291		3,567
Noninterest Expense
Compensation and benefits		1,635		1,504		4,901		4,507
Vesting expense for Recognition and Retention Plan		70		0		210		355
Fair value adjustment on deferred compensation assets		26		46		57		80
Occupancy and equipment expense		486		510		1,466		1,286
Professional services		132		136		443		392
Amortization of intangible assets		78		104		249		320
Loss on sale of assets		21		23		96		23
Other noninterest expenses		855		941		2,510		2,361
Total noninterest expense		3,303		3,264		9,932		9,324
Income before income taxes		1,382		1,012		3,951		3,751
Provision for income taxes		418		242		1,184		1,072
Net income	$	964	$	770	$	2,767	$	2,679
Basic earnings per share	$	0.14	$	0.1	$	0.40	$	0.35
Diluted earnings per share	$	0.14	$	0.11	$	0.39	$	0.34
Basic average common shares outstanding		6,965,159		7,213,577		7,005,823		7,755,483
Diluted average common shares outstanding		7,058,123		7,323,021		7,096,249		7,854,010