Citizens South Banking 8-K Citizens South Banking Corporation Announces a 20% Increase in First Quarter Earnings Per Share

Exhibit 99.1

Citizens South Banking Corporation Announces a 20% Increase in First Quarter Earnings Per Share

          GASTONIA, N.C., April 16 /PRNewswire-FirstCall/ -- Citizens South Banking Corporation (Nasdaq: CSBC), the holding company for Citizens South Bank, announced that net income for the quarter ended March 31, 2007, amounted to $1.4 million, or $.18 per diluted share, compared to $1.2 million, or $.15 per diluted share, for the  quarter ended March 31, 2006.  This represents an increase of $212,000, or 17.8%, in net income year over year and an increase of $.03, or 20.0%, in earnings per diluted share. 

          Strong Core Deposit Growth

          Core deposits, which include demand deposits, money market deposit accounts, and savings accounts, increased by $9.7 million, or 17.3% annualized, during the first quarter 2007.  During this period, management aggressively marketed these deposit products and initiated incentive programs for opening new core deposit accounts.  While core deposit growth was strong during the quarter, total deposit growth was more moderate at $5.4 million, or 3.8% annualized.  This was primarily due to a $4.3 million decrease in time deposits.  We continue to deemphasize time deposits as we successfully develop lower cost core deposit funding sources. 

          Solid Loan Production - Moderate Loan Growth

          During the first quarter of 2007, loan production was on target with approximately   $67 million of loan closings.  However, during this period, outstanding loans increased by only $3.7 million, or 2.9% annualized.  First quarter loan growth was somewhat slower than projected due to an increased amount of loan payoffs.  Many of these payoffs were the result of completed construction loans or completed residential acquisition and development loans.  We believe residential real estate developers and builders are exercising more care in their business plans and are curbing their starts and appetite for debt.  We believe this is a healthy correction and our underwriting and loan production focus reflect our belief that the housing market in our region will continue to be vibrant, but not as brisk as the levels of the recent past. 

          Credit Quality Remains Strong

          Credit quality continues to compare favorably with industry peers with nonperforming assets decreasing from 0.41% of total assets at March 31, 2006, to 0.25% of total assets, at March 31, 2007.  At the same time, reserves for loan losses increased from   $5.3 million, or 1.07% of total loans, at March 31, 2006, to $6.0 million, or 1.16% of total loans, at March 31, 2007.  Also, net charge-offs decreased from $126,000 during the first   quarter of 2006 to $71,000 during the first quarter of 2007. 

          Stabilizing Net Interest Margin on a Linked-Quarter Basis

          The margin compression experienced during the second half of 2006 stabilized in the first quarter of 2007.  The Company’s net interest margin amounted to 3.18% for the first quarter 2007, representing a one basis point increase on a linked-quarter basis.  This compares favorably to declines of 14 basis points and 10 basis points, respectively, on a linked-quarter basis in the last two quarters of 2006.

          Favorable Operating Noninterest Income and Expenses

          During the comparable quarters, noninterest operating income increased by $54,000, or 3.7%, to $1.5 million, while noninterest operating expense decreased by $203,000, or 4.5%, to $4.3 million.  The increase in noninterest income was primarily attributable to increased fee income generated from mortgage lending activities.  The decrease in noninterest operating expense was primarily due to the consolidation of the back-office functions arising from the Trinity Bank acquisition and the execution of our Performance Enhancement Plan.  These favorable trends in noninterest income and noninterest expense have been a driving factor in reducing our operating efficiency ratio from 68.3% during the first quarter of 2006 to 65.2% during the first quarter of 2007.

          In making the announcement, Kim S. Price, President and CEO, stated “The focus and extra effort of our team in bringing our community banking model to the Charlotte region continues to gain momentum.  We are extremely proud of the positive strides we are making and the widespread acceptance of our approach to banking.” 

          General Information

          Headquartered in Gastonia, North Carolina, Citizens South Bank was founded in 1904.  Deposits are FDIC insured.  At March 31, 2007, the Bank had approximately $738 million in assets with 14 full-service offices in the Charlotte region, including Gaston, Iredell, Rowan, and Union counties in North Carolina, and three loan production offices in Mecklenburg and Union counties in North Carolina, and York County, South Carolina.  Citizens South Bank is an Equal Housing Lender and Member, FDIC.  The Bank is a wholly-owned subsidiary of Citizens South Banking Corporation, and shares of the common stock of the Company trade on the NASDAQ Global Market under the ticker symbol “CSBC”.  The Company maintains a website at www.citizenssouth.com that includes information on the Company, along with a list of products and services, branch locations, current financial information, and links to the Company’s 1934 Securities Exchange Act filings with the SEC. 

          Forward-looking Statements

          This news release contains certain forward-looking statements which include, but are not limited to, statements of our earnings expectations, statements regarding our operating strategy, and estimates of our future costs and benefits.   These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control.  In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Forward-looking statements speak only as of the date they are made and the Company is under no duty to update these 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. A number of factors could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements.  Factors that could cause such a difference include, but are not limited to, changes in general economic conditions - either locally or nationally, competition among depository and financial institutions, the continuation of current revenue and expense trends, unforeseen changes in the Company’s markets, and legal, regulatory, or accounting changes.  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, 2006, describe some of these factors.

Important Tables Follow

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

	Quarter ended March 31, 2007			Quarter ended March 31, 2006			Year ended Dec. 31, 2006			Year ended Dec. 31, 2005
Reconciliation of GAAP to non-GAAP Measures:
Net income, as reported (GAAP)	$	1,400		$	1,188		$	5,455		$	3,273
Non-operating items:
(Gain)/ loss on sale of assets, net		(5	)		57			(69	)		(62	)
Merger and integration related expense		0			57			57			384
Related income taxes (39%)		2			(45	)		5			(126	)
Net Operating Income	$	1,397		$	1,257		$	5,448		$	3,469
Per Share Data:
Average common shares outstanding, basic		7,862,174			8,056,574			8,017,956			7,207,368
Basic net income - GAAP	$	0.18		$	0.15		$	0.68		$	0.45
Basic net income - Operating		0.18			0.16			0.68			0.48
Average common shares outstanding, diluted		7,938,162			8,138,277			8,095,276			7,298,219
Diluted net income - GAAP	$	0.18		$	0.15		$	0.67		$	0.45
Diluted net income - Operating		0.18			0.15			0.67			0.48
Cash dividends declared	$	0.08		$	0.075		$	0.30		$	0.28
Period-end book value		10.71			10.21			10.61			10.16
Financial Ratios (annualized):
Return on average stockholders’ equity - GAAP		6.62	%		5.70	%		6.42	%		4.40	%
Return on avg. stockholders’ equity - Operating		6.60			6.03			6.41			4.67
Return on average assets - GAAP		0.77	%		0.69	%		0.76	%		0.60	%
Return on average assets - Operating		0.77			0.73			0.76			0.64
Efficiency ratio - GAAP		65.15	%		69.78	%		65.51	%		71.98	%
Efficiency ratio - Operating		65.20			68.31			65.20			70.15
Net interest margin		3.18	%		3.39	%		3.30	%		3.23	%
Average equity to average assets		11.61			12.05			11.86			13.69
Asset Quality Data:
Allowance for loan losses	$	6,023		$	5,263		$	5,764		$	5,104
Nonperforming loans		1,686			1,539			3,011			2,551
Nonperforming assets		1,879			2,844			3,150			3,708
Net charge-offs		71			126			505			400
Allowance for loan losses to total loans		1.16	%		1.07	%		1.12	%		1.08	%
Nonperforming loans to total loans		0.32			0.31			0.58			0.54
Nonperforming assets to total assets		0.25			0.41			0.42			0.53
Average Balances:
Total assets	$	738,674		$	701,429		$	716,934		$	543,311
Loans receivable, net of unearned income		511,747			483,136			493,324			347,720
Interest-earning assets		644,455			607,101			625,125			479,510
Deposits		565,070			518,712			535,935			395,327
Interest-bearing liabilities		603,396			575,349			586,808			438,308
Stockholders’ equity		85,784			84,506			85,035			74,362
At Period End:
Total assets	$	737,639		$	702,131		$	743,370		$	701,094
Loans receivable, net of unearned income		519,108			491,761			515,402			473,336
Interest-earning assets		648,109			618,812			646,819			612,240
Intangible assets		31,501			32,214			31,666			32,424
Deposits		568,173			522,650			562,802			517,544
Interest-bearing liabilities		602,433			579,505			610,212			585,095
Stockholders’ equity		85,611			84,530			85,961			84,258

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

	March 31, 2007			December 31, 2006
		(unaudited)
ASSETS
Cash and due from banks	$	10,740		$	17,581
Interest-earning bank balances		13,115			8,640
Cash and cash equivalents		23,855			26,221
Investment securities available-for-sale, at fair value		61,204			65,326
Mortgage-backed securities available-for-sale, at fair value		60,934			60,691
Loans receivable, net unearned income		519,108			515,402
Allowance for loan losses		(6,023	)		(5,764	)
Loans receivable, net		513,085			509,638
Real estate acquired through foreclosure, net		193			139
Premises and equipment, net		18,056			18,287
Accrued interest receivable		3,313			3,236
Federal Home Loan Bank stock, at cost		3,313			3,581
Intangible assets		31,501			31,666
Bank owned life insurance		15,716			15,527
Other assets		6,469			9,058
Total assets	$	737,639		$	743,370
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Demand deposit accounts	$	93,368		$	90,540
Money market deposit accounts		125,558			117,632
Savings accounts		14,966			16,027
Time deposits		334,281			338,603
Total deposits		568,173			562,802
Borrowed money		75,524			85,964
Deferred compensation		5,074			5,724
Other liabilities		3,257			2,919
Total liabilities		652,028			657,409
Stockholders’ Equity:
Common stock issued and outstanding, $0.01 par value, 20,000,000 shares authorized, 9,062,727 issued at March 31, 2007, and December 31, 2006, and 7,996,947 shares outstanding at March 31, 2007, and 8,104,683 shares outstanding at December 31, 2006		91			91
Additional paid-in-capital		68,585			68,578
Unallocated common stock held by Employee Stock Ownership Plan		(1,385	)		(1,430	)
Unearned compensation related to Recognition and Retention Plan		(1,069	)		(1,139	)
Retained earnings, substantially restricted		33,830			33,031
Accumulated unrealized loss on securities available-for-sale, net of tax		(785	)		(991	)
Treasury stock of 1,065,780 shares at March 31, 2007, and 958,044 shares at December 31, 2006		(13,656	)		(12,179	)
Total stockholders’ equity		85,611			85,961
Total liabilities and stockholders’ equity	$	737,639		$	743,370

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

	Three Months Ended March 31,
	2007		2006
Interest income
Loans	$	9,893	$	8,505
Investment securities		669		492
Interest-bearing deposits		132		152
Mortgage-backed and related securities		671		716
Total interest income		11,365		9,865
Interest Expense
Deposits		5,341		3,729
Borrowed funds		978		1,037
Total interest expense		6,319		4,766
Net interest income		5,046		5,099
Provision for loan losses		330		285
Net interest income after provision for loan losses		4,716		4,814
Noninterest Income
Fee income on deposit accounts		653		678
Fee income on mortgage banking activities		232		78
Fee income on lending activities		110		171
Dividends on FHLB stock		51		55
Increase in cash value of bank-owned life insurance		209		247
Fair value adjustment on deferred compensation assets		37		63
Net gain / (loss) on sale of assets		5		(57	)
Other noninterest income		233		179
Total noninterest income		1,530		1,414
Noninterest Expense
Compensation and benefits		2,342		2,379
Fair value adjustment on deferred compensation obligation		37		63
Occupancy and equipment expense		668		713
Professional services		124		170
Amortization of intangible assets		165		186
Merger and integration related expenses		0		57
Other noninterest expenses		949		977
Total noninterest expense		4,285		4,545
Income before income taxes		1,961		1,683
Provision for income taxes		561		495
Net income	$	1,400	$	1,188
Basic earnings per share	$	0.18	$	0.15
Diluted earnings per share	$	0.18	$	0.15
Basic average common shares outstanding		7,862,174		8,056,574
Diluted average common shares outstanding		7,938,162		8,138,277

SOURCE  Citizens South Banking Corporation
          -0-                                                       04/16/2007
          /CONTACT:  Gary F. Hoskins, CFO of Citizens South Banking Corporation, +1-704-884-2263, gary.hoskins@citizenssouth.com /
          /Web site:  http://www.citizenssouth.com/