8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

Current Report

Pursuant to Section 13 or 15(d) of the

Securities and Exchange Act of 1934

Date of Report: January 28, 2008

Citizens South Banking Corporation

(Exact Name of Registrant as Specified in Charter)

Delaware	0-23971	54-2069979
(State or other jurisdiction	(Commission File Number)	(I.R.S. Employer
of incorporation)		Identification No.)

519 South New Hope Road, Gastonia, North Carolina	28054-4040
(Address of Principal Executive Offices)	(Zip Code)

Registrant's telephone number, including area code:704-868-5200

Item 2.02Results of Operations and Financial Condition

On January 28, 2008, Citizens South Banking Corporation issued a press release to announce its results of operations for the three- and twelve-month periods ended December 31, 2007 and 2006. The text of the press release and related financial supplements are included as Exhibit 99.1 to this report. The information included in the text and financial supplements of the press releases is considered to be “furnished” under the Securities Exchange Act of 1934. The Company will include final financial statements and additional analyses for the three- and twelve-month periods ended December 31, 2007 and 2006, as part of its Form 10-K covering that period.

Item 9.01Financial Statements and Exhibits

(d)Exhibits

99.1 Earnings Press Release of Citizens South Banking Corporation

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

	CITIZENS SOUTH BANKING CORPORATION
DATE: January 28, 2008	By:	/s/ Kim S. Price
		Kim S. Price President and Chief Executive Officer

By:	/s/ Gary F. Hoskins
	Gary F. Hoskins Chief Financial Officer

2

EXHIBIT INDEX

99.1 Earnings Press Release of Citizens South Banking Corporation

3

EX-99.1

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

CITIZENS SOUTH BANKING CORPORATION ANNOUNCES STABLE EARNINGS AND STRONG ASSET QUALITY

FOR THE FOURTH QUARTER OF 2007

GASTONIA, NC, January 28, 2008. . . . . Citizens South Banking Corporation (Nasdaq: CSBC), the holding company for Citizens South Bank, announced that net income for the quarter ended December 31, 2007, amounted to$1.3 million, or $0.18 per diluted share, compared to $1.5 million, or $0.18 per diluted share, for the quarter ended December 31, 2006. Net income for the twelve-month period ended December 31, 2007, amounted to $5.7 million, or$0.73 per diluted share, compared to $5.5 million, or $0.67 per diluted share for the twelve-month period ended December 31, 2006. Net operating income, as calculated in the table that follows this release, for the comparable twelve month periods amounted to $5.5 million, or $0.70 per diluted share, in 2007 and $5.4 million, or $0.67 per diluted share, in 2006. This represented an increase of $0.03 per diluted share, or 4.5%, for the comparable twelve-month periods.

Credit Quality Remains Strong

Credit quality continues to compare favorably with industry peers and has improved on both an annual basis and a linked-quarter basis. Nonperforming assets totaled 0.30% of total assets at December 31, 2007, compared to 0.42% of total assets at December 31, 2006. Also, nonperforming loans to total loans totaled 0.32% at December 31, 2007, compared to 0.58% at December 31, 2006. Both of these ratios also show improvement on a linked-quarter basis with 0.42% nonperforming loans and 0.46% nonperforming assets at September 30, 2007. In addition, during the past year, reserves for loan losses increased from $5.8 million at December 31, 2006, to $6.1 million, at December 31, 2007. The current reserve for loan losses amounts to 1.10% of total loans, compared to 1.12% of total loans at the end of 2006. Net charge-offs amounted to $479,000 for the fourth quarter of 2007 compared to $96,000 for the fourth quarter of 2006. The increase in charge-offs during the fourth quarter of 2007 was primarily due to one credit relationship with a local operating company that has now been completely charged-off the books of the Bank.

The Company has not been an originator or purchaser of option adjustable rate or "no documentation" portfolio mortgage loans and the portfolio does not include any mortgage loans that the Company classifies as sub-prime.

Steady Loan Growth in the Fourth Quarter

While the Charlotte, North Carolina region remains vibrant compared to most of the country, housing starts have slowed and demand for commercial real estate has moderated. During 2007, gross loans increased by $44.6 million, or 8.6%, including $12.0 million of loan growth during the fourth quarter compared to growth of $12.2 million in the third quarter 2007. Loan pricing for borrowers with experience, strong balance sheets, and excellent credit remain highly competitive. However, the Company continues to focus on quality over volume which may result in moderate loan growth and tighter net interest margins during the first half of 2008.

Deposit Growth

During 2007, core deposits, which include demand deposits, money market deposit accounts and savings accounts, increased by $19.5 million, or 8.7%. Core deposit growth was strong in the fourth quarter of 2007, amounting to $13.3 million. This was due in part to growth in commercial deposit accounts resulting from a renewed focus on treasury services. Also during 2007, total deposits increased by $28.0 million, or 5.0%. The Company continues to actively market the Company's core deposit products at pricing points that are considered profitable to the Company and is experiencing deposit growth in spite of aggressive deposit pricing in the market place.

2

Margin Compression on a Linked-Quarter Basis

During the fourth quarter of 2007, the tax-equivalent net interest margin amounted to 3.01%, compared to 3.13% for the third quarter 2007. While the Company maintained a relatively neutral interest rate position on an annual basis, the Federal Reserve Board’s actions to lower the federal funds rate have a more pronounced negative impact in the first three months following a decrease in interest rates. The short-term negative effects of decreases in interest rates are mostly offset by time deposits that mature over the next twelve months and reprice at a lower cost to the Company.

Noninterest Operating Income and Expense Trends

During the comparable fourth quarter periods, noninterest operating income, as calculated in the following tables, decreased by $30,000, or 1.9%, to $1.5 million. This was primarily attributable to moderate decreases in fee income generated on loan and deposit products, which were partly offset by increases in mortgage banking fees and cash value increases on bank-owned life insurance.

While noninterest operating expense increased slightly from $4.3 million for the quarter ended December 31, 2006, to $4.4 million for the quarter ended December 31, 2007, the ratio of noninterest operating expense to average assets improved from 2.33% to 2.30% for the comparable quarters. The primary reason for the improvement in our noninterest expense ratio was the addition of several experienced loan production personnel during 2007 who contributed to the Company's steady loan growth and have proven to be efficient generators of quality asset growth.

3

In making the announcement, Kim S. Price, President and CEO, stated, "We are especially proud to be able to continue our positive credit quality measures and sustain our level of EPS during this time of turmoil and uncertainty in the financial markets. We are fortunate to operate in the continually positive Charlotte geographic region that shows little of the stresses demonstrated in other markets nationally. We believe our opportunities for continued market gains are excellent due to the generally favorable local economy and competitive changes in the Charlotte market created by recent bank mergers."

General Information

Headquartered in Gastonia, North Carolina, Citizens South Bank was founded in 1904. Deposits are FDIC insured. At December 31, 2007, the Bank had approximately $779 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.

-END-

Important Tables Follow

# # #

4

Citizens South Banking Corporation Selected Financial Information (dollars in thousands, except per share data)
		Quarter ended December 31, 2007 (unaudited)			Quarter ended December 31, 2006			Twelve months ended December 31, 2007 (unaudited)			Twelve months ended December 31, 2006
Reconciliation of GAAP to non-GAAP Measures: Net income, as reported (GAAP)	$	1,327		$	1,483		$	5,665		$	5,455
Non-operating items:
(Gain)/ loss on sale of assets, net		13			(109	)		(323	)		(69	)
Impairment of investments		-			-			162			-
Merger and integration related expense		-			-			-			57
Insurance proceeds, net		-			-			(112	)		-
Related income taxes, excl. ins. proceeds (39%)		(5	)		43			63			5
Net Operating Income	$	1,335		$	1,417		$	5,455		$	5,448
Noninterest income, as reported (GAAP)	$	1,511		$	1,715		$	6,562		$	6,140
Non-operating items:
(Gain)/ loss on sale of assets, net		13			(109	)		(323	)		69
Fair value adjustment on deferred comp assets		(12	)		(64	)		(122	)		(207	)
Insurance proceeds, net		-			-			(112	)		-
Noninterest Operating Income	$	1,512		$	1,542		$	6,005		$	6,002
Noninterest expense, as reported (GAAP)	$	4,439		$	4,329		$	17,895		$	17,544
Non-operating items:
Impairment of investments		-			-			(162	)		-
Fair value adjustment on deferred comp assets		(12	)		(64	)		(122	)		(207	)
Merger and integration related expenses		-			-			-			(57	)
Noninterest Operating Expense	$	4,427		$	4,265		$	17,611		$	17,280
Per Share Data:
Average common shares outstanding, basic		7,513,151			7,949,884			7,688,595			8,017,956
Basic net income - GAAP	$	0.18		$	0.19		$	0.74		$	0.68
Basic net income - Operating		0.18			0.18			0.71			0.68
Average common shares outstanding, diluted		7,570,671			8,025,559			7,754,599			8,095,276
Diluted net income - GAAP	$	0.18		$	0.18		$	0.73		$	0.67
Diluted net income - Operating		0.18			0.18			0.70			0.67
Cash dividends declared	$	0.08		$	0.075		$	0.32		$	0.30
Period-end book value		11.05			10.61			11.05			10.61
Financial Ratios (annualized):
Return on average stockholders’ equity - GAAP		6.24	%		6.86	%		6.68	%		6.41	%
Return on avg. stockholders’ equity - Operating		6.28			6.55			6.43			6.41
Return on average assets - GAAP		0.68	%		0.80	%		0.75	%		0.76	%
Return on average assets - Operating		0.69			0.77			0.72			0.76
Efficiency ratio - GAAP		68.04	%		63.29	%		66.78	%		65.51	%
Efficiency ratio - Operating		67.84			63.97			67.12			65.19
Net interest margin (tax equivalent)		3.01	%		3.21	%		3.15	%		3.34	%
Average equity to average assets		10.95			11.70			11.26			11.86
Asset Quality Data:
Allowance for loan losses	$	6,144		$	5,764		$	6,144		$	5,764
Nonperforming loans		1,815			3,011			1,815			3,011
Nonperforming assets		2,344			3,150			2,344			3,150
Net charge-offs		479			96			911			505
Net charge-offs to average loans		0.09	%		0.02	%		0.17	%		0.10	%
Allowance for loan losses to total loans		1.10			1.12			1.10			1.12
Nonperforming loans to total loans		0.32			0.58			0.32			0.58
Nonperforming assets to total assets		0.30			0.42			0.30			0.42
Average Balances:
Total assets	$	770,338		$	733,153		$	753,085		$	716,934
Loans receivable, net of unearned income		550,255			509,717			526,913			493,324
Interest-earning assets		680,975			641,624			660,490			622,793
Deposits		581,086			556,778			575,302			535,935
Interest-bearing liabilities		635,601			599,622			618,126			586,809
Stockholders’ equity		84,362			85,774			84,783			85,035
At Period End:
Total assets	$	779,140		$	743,370		$	779,140		$	743,370
Loans receivable, net of unearned income		559,956			515,402			559,956			515,402
Interest-earning assets		690,007			647,048			690,007			647,048
Deposits		590,765			562,802			590,765			562,802
Interest-bearing liabilities		643,478			611,004			643,478			611,004
Stockholders’ equity		84,033			85,961			84,033			85,961

5

Citizens South Banking Corporation

Consolidated Statements of Financial Condition

(dollars in thousands)

		December 31,			December 31,
		2007			2006
		(unaudited)
ASSETS
Cash and due from banks	$	14,285		$	17,581
Interest-earning bank balances		15,454			8,640
Cash and cash equivalents		29,739			26,221
Investment securities available-for-sale, at fair value		46,519			65,326
Mortgage-backed securities available-for-sale, at fair value		69,893			60,691
Loans receivable, net unearned income		559,956			515,402
Allowance for loan losses		(6,144	)		(5,764	)
Loans receivable, net		553,812			509,638
Real estate acquired through foreclosure, net		529			139
Premises and equipment, net		17,965			18,287
Accrued interest receivable		3,254			3,236
Federal Home Loan Bank stock, at cost		4,236			3,581
Intangible assets		31,037			31,666
Bank owned life insurance		16,099			15,527
Other assets		6,057			9,058
Total assets	$	779,140		$	743,370
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposit accounts	$	101,981		$	90,540
Money market deposit accounts		129,688			117,632
Savings accounts		12,037			16,027
Time deposits		347,059			338,603
Total deposits		590,765			562,802
Borrowed money		96,284			85,964
Deferred compensation		5,389			5,724
Other liabilities		2,669			2,919
Total liabilities		695,107			657,409
Stockholders' Equity:
Preferred stock, 10,000,000 authorized, none issued		-			-
Common stock issued and outstanding, $0.01 par value, 20,000,000 shares
authorized, 9,062,727 issued at December 31, 2007, and December 31, 2006,
and 7,606,532 shares outstanding at December 31, 2007, and 8,111,659 shares
outstanding at December 31, 2006		91			91
Additional paid-in-capital		68,683			68,578
Unallocated common stock held by Employee Stock Ownership Plan		(1,247	)		(1,430	)
Unearned compensation related to Recognition and Retention Plan		(965	)		(1,139	)
Retained earnings, substantially restricted		36,028			33,031
Accumulated unrealized loss on securities available-for-sale, net of tax		(343	)		(991	)
Treasury stock of 1,456,195 shares at December 31, 2007, and 951,068 shares
at December 31, 2006		(18,214	)		(12,179	)
Total stockholders’ equity		84,033			85,961
Total liabilities and stockholders’ equity	$	779,140		$	743,370

6

Citizens South Banking Corporation

Consolidated Statements of Operations (unaudited)

(in thousands, except per share data)

		Three Months Ended December 31,					Twelve Months Ended December 31,
		2007			2006		2007		2006
Interest income
Loans	$	10,348		$	9,946	$	40,679	$	37,447
Investment securities		600			539		2,670		1,997
Interest-bearing deposits		105			351		447		838
Mortgage-backed and related securities		789			610		2,939		2,637
Total interest income		11,842			11,446		46,735		42,919
Interest Expense
Deposits		5,643			5,300		22,315		18,103
Borrowed funds		1,186			1,021		4,185		4,176
Total interest expense		6,829			6,321		26,500		22,279
Net interest income		5,013			5,125		20,235		20,640
Provision for loan losses		330			300		1,290		1,165
Net interest income after provision for loan losses		4,683			4,825		18,945		19,475
Noninterest Income
Fee income on deposit accounts		696			699		2,722		2,856
Fee income on mortgage banking activities		242			232		990		638
Fee income on lending activities		125			186		484		645
Dividends on FHLB stock		62			53		212		221
Increase in cash value of bank-owned life insurance		192			182		769		762
Fair value adjustment on deferred compensation assets		12			64		122		207
Life insurance proceeds, net		-			-		112		-
Net gain / (loss) on sale of assets		(13	)		109		323		69
Other noninterest income		195			190		828		743
Total noninterest income		1,511			1,715		6,562		6,141
Noninterest Expense
Compensation and benefits		2,439			2,326		9,606		9,187
Fair value adjustment on deferred compensation obligation		12			64		122		207
Occupancy and equipment expense		647			624		2,648		2,614
Professional services		141			130		544		550
Amortization of intangible assets		146			176		629		734
Impairment of investments		-			-		162		-
Merger and integration related expenses		-			-		-		57
Other noninterest expenses		1,054			1,009		4,184		4,195
Total noninterest expense		4,439			4,329		17,895		17,544
Income before income taxes		1,755			2,211		7,612		8,072
Provision for income taxes		428			728		1,947		2,617
Net income	$	1,327		$	1,483	$	5,665	$	5,455
Basic earnings per share	$	0.18		$	0.19	$	0.74	$	0.68
Diluted earnings per share	$	0.18		$	0.18	$	0.73	$	0.67
Basic average common shares outstanding		7,513,151			7,949,884		7,688,595		8,017,956
Diluted average common shares outstanding		7,570,671			8,025,559		7,754,599		8,095,276

7