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: April 17, 2006

Citizens South Banking Corporation

(Exact Name of Registrant as Specified in Charter)

Delaware	0-23971	54-2069979
(State or other jurisdiction  of incorporation)	(Commission File Number)	(I.R.S. Employer 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

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting materials pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02           Results of Operations and Financial Condition

          On April 17, 2006, Citizens South Banking Corporation issued a press release to announce its results of operations for the quarters ended March 31, 2006 and 2005.  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 quarters ended March 31, 2006 and 2005, as part of its Form 10-Q covering that period.

Item 9.01          Financial 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:  April 17, 2006	By:	/s/ Kim S. Price
		Kim S. Price
		President and Chief Executive Officer
	By:	/s/ Gary F. Hoskins
		Gary F. Hoskins
		Chief Financial Officer

EXHIBIT INDEX

          99.1          Earnings Press Release of Citizens South Banking Corporation

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

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

CITIZENS SOUTH BANKING CORPORATION ANNOUNCES A
15.4% INCREASE IN FIRST QUARTER EARNINGS PER SHARE

GASTONIA, NC, April 17, 2006 --- Citizens South Banking Corporation (Nasdaq: CSBC), the holding company for Citizens South Bank, announced earnings for the quarter ended March 31, 2006, of $1.2 million, or $0.15 per diluted share, compared to $902,000, or $0.13 per diluted share, for the quarter ended March 31, 2005.   This represents a 15.4% increase in earnings per diluted share when compared to the first quarter of 2005.  Also, operating income, which excludes net gains on sales of assets and merger-related expenses, amounted to $1.3 million, or $0.15 per diluted share, for the quarter ended March 31, 2006, compared to $861,000, or $0.12 per diluted share, for the quarter ended March 31, 2005.  This represents an increase in operating income of $0.03 per diluted share, or 25.0%, for the comparable quarters.

Net interest income increased by $1.5 million, or 40.5%, during the first quarter of 2006 compared to the first quarter of 2005.  This increase was primarily the result of the acquisition of Trinity Bank, loan growth, a change in the asset mix, and margin expansion.  Total loans increased by $18.4 million, or 15.6% annualized, to $491.8 million during the first quarter of 2006.  This increase in loans was partially funded by maturing investment securities, and fueled an expansion of our net interest margin, which increased by 16 basis points to 3.39% during the first quarter of 2006.   

 The Company’s credit quality continues to compare favorably with industry peers.  Nonperforming assets totaled $2.8 million, or 0.41% of total assets, at March 31, 2006, compared to $3.7 million, or 0.53% of total assets, at the end of 2005.  Management remains focused on maintaining the high level of loan quality as the Company pursues additional loan growth.

During the first quarter of 2006, the Company’s core deposits, which include demand deposit accounts, money market deposit accounts, and savings accounts, increased by $5.5 million, or 10.4% annualized, to $219.1 million at March 31, 2006.  Total deposits increased by $5.1 million during the same period, reflecting our strategy of replacing time deposits with lower-costing core deposits.

 Noninterest income increased by $429,000, or 43.6%, to $1.4 million for the quarter ended March 31, 2006, compared to $1.0 million for the quarter ended March 31, 2005.  This increase was largely attributable to the expanded customer base developed and acquired during the year.  

Noninterest expense increased by $1.4 million, or 42.9%, to $4.6 million for the first quarter of 2006.  These increased expenses are largely associated with the staffing and operations of three additional full-service offices and an additional loan production office.  The Company completed the integration of the back-office functions of the recently acquired Trinity Bank, including the core processing and items processing systems, during the first quarter 2006.  The financial benefits of the consolidation of these back-office operations are expected to be more fully realized in the second quarter of 2006. 

Kim S. Price, President and CEO, commented, “The work of our team in integrating Trinity Bank and executing our Performance Enhancement Plan make it especially gratifying to report this quarter’s earnings.  Revenue growth fueled by loan and deposit growth, enhanced by a changing balance sheet mix, drove margin improvement in the face of a difficult yield curve.  Our team is finding increasing success in providing community banking services in a vibrant market.”

Citizens South Bank, headquartered in Gastonia, North Carolina, was founded in 1904.  At March 31, 2006, the Bank had approximately $702 million in assets, operated 14 full-service offices located in four North Carolina counties - Gaston, Rowan, Iredell, and Union - and operated two loan production offices in Mecklenburg County, North Carolina and York County, South Carolina.

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, our ability to successfully integrate Trinity Bank, 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, 2005, describe some of these factors. 

(Tables Follow)

# # #

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

	Quarter ended March 31, 2006			Quarter ended March 31, 2005			Year ended December 31, 2005			Year ended December 31, 2004
Reconciliation of GAAP to non-GAAP Measures:	$	1,188		$	902		$	3,273		$	2,955
Net income, as reported (GAAP)
Non-operating items:
(Gain)/ loss on sale of assets, net		57			(67	)		(62	)		(674	)
Merger and integration related expense		57			0			384			0
Impairment of GSE preferred stock		0			0			0			983
Related income taxes (39%)		(45	)		26			(126	)		(120	)
Net Operating Income	$	1,257		$	861		$	3,469		$	3,144
Per Share Data:
Average common shares outstanding, basic		8,056,574			7,084,471			7,207,368			7,611,022
Basic net income - GAAP	$	0.15		$	0.13		$	0.45		$	0.39
Basic net income - Operating		0.16			0.12			0.48			0.41
Average common shares outstanding, diluted		8,138,451			7,203,885			7,298,219			7,712,591
Diluted net income - GAAP	$	0.15		$	0.13		$	0.45		$	0.38
Diluted net income - Operating		0.15			0.12			0.48			0.41
Cash dividends declared	$	0.075		$	0.07		$	0.28		$	0.26
Period-end book value		10.21			9.59			10.16			9.74
Financial Ratios (annualized):
Return on average stockholders’ equity - GAAP		5.70	%		5.04	%		4.40	%		3.78	%
Return on average stockholders’ equity - Operating		6.03			4.81			4.67			4.02
Return on average assets - GAAP		0.69	%		0.71	%		0.60	%		0.59	%
Return on average assets - Operating		0.73			0.68			0.64			0.63
Efficiency ratio - GAAP		69.88	%		69.45	%		71.99	%		75.75	%
Efficiency ratio - Operating		68.40			70.05			70.29			73.03
Net interest margin		3.39	%		3.24	%		3.23	%		2.98	%
Average equity to average assets		12.05			14.08			13.69			15.64
Asset Quality Data:
Allowance for loan losses	$	5,263		$	3,184		$	5,104		$	3,029
Nonperforming loans		1,539			1,419			2,551			946
Nonperforming assets		2,844			1,842			3,708			1,752
Net charge-offs (recoveries)		126			(5	)		398			270
Allowance for loan losses to total loans		1.07	%		0.97	%		1.08	%		0.95	%
Nonperforming loans to total loans		0.31			0.43			0.55			0.30
Nonperforming assets to total assets		0.41			0.36			0.53			0.34
Average Balances:
Total assets	$	701,429		$	508,280		$	543,311		$	499,937
Loans receivable, net of unearned income		483,136			317,901			347,720			294,953
Interest-earning assets		607,101			448,416			477,819			442,809
Deposits		518,712			369,744			395,327			361,893
Interest-bearing liabilities		575,349			407,487			438,308			398,778
Stockholders’ equity		84,506			71,571			74,361			78,192
At Period End:
Total assets	$	702,131		$	511,088		$	701,094		$	508,961
Loans receivable, net		491,761			324,599			473,336			314,127
Interest-earning assets		618,812			457,469			612,238			455,577
Deposits		522,650			372,104			517,543			374,744
Interest-bearing liabilities		579,505			415,562			585,095			410,782
Stockholders’ equity		84,530			69,510			84,258			72,394

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

	March  31, 2006			December 31, 2005
		(unaudited)
ASSETS
Cash and due from banks	$	9,418		$	8,863
Interest-earning bank balances		4,500			17,790
Cash and cash equivalents		13,918			26,653
Investment securities available-for-sale, at fair value		52,919			53,429
Mortgage-backed securities available-for-sale, at fair value		66,402			70,236
Loans receivable, net unearned income		491,761			473,336
Allowance for loan losses		(5,263	)		(5,104	)
Loans receivable, net		486,498			468,232
Real estate acquired through foreclosure, net		1,305			1,157
Premises and equipment, net		19,539			19,819
Accrued interest receivable		2,590			2,539
Federal Home Loan Bank stock, at cost		4,099			4,084
Intangible assets		32,214			32,424
Bank owned life insurance		15,055			14,828
Other assets		7,592			7,693
Total assets	$	702,131		$	701,094
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Demand deposit accounts	$	87,293		$	85,489
Money market deposit accounts		109,737			104,421
Savings accounts		22,021			23,654
Time deposits		303,599			303,980
Total deposits		522,650			517,544
Borrowed money		88,057			91,342
Deferred compensation		5,369			5,849
Other liabilities		1,525			2,101
Total liabilities		617,601			616,836
Stockholders’ Equity:
Common stock issued and outstanding, $0.01 par value, 20,000,000 shares authorized, 9,062,727 issued at March 31, 2006 and December 31, 2005and 8,278,523 shares outstanding at March 31, 2006 and 8,291,544 shares outstanding at December 31, 2005		91			91
Additional paid-in-capital		68,474			68,468
Unallocated common stock held by Employee Stock Ownership Plan		(1,567	)		(1,613	)
Unearned compensation related to Recognition and Retention Plan		(1,349	)		(1,419	)
Retained earnings, substantially restricted		30,745			30,311
Accumulated unrealized gain on securities available-for-sale, net of tax		(1,693	)		(1,567	)
Treasury stock of 784,204 shares at March 31, 2006, and 711,183 shares at December 31, 2005		(10,171	)		(10,013	)
Total stockholders’ equity		84,530			84,258
Total liabilities and stockholders’ equity	$	702,131		$	701,094

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

	Three Months Ended March 31,
	2006			2005
Interest income
Loans	$	8,505		$	4,632
Investment securities		492			396
Interest-bearing deposits		152			35
Mortgage-backed and related securities		716			737
Total interest income		9,865			5,800
Interest Expense
Deposits		3,729			1,696
Borrowed funds		1,037			475
Total interest expense		4,766			2,171
Net interest income		5,099			3,629
Provision for loan losses		285			150
Net interest income after provision for loan losses		4,814			3,479
Noninterest Income
Fee income on deposit accounts		678			544
Fee income on mortgage banking and lending activities		249			113
Dividends on FHLB stock		55			37
Increase in cash value of bank-owned life insurance		247			161
Fair value adjustment on deferred compensation assets		63			(47	)
Net gain / (loss) on sale of assets		(57	)		67
Other noninterest income		179			110
Total noninterest income		1,414			985
Noninterest Expense
Compensation and benefits		2,379			1,666
Fair value adjustment on deferred compensation obligation		63			(47	)
Occupancy and equipment expense		713			485
Professional services		170			151
Amortization of intangible assets		186			87
Merger and integration related expenses		57			0
Other noninterest expenses		977			843
Total noninterest expense		4,545			3,185
Income before income taxes		1,683			1,279
Provision for income taxes		495			377
Net income	$	1,188		$	902
Basic earnings per share	$	0.15		$	0.13
Diluted earnings per share	$	0.15		$	0.13
Basic average common shares outstanding		8,056,574			7,084,471
Diluted average common shares outstanding		8,138,277			7,202,704