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: July 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:

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

o Soliciting material 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 July 17, 2006, Citizens South Banking Corporation issued a press release to announce its results of operations for the quarters ended June 30, 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 June 30, 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:  July 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

Citizens South Banking Corporation Announces a 49.5% Increase in
Second Quarter Net Income

          GASTONIA, N.C., July 17 /PRNewswire-FirstCall/ -- Citizens South Banking Corporation (Nasdaq: CSBC), the holding company for Citizens South Bank, announced net income for the quarter ended June 30, 2006, of $1.3 million, or $0.17 per diluted share, compared to $901,000, or $0.13 per diluted share, for the quarter ended June 30, 2005.  This represents a $446,000, or 49.5%, increase in net income for the second quarter of 2006 when compared to the second quarter of 2005.  Also, diluted earnings per share increased by $0.04, or 30.8%, for the same periods.  Net operating income, which excludes net gains on sales of assets and merger-related expenses, amounted to $1.3 million, or $0.17 per diluted share, for the quarter ended June 30, 2006, compared to $904,000, or $0.13 per diluted share, for the quarter ended June 30, 2005.

          Net interest income increased by $1.5 million, or 42.3%, during the second quarter of 2006 compared to the second quarter of 2005. This increase was primarily the result of the acquisition of Trinity Bank, continued loan growth, a change in the asset mix, and margin expansion.  Total loans increased by $18.1 million, or 14.8% annualized, to $509.9 million during the second quarter of 2006.  This increase in loans was primarily funded by an increase in deposits and maturing investment securities.  The Company’s net interest margin increased from 3.39% during the first quarter of 2006 to 3.41% during the second quarter of 2006.

          The Company’s credit quality remains at a favorable level when compared with industry peers.  Nonperforming assets totaled $2.7 million, or 0.37% of total assets, at June 30, 2006, compared to $2.8 million, or 0.41% of total assets, at the end of the first quarter of 2006.  Management remains focused on maintaining the high level of loan quality as the Company pursues additional loan growth and market expansion.

          During the second quarter of 2006, the Company’s total deposits increased by $15.6 million, or 12.0% annualized, as compared to the first quarter of 2006.  As of June 30, 2006, total deposits were $538.3 million.

          Noninterest income increased by $254,000, or 22.8%, to $1.4 million for the quarter ended June 30, 2006, compared to $1.1 million for the quarter ended June 30, 2005.  This increase was largely attributable to the expanded customer base developed during the year and acquired through the Trinity acquisition, which resulted in higher fee income from loan and deposit products.

          Noninterest expense increased by $911,000, or 27.0%, to $4.3 million for the second quarter of 2006.  These increased expenses are largely associated with the staffing and operations of three additional full-service offices resulting from the acquisition of Trinity Bank, the opening of a new full- service office in Belmont, North Carolina, and the opening of a new loan production office in Rock Hill, South Carolina.

          Kim S. Price, President and CEO, commented, “The completion of the Trinity Bank integration and the execution of our Performance Enhancement Plan have proven positive to the earnings capacity of the Company, resulting in record $0.17 earnings per share for the quarter.  Our increased revenue has been fueled by loan and deposit growth, a changing balance sheet mix, and continued margin improvement.  We are also pleased with the continued high quality of our asset portfolio. In addition, our retail and commercial banking teams are experiencing increasing success in providing community banking services in the vibrant Charlotte region.”

          Citizens South Bank, headquartered in Gastonia, North Carolina, was founded in 1904.  At June 30, 2006, the Bank had approximately $718 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.

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

	Quarter ended June 30, 2006			Quarter ended June 30, 2005			Six Months ended June 30, 2006			Six Months ended June 30, 2005
Reconciliation of GAAP to non-GAAP Measures:
Net income, as reported (GAAP)	$	1,347		$	901		$	2,534		$	1,803
Non-operating items:
(Gain)/ loss on sale of assets, net		(9	)		5			48			(63	)
Merger and integration related expense		0			0			57			0
Related income taxes (39%)		3			(2	)		(41	)		25
Net Operating Income	$	1,341		$	904		$	2,598		$	1,765
Per Share Data:
Average common shares outstanding, basic		8,049,042			6,969,151			8,053,954			7,026,493
Basic net income - GAAP	$	0.17		$	0.13		$	0.31		$	0.26
Basic net income - Operating		0.17			0.13			0.32			0.25
Average common shares outstanding, diluted		8,123,232			7,029,230			8,131,987			7,115,649
Diluted net income - GAAP	$	0.17		$	0.13		$	0.31		$	0.25
Diluted net income - Operating		0.17			0.13			0.32			0.25
Cash dividends declared	$	0.075		$	0.07		$	0.15		$	0.14
Period-end book value		10.24			9.76			10.24			9.76
Financial Ratios (annualized):
Return on average stockholders’ equity - GAAP		6.37	%		5.16	%		6.05	%		5.12	%
Return on average stockholders’ equity - Operating		6.34			5.18			6.19			5.01
Return on average assets - GAAP		0.76	%		0.71	%		0.72	%		0.71	%
Return on average assets - Operating		0.75			0.71			0.74			0.70
Efficiency ratio - GAAP		65.04	%		70.57	%		67.40	%		70.02	%
Efficiency ratio - Operating		65.13			70.44			66.73			70.25
Net interest margin		3.41	%		3.23	%		3.41	%		3.26	%
Average equity to average assets		11.90			13.68			11.97			13.92
Asset Quality Data:
Allowance for loan losses	$	5,414		$	3,271		$	5,414		$	3,271
Nonperforming loans		1,974			1,413			1,974			1,413
Nonperforming assets		2,653			1,745			2,653			1,745
Net charge-offs (recoveries)		127			33			253			33
Allowance for loan losses to total loans		1.06	%		0.99	%		1.06	%		0.99	%
Nonperforming loans to total loans		0.39			0.43			0.39			0.43
Nonperforming assets to total assets		0.37			0.34			0.37			0.34
Average Balances:
Total assets	$	710,799		$	511,701		$	706,683		$	509,834
Loans receivable, net of unearned income		487,137			329,259			480,045			326,033
Interest-earning assets		613,899			454,617			610,500			450,809
Deposits		495,004			372,947			490,332			372,020
Interest-bearing liabilities		583,864			412,648			579,606			410,064
Stockholders’ equity		84,613			69,996			84,564			70,965
At Period End:
Total assets	$	718,160		$	514,894		$	718,160		$	514,894
Loans receivable, net		504,499			327,927			504,499			327,927
Interest-earning assets		626,109			455,644			626,109			455,644
Deposits		538,265			372,385			538,265			372,385
Interest-bearing liabilities		588,234			417,636			588,234			417,636
Stockholders’ equity		84,530			70,877			84,530			70,877

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

	June 30, 2006			December 31, 2005
	(unaudited)
ASSETS
Cash and due from banks	$	13,931		$	8,863
Interest-earning bank balances		3,491			17,790
Cash and cash equivalents		17,422			26,653
Investment securities available-for-sale, at fair value		53,373			53,429
Mortgage-backed securities available-for-sale, at fair value		61,321			70,236
Loans receivable, net unearned income		509,913			473,336
Allowance for loan losses		(5,414	)		(5,104	)
Loans receivable, net		504,499			468,232
Real estate acquired through foreclosure, net		679			1,157
Premises and equipment, net		19,298			19,819
Accrued interest receivable		2,617			2,539
Federal Home Loan Bank stock, at cost		3,941			4,084
Intangible assets		32,028			32,424
Bank owned life insurance		15,218			14,828
Other assets		7,764			7,693
Total assets	$	718,160		$	701,094
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Demand deposit accounts	$	89,025		$	85,489
Money market deposit accounts		108,506			104,421
Savings accounts		19,426			23,654
Time deposits		321,308			303,980
Total deposits		538,265			517,544
Borrowed money		87,297			91,342
Deferred compensation		5,419			5,849
Other liabilities		2,649			2,101
Total liabilities		633,630			616,836
Stockholders’ Equity:
Common stock issued and outstanding, $0.01 par value, 20,000,000 shares authorized, 9,062,727 issued at June 30, 2006 and December 31, 2005 and 8,252,508 shares outstanding at June 30, 2006 and 8,291,544 shares outstanding at December 31, 2005		91			91
Additional paid-in-capital		68,480			68,468
Unallocated common stock held by Employee Stock Ownership Plan		(1,522	)		(1,613	)
Unearned compensation related to Recognition and Retention Plan		(1,279	)		(1,419	)
Retained earnings, substantially restricted		31,384			30,311
Accumulated unrealized loss on securities available-for-sale, net of tax		(2,263	)		(1,567	)
Treasury stock of 810,219 shares at June 30, 2006, and 711,183 shares at December 31, 2005		(10,361	)		(10,013	)
Total stockholders’ equity		84,530			84,258
Total liabilities and stockholders’ equity	$	718,160		$	701,094

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
Interest income
Loans	$	9,193		$	4,960		$	17,697		$	9,592
Investment securities		499			373			991			770
Interest-bearing deposits		124			119			276			154
Mortgage-backed and related securities		667			676			1,383			1,413
Total interest income		10,483			6,128			20,347			11,929
Interest Expense
Deposits		4,216			1,945			7,944			3,642
Borrowed funds		1,053			518			2,090			993
Total interest expense		5,269			2,463			10,034			4,635
Net interest income		5,214			3,665			10,313			7,294
Provision for loan losses		280			120			565			270
Net interest income after provision for loan losses		4,934			3,545			9,748			7,024
Noninterest Income
Fee income on deposit accounts		736			611			1,414			1,155
Fee income on mortgage banking and lending activities		256			127			505			240
Dividends on FHLB stock		57			42			111			79
Increase in cash value of bank-owned life insurance		167			148			414			309
Fair value adjustment on deferred compensation assets		(21	)		78			43			31
Net gain / (loss) on sale of assets		9			(4	)		(47	)		63
Other noninterest income		165			113			343			223
Total noninterest income		1,369			1,115			2,783			2,100
Noninterest Expense
Compensation and benefits		2,201			1,740			4,580			3,406
Fair value adjustment on deferred compensation obligation		(21	)		78			43			31
Occupancy and equipment expense		667			496			1,379			981
Professional services		134			160			304			310
Amortization of intangible assets		186			84			372			171
Merger and integration related expenses		0			0			57			0
Other noninterest expenses		1,114			812			2,092			1,656
Total noninterest expense		4,281			3,370			8,827			6,555
Income before income taxes		2,022			1,290			3,704			2,569
Provision for income taxes		675			389			1,170			766
Net income	$	1,347		$	901		$	2,534		$	1,803
Basic earnings per share	$	0.17		$	0.13		$	0.31		$	0.26
Diluted earnings per share	$	0.17		$	0.13		$	0.31		$	0.25
Basic average common shares outstanding		8,049,042			6,969,151			8,053,954			7,026,493
Diluted average common shares outstanding		8,123,232			7,029,230			8,131,987			7,115,649

SOURCE  Citizens South Banking Corporation
          -0-                                                  07/17/2006
          /CONTACT:  Gary F. Hoskins, CFO of Citizens South Banking Corporation,
+1-704-884-2263, or gary.hoskins@citizenssouth.com /
          /Web site:  http://www.citizenssouth.com /
          (CSBC)

CO:	Citizens South Banking Corporation; Citizens South Bank
ST:	North Carolina, South Carolina
IN:	FIN
SU:	ERN