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Gastonia bank using TARP money for low-interest mortgage program

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(The following information is from Citizens South Bank.)

GASTONIA, NC - Citizens South Bank (NASDAQ: CSBC) announced today that it will use all of its $20.5 million in federal Troubled Assets Relief Program (TARP) money to create a 30-year residential loan program with a starting interest rate of 3.5 percent in an effort to stimulate the local housing market.

The loan program, which uses the bank's entire $20.5 million in federal TARP funds allocated under the Capital Purchase Program (CPP), has a maximum rate of 5.5 percent and waives closing costs. Citizens South has continued to lend as the financial crisis has unfolded.

"CPP funds issued as part of the TARP are intended to stimulate the economy by enabling banks to increase lending, and we are glad to utilize the funds we received under the program as Congress intended," said Kim S. Price, president and CEO of Citizens South Bank. "We are participating in the program from a position of financial strength and our new reduced-rate mortgage program represents an expansion of our current lending."

The new Citizens South program will bring together builders and developers, who are Citizens South customers and have extra housing stock or residential lots ready for sale, with consumers who are looking for the best possible mortgage rate. Participating builders and developers will agree to pay the closing costs on the mortgages as a form of assistance to qualified homebuyers.

"Recent consumer surveys show that lower interest rates provide people with the assistance they need to purchase a home," Price said. "We believe this program is the best use of our CPP funds because it promotes home ownership and generates work for builders, developers, construction workers and real estate agents."

While the program sets the interest rate for the first 24 months of the loan at 3.5 percent and adjusts the rate to 5.5 percent at the start of the 25^th month, all applicants will be qualified as if they were receiving a 5.5 percent interest rate for the life of the loan.

"We have always been a conservative institution and we want to make sure we continue to make responsible loans while assisting our community in recovering from the recession," Price added. "Additionally, all of these loans will stay with our bank and not be resold."

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About Citizens South

Citizens South Banking Corporation is the parent corporation for Citizens South Bank, which was established in 1904 and is headquartered in Gastonia, N.C. The Bank has 15 full-service banking offices located in the Charlotte, N.C. region. As of December 31, 2008, the Company had consolidated assets of $817 million, outstanding loans of $627 million, total deposits of $581 million and stockholders' equity of $105 million.