EXHIBIT 10.11

SALARY CONTINUATION AGREEMENT WITH GARY F. HOSKINS

        THIS SALARY CONTINUATION AGREEMENT (this Agreement) is made and entered
into as of this 1st day of January, 2004, by and between Citizens South Bank, a
federally chartered savings bank (the Bank), and Gary F. Hoskins, its Executive
Vice President, Treasurer and Chief Financial Officer (the Executive).

        WHEREAS, the Executive has contributed substantially to the success of
the Bank, and the Bank desires that the Executive continue in its employ,

        WHEREAS, to encourage the Executive to remain an employee of the Bank,
the Bank is willing to provide salary continuation benefits to the Executive.
The Bank will pay the benefits from its general assets,

        WHEREAS, none of the conditions or events included in the definition of
the term golden parachute payment that is set forth in section 18(k)(4)(A)(ii)
of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in
Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR
359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is contemplated
insofar as the Bank is concerned,

        WHEREAS, the parties hereto intend that this Agreement shall be
considered an unfunded arrangement maintained primarily to provide supplemental
retirement benefits for the Executive, and to be considered a non-qualified
benefit plan for purposes of the Employee Retirement Income Security Act of
1974, as amended (ERISA). The Executive is fully advised of the Bank's financial
status,

        WHEREAS, the Bank and the Executive are parties to an Executive
Supplemental Retirement Plan Executive Agreement dated as of June 25, 2001, and

        WHEREAS, the Bank and the Executive intend that this Agreement shall
amend and restate in its entirety the June 25, 2001 Executive Supplemental
Retirement Plan Executive Agreement, and from and after the Effective Date (as
hereinafter defined) of this Agreement the June 25, 2001 Executive Supplemental
Retirement Plan Executive Agreement shall be of no further force or effect.

        NOW THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Executive and the Bank hereby agree as follows.

                                    ARTICLE 1
                                   DEFINITIONS

        The following words and phrases used in this Agreement have the meanings
specified.

        1.1     Accrual Balance means the liability that should be accrued by
the Bank under generally accepted accounting principles (GAAP) for the Bank's
obligation to the Executive under this Agreement, by applying Accounting
Principles Board Opinion No. 12, as amended by Statement of Financial Accounting
Standards No. 106, and the calculation method and discount rate specified
hereinafter. The

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Accrual Balance shall be calculated assuming a level principal amount and
interest as the discount rate is accrued each period. The principal accrual is
determined such that when it is credited with interest each month, the Accrual
Balance at Normal Retirement Age equals the present value of the normal
retirement benefits. The discount rate means the rate used by the Plan
Administrator for determining the Accrual Balance. The rate is based on the
yield on a 20-year corporate bond rated Aa by Moody's, rounded to the nearest
1/4%. The initial discount rate is 8.50%. In its sole discretion, the Plan
Administrator may adjust the discount rate to maintain the rate within
reasonable standards according to GAAP.

        1.2     Beneficiary means each designated person, or the estate of the
deceased Executive, entitled to benefits, if any, upon the death of the
Executive, determined according to Article 4.

        1.3     Beneficiary Designation Form means the form established from
time to time by the Plan Administrator that the Executive completes, signs, and
returns to the Plan Administrator to designate one or more Beneficiaries.

        1.4     Change in Control shall have the same meaning specified in any
severance or employment agreement existing on the date hereof or hereafter
entered into between the Executive and the Bank or between the Executive and
Citizens South Banking Corporation, a Delaware corporation of which the Bank is
a wholly owned subsidiary. If the Executive is not a party to a severance or
employment agreement containing a definition of Change in Control, Change in
Control means any of the following events occur -

        (a)     Merger: Citizens South Banking Corporation merges into or
consolidates with another corporation, or merges another corporation into
Citizens South Banking Corporation, and as a result less than a majority of the
combined voting power of the resulting corporation immediately after the merger
or consolidation is held by persons who were stockholders of Citizens South
Banking Corporation immediately before the merger or consolidation,

        (b)     Acquisition of Significant Share Ownership: after the date of
this Agreement a report on Schedule 13D, Schedule TO, or another form or
schedule (other than Schedule 13G) is filed or is required to be filed under
Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule
discloses that the filing person or persons acting in concert has or have become
the beneficial owner of 25% or more of the combined voting power of Citizens
South Banking Corporation's voting securities outstanding (but this clause (b)
shall not apply to beneficial ownership of voting shares held by a subsidiary in
a fiduciary capacity or beneficial ownership of voting shares held by an
employee benefit plan of Citizens South Banking Corporation or any subsidiary.
For purposes of this Agreement, subsidiary means an entity in which Citizens
South Banking Corporation beneficially owns 50% or more of the outstanding
voting securities, whether Citizens South Banking Corporation owns the shares
directly or owns the shares indirectly through an intermediate subsidiary,

        (c)     Change in Board Composition. during any period of two
consecutive years, individuals who constitute Citizens South Banking
Corporation's board of directors at the beginning of the two-year period cease
for any reason to constitute at least a majority thereof; provided, however,
that - for purposes of this clause (c) - each director who is first elected by
the board (or first nominated by the board for election by stockholders) by a
vote of at least two-thirds (2/3) of the directors who were directors at the
beginning of the period shall be deemed to have been a director at the beginning
of the two-year period, or

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        (d)     Sale of Assets: Citizens South Banking Corporation sells to a
third party all or substantially all of Citizens South Banking Corporation's
assets. For this purpose, sale of all or substantially all of Citizens South
Banking Corporation's assets includes sale of the shares or assets of the Bank
alone.

        1.5     Disability means the Executive suffers a sickness, accident or
injury that is determined by the carrier of any individual or group disability
insurance policy covering the Executive, or by the Social Security
Administration, to be a disability rendering the Executive totally and
permanently disabled. At the Bank's request, the Executive must submit to the
Bank proof of the carrier's or Social Security Administration's determination.

        1.6     Early Termination means Termination of Employment before Normal
Retirement Age for reasons other than death, Disability, Termination for Cause
or following a Change in Control.

        1.7     Early Termination Date means the date on which Early Termination
occurs.

        1.8     Effective Date means January 1, 2004.

        1.9     Good Reason shall have the same meaning specified in any
employment or severance agreement existing on the date hereof or entered into
hereafter by the Executive and the Bank or by the Executive and Citizens South
Banking Corporation. If the term Good Reason is not defined in an employment
agreement or severance agreement, it means:

                (a)     a material reduction in Executive's title or
        responsibilities,

                (b)     a reduction in base salary as in effect on the date of a
        Change in Control,

                (c)     relocation of the Bank's principal executive offices, or
        requiring the Executive to change his principal work location, to any
        location that is more than 15 miles from the location of the Bank's
        principal executive offices on the date of this Agreement,

                (d)     the adverse and substantial alteration in the nature and
        quality of the office space within which the Executive performs his
        duties, including the size and location thereof, as well as the
        secretarial and administrative support provided to the Executive,

                (e)     the failure by the Bank to continue to provide the
        Executive with compensation and benefits substantially similar to those
        provided to the Executive under any of the employee benefit plans in
        which the Executive becomes a participant, or the taking of any action
        by the Bank which would directly or indirectly materially reduce any of
        such benefits or deprive the Executive of any material fringe benefit to
        which the Executive was entitled at the time of the Change in Control,
        or

                (f)     the failure of the Bank to obtain a satisfactory
        agreement from any successor or assign of the Bank to assume and agree
        to perform this Agreement, as contemplated in Section 7.5 hereof.

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        1.10    Intentional, for purposes of this Agreement, no act or failure
to act on the part of the Executive shall be deemed to have been intentional if
it was due primarily to an error in judgment or negligence. An act or failure to
act on the Executive's part shall be considered intentional if it is not in good
faith and if it is without a reasonable belief that the action or failure to act
is in the best interests of the Bank.

        1.11    Normal Retirement Age means the Executive's 65th birthday.

        1.12    Normal Retirement Date means the later of the Normal Retirement
Age or Termination of Employment.

        1.13    Plan Administrator means the plan administrator described in
Article 8.

        1.14    Plan Year means a twelve-month period commencing on January 1
and ending on December 31 of each year. The initial Plan Year shall commence on
the effective date of this Agreement.

        1.15    Termination for Cause and Cause shall have the same definition
specified in any severance or employment agreement existing on the date hereof
or entered into hereafter between the Executive and the Bank or between the
Executive and Citizens South Banking Corporation. If the Executive is not a
party to a severance or employment agreement containing a definition of
termination for cause, Termination for Cause means the Bank terminates the
Executive's employment for any of the following reasons -

        (a)     the Executive's gross negligence or gross neglect of duties or
intentional and material failure to perform stated duties after written notice
thereof, or

        (b)     disloyalty or dishonesty by the Executive in the performance of
his duties, or a breach of the Executive's fiduciary duties for personal profit,
in any case whether in his capacity as a director or officer, or

        (c)     intentional wrongful damage by the Executive to the business or
property of the Bank or its affiliates, including without limitation the
reputation of the Bank, which in the judgement of the Bank causes material harm
to the Bank or affiliates, or

        (d)     a willful violation by the Executive of any applicable law or
significant policy of the Bank or an affiliate that, in the Bank's judgement,
results in an adverse effect on the Bank or the affiliate, regardless of whether
the violation leads to criminal prosecution or conviction. For purposes of this
Agreement, applicable laws include any statute, rule, regulatory order,
statement of policy, or final cease-and-desist order of any governmental agency
or body having regulatory authority over the Bank, or

        (e)     the occurrence of any event that results in the Executive being
excluded from coverage, or having coverage limited for the Executive as compared
to other executives of the Bank, under the Bank's blanket bond or other fidelity
or insurance policy covering its directors, officers, or employees, or

        (f)     the Executive is removed from office or permanently prohibited
from participating in the conduct of the Bank's affairs by an order issued under
section 8(e)(4) or section 8(g)(1) of the Federal Deposit Insurance Act, 12
U.S.C. 1818(e)(4) or (g)(1), or

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        (g)     conviction of the Executive for or plea of nolo contendere to a
felony or conviction of or plea of nolo contendere to a misdemeanor involving
moral turpitude, or the actual incarceration of the Executive for 45 consecutive
days or more.

        1.16    Termination of Employment means the Executive ceases to be
employed by the Bank for any reason whatsoever, other than because of a leave of
absence approved by the Bank. For purposes of this Agreement, if there is a
dispute about the employment status of the Executive or the date of the
Executive's Termination of Employment, the Bank shall have the sole and absolute
right to decide the dispute unless a Change in Control shall have occurred.

        1.17    Vesting, for purposes of this Agreement, including for purposes
of determining the Executive's Early Termination benefit under Section 2.2,
shall be determined as follows. The executive shall be 100% vested on his 65th
birthday if Termination of Employment occurs on or after his 65th birthday. The
executive shall be 75% vested on his 60th birthday if Termination of Employment
occurs on or after his 60th birthday, vesting in additional 5% increments on his
61st through 65th birthdays provided he remains employed by the Bank on those
dates. The Executive may not be more than 75% vested until his 61st birthday.
The Executive is 30% vested as of the Effective Date. On January 1, 2005 and on
January 1 of each Plan Year thereafter the Executive shall be vested in an
additional 10% increment until he is 70% vested, provided the Executive remains
employed by the Bank. On January 1 of each Plan Year after the year in which the
Executive becomes 70% vested, he shall vest in an additional 1% increment until
he is 75% vested or until he attains age 60, whichever first occurs, provided
the Executive remains employed by the Bank. The vesting schedule is illustrated
in Schedule A attached to this Agreement.

                                    ARTICLE 2
                                LIFETIME BENEFITS

        2.1     Normal Retirement Benefit. For Termination of Employment on or
after the Normal Retirement Age for reasons other than death, the Bank shall pay
to the Executive the benefit described in this Section 2.1 instead of any other
benefit under this Agreement.

        2.1.1   Amount of Benefit. The annual benefit under this Section 2.1 is
        $45,000. Beginning with the year after the year in which the Normal
        Retirement Date occurs, the amount of the annual benefit under this
        Section 2.1.1 shall be increased annually at a rate of 2% to offset
        inflation.

        2.1.2   Payment of Benefit. The Bank shall pay the annual benefit to the
        Executive in 12 equal monthly installments payable on the first day of
        each month, beginning in the month immediately after the Executive's
        Normal Retirement Date. The Normal Retirement annual benefit shall be
        paid to the Executive for his lifetime.

        2.2     Early Termination Benefit. After Early Termination, the Bank
shall pay to the Executive the benefit described in this Section 2.2 instead of
any other benefit under this Agreement.

        2.2.1   Amount of Benefit. The benefit under this Section 2.2 is the
        vested Early Termination annual benefit amount set forth on Schedule A
        for the Plan Year ending immediately before the Early Termination Date
        (except during the first Plan Year, the benefit is the amount set forth
        for Plan Year 1). Beginning one year after payment of the Early
        Termination benefit commences, the amount of the annual benefit under
        this Section 2.2.1 shall be increased annually at a rate of 2% to offset
        inflation.

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        2.2.2   Payment of Benefit. The Bank shall pay the annual benefit to the
        Executive in 12 equal monthly installments payable on the first day of
        each month, beginning with the month after the Normal Retirement Age.
        The annual benefit shall be paid to the Executive for his lifetime.

        2.3     Disability Benefit. After Termination of Employment because of
Disability before Normal Retirement Age, the Bank shall pay to the Executive the
benefit described in this Section 2.3 instead of any other benefit under this
Agreement.

        2.3.1   Amount of Benefit. The benefit under this Section 2.3 is the
        Disability annual benefit amount set forth on Schedule A for the Plan
        Year ended immediately before the date on which Termination of
        Employment occurs (except during the first Plan Year, the benefit is the
        amount set forth for Plan Year 1), without regard to vesting. Beginning
        one year after payment of the Disability benefit commences, the amount
        of the annual benefit under this Section 2.3.1 shall be increased
        annually at a rate of 2% to offset inflation.

        2.3.2   Payment of Benefit. Beginning with the month immediately after
        the Executive's Normal Retirement Age, the Bank shall pay the Disability
        benefit to the Executive in 12 equal monthly installments on the first
        day of each month. The annual benefit shall be paid to the Executive for
        his lifetime.

        2.4     Change-in-Control Benefit. If the Executive's employment with
the Bank terminates involuntarily within 12 months after a Change in Control, or
if the Executive terminates employment voluntarily for Good Reason within 12
months after a Change in Control, the Bank shall pay to the Executive the
benefit described in this Section 2.4 instead of any other benefit under this
Agreement. However, no benefits shall be payable under this Agreement if the
Executive's employment is terminated under circumstances described in Article 5
of this Agreement.

        2.4.1   Amount of Benefit: The benefit under this Section 2.4 is the
        Normal Retirement Age Accrual Balance required by Section 2.1,
        discounting the Normal Retirement Age Accrual Balance to present value
        using a discount rate of 8.50%, or a discount rate selected by the Plan
        Administrator if the Plan Administrator determines that a different
        discount rate is appropriate; provided, however, that the discount rate
        selected shall not exceed the discount rate employed at the time of the
        Change in Control for purposes of calculating the Accrual Balance.

        2.4.2   Payment of Benefit: The Bank shall pay the Change-in-Control
        benefit under Section 2.4 of this Agreement to the Executive in one lump
        sum within three days after Termination of Employment.

        2.5     Change-in-Control Payout of Normal Retirement Benefit, Early
Termination Benefit, or Disability Benefit Being Paid to the Executive at the
Time of a Change in Control. If a Change in Control occurs at any time during
the salary continuation benefit payment period and if at the time of that Change
in Control the Executive is receiving the benefit provided by Sections 2.1.2,
2.2.2, or 2.3.2, the Bank shall pay the remaining salary continuation benefits
to the Executive in a single lump sum within three days after the Change in
Control. The lump-sum payment due to the Executive as a result of a Change in
Control shall be an amount equal to the Accrual Balance amount corresponding to
that particular benefit then being paid, without regard to vesting.

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        2.6     Petition for Payment of Normal Retirement Benefit, Vested Early
Termination Benefit or Disability Benefit. If the Executive is entitled to the
normal retirement benefit provided by Section 2.1, the Early Termination benefit
provided by Section 2.2, or the Disability benefit provided by Section 2.3, the
Executive may petition the board of directors to have the Accrual Balance (or
vested Accrual Balance in the case of the Early Termination benefit) amount
corresponding to that particular benefit paid to the Executive in a single lump
sum. The board of directors shall have sole and absolute discretion about
whether to pay the remaining Accrual Balance (or vested Accrual Balance in the
case of the Early Termination benefit) in a lump sum. If the remaining Accrual
Balance is paid in a single lump sum, the Bank shall have no further obligations
under this Agreement.

        2.7     Contradiction in Terms of Agreement and Schedule A. If there is
a contradiction in the terms of this Agreement and Schedule A attached hereto
concerning the actual amount of a particular benefit amount due the Executive
under Section 2.2, 2.3, or 2.4 hereof, then the actual amount of the benefit set
forth in the Agreement shall control.

                                    ARTICLE 3
                                 DEATH BENEFITS

        3.1     Death During Active Service. Except as provided in Section 5.2,
if the Executive dies in active service to the Bank before the Normal Retirement
Date, the Bank shall pay to the Executive's Beneficiary (a) an amount in cash
equal to the Accrual Balance at the time of the Executive's death (without
regard to vesting), and (b) the benefit described in the Split Dollar Agreement
attached to this Agreement as Addendum A.

        3.2     Death after Termination of Employment. If the Executive dies
after Termination of Employment and the Executive is entitled to the normal
retirement benefit provided by Section 2.1, the Early Termination benefit
provided by Section 2.2, or the Disability benefit provided by Section 2.3, the
Bank shall pay to the Executive's Beneficiary (a) an amount in cash equal to the
Accrual Balance (or vested Accrual Balance in the case of the Early Termination
benefit) remaining at the time of the Executive's death, and (b) the benefit
described in the Split Dollar Agreement attached to this Agreement as Addendum
A; provided, however, that no benefits under this Agreement or under the Split
Dollar Agreement shall be paid or payable to the Executive or the Executive's
Beneficiary if this Agreement is terminated according to Article 5.

                                    ARTICLE 4
                                  BENEFICIARIES

        4.1     Beneficiary Designations. The Executive shall have the right to
designate at any time a Beneficiary to receive any benefits payable under this
Agreement upon the death of the Executive. The Beneficiary designated under this
Agreement may be the same as or different from the beneficiary designation under
any other benefit plan of the Bank in which the Executive participates.

        4.2     Beneficiary Designation: Change. The Executive shall designate a
Beneficiary by completing and signing the Beneficiary Designation Form and
delivering it to the Plan Administrator or its designated agent. The Executive's
Beneficiary designation shall be deemed automatically revoked if the Beneficiary
predeceases the Executive or if the Executive names a spouse as Beneficiary and
the marriage is subsequently dissolved. The Executive shall have the right to
change a Beneficiary by

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completing, signing, and otherwise complying with the terms of the Beneficiary
Designation Form and the Plan Administrator's rules and procedures, as in effect
from time to time. Upon the acceptance by the Plan Administrator of a new
Beneficiary Designation Form, all Beneficiary designations previously filed
shall be cancelled. The Plan Administrator shall be entitled to rely on the last
Beneficiary Designation Form filed by the Executive and accepted by the Plan
Administrator before the Executive's death.

        4.3     Acknowledgment. No designation or change in designation of a
Beneficiary shall be effective until received, accepted, and acknowledged in
writing by the Plan Administrator or its designated agent.

        4.4     No Beneficiary Designation. If the Executive dies without a
valid beneficiary designation, or if all designated Beneficiaries predecease the
Executive, then the Executive's spouse shall be the designated Beneficiary. If
the Executive has no surviving spouse, the benefits shall be made to the
personal representative of the Executive's estate.

        4.5     Facility of Payment. If a benefit is payable to a minor, to a
person declared incapacitated, or to a person incapable of handling the
disposition of his or her property, the Bank may pay such benefit to the
guardian, legal representative, or person having the care or custody of the
minor, incapacitated person, or incapable person. The Bank may require proof of
incapacity, minority, or guardianship as it may deem appropriate before
distribution of the benefit. Distribution shall completely discharge the Bank
from all liability for the benefit.

                                    ARTICLE 5
                               GENERAL LIMITATIONS

        5.1     Termination for Cause. Notwithstanding any provision of this
Agreement to the contrary, the Bank shall not pay any benefit under this
Agreement and this Agreement shall terminate if Termination of Employment is a
result of Termination for Cause. Likewise, the Bank shall not pay any benefits
under the Split Dollar Agreement attached to this Agreement as Addendum A, and
the Split Dollar Agreement also shall terminate, if Termination of Employment is
a result of Termination for Cause.

        5.2     Misstatement. The Bank shall not pay any benefit under this
Agreement or under the Split Dollar Agreement attached as Addendum A if the
Executive makes any material misstatement of fact on any application or resume
provided to the Bank or on any application for benefits provided by the Bank.

        5.3     Removal. If the Executive is removed from office or permanently
prohibited from participating in the Bank's affairs by an order issued under
section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C.
1818(e)(4) or (g)(1), all obligations of the Bank under this Agreement shall
terminate as of the effective date of the order.

        5.4     Default. Notwithstanding any provision of this Agreement to the
contrary, if the Bank is in default or in danger of default, as those terms are
defined in section 3(x) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(x),
all obligations under this Agreement shall terminate.

        5.5     FDIC Open-Bank Assistance. All obligations under this Agreement
shall terminate, except to the extent determined that continuation of the
contract is necessary for the continued operation of the Bank, when the Federal
Deposit Insurance Corporation enters into an agreement to provide assistance to
or on behalf of the Bank under the authority contained in Federal Deposit
Insurance Act section 13(c). 12 U.S.C. 1823(c). Rights of the parties that have
already vested shall not be affected by such action, however.

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                                    ARTICLE 6
                          CLAIMS AND REVIEW PROCEDURES

        6.1     Claims Procedure. A person or beneficiary (claimant) who has not
received benefits under the Agreement that he or she believes should be paid
shall make a claim for such benefits as follows:

        6.1.1   Initiation Written Claim. The claimant initiates a claim by
        submitting to the Bank a written claim for the benefits.

        6.1.2   Timing of Bank Response. The Bank shall respond to the claimant
        within 90 days after receiving the claim. If the Bank determines that
        special circumstances require additional time for processing the claim,
        the Bank may extend the response period by an additional 90 days by
        notifying the claimant in writing before the end of the initial 90-day
        period that an additional period is required. The notice of extension
        must state the special circumstances and the date by which the Bank
        expects to render its decision.

        6.1.3   Notice of Decision. If the Bank denies part or all of the claim,
        the Bank shall notify the claimant in writing of the denial. The Bank
        shall write the notification in a manner calculated to be understood by
        the claimant. The notification shall set forth -

                6.1.3.1 the specific reasons for the denial,

                6.1.3.2 a reference to the specific provisions of the Agreement
                on which the denial is based,

                6.1.3.3 a description of any additional information or material
                necessary for the claimant to perfect the claim and an
                explanation of why it is needed,

                6.1.3.4 an explanation of the Agreement's review procedures and
                the time limits applicable to such procedures, and

                6.1.3.5 a statement of the claimant's right to bring a civil
                action under ERISA section 502(a) following an adverse benefit
                determination on review.

        6.2     Review Procedure. If the Bank denies part or all of the claim,
the claimant shall have the opportunity for a full and fair review by the Bank
of the denial, as follows:

        6.2.1   Initiation Written Request. To initiate the review, within 60
        days after receiving the Bank's notice of denial the claimant must file
        with the Bank a written request for review.

        6.2.2   Additional Submissions Information Access. The claimant shall
        then have the opportunity to submit written comments, documents,
        records, and other information relating to the claim. Upon request and
        free of charge, the Bank shall also provide the claimant reasonable

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        access to and copies of all documents, records, and other information
        relevant (as defined in applicable ERISA regulations) to the claimant's
        claim for benefits.

        6.2.3   Considerations on Review. In considering the review, the Bank
        shall take into account all materials and information the claimant
        submits relating to the claim, without regard to whether the information
        was submitted or considered in the initial benefit determination.

        6.2.4   Timing of Bank Response. The Bank shall respond in writing to
        the claimant within 60 days after receiving the request for review. If
        the Bank determines that special circumstances require additional time
        for processing the claim, the Bank may extend the response period by an
        additional 60 days by notifying the claimant in writing before the end
        of the initial 60-day period that an additional period is required. The
        notice of extension must state the special circumstances and the date by
        which the Bank expects to render its decision.

        6.2.5   Notice of Decision. The Bank shall notify the claimant in
        writing of its decision on review. The Bank shall write the notification
        in a manner calculated to be understood by the claimant. The
        notification shall set forth:

                6.2.5.1 the specific reason for the denial,

                6.2.5.2 a reference to the specific provisions of the Agreement
                on which the denial is based,

                6.2.5.3 a statement that the claimant is entitled to receive,
                upon request and free of charge, reasonable access to and copies
                of all documents, records, and other information relevant (as
                defined in applicable ERISA regulations) to the claimant's claim
                for benefits, and

                6.2.5.4 a statement of the claimant's right to bring a civil
                action under ERISA section 502(a).

                                    ARTICLE 7
                                  MISCELLANEOUS

        7.1     Amendments and Termination. Subject to Section 7.14 of this
Agreement, (a) this Agreement may be amended solely by a written agreement
signed by the Bank and by the Executive, and (b) except for termination
occurring under Article 5, this Agreement may be terminated solely by a written
agreement signed by the Bank and by the Executive.

        7.2     Binding Effect. This Agreement shall bind the Executive, the
Bank, and their beneficiaries, survivors, executors, successors, administrators,
and transferees.

        7.3     No Guarantee of Employment. This Agreement is not an employment
policy or contract. It does not give the Executive the right to remain an
employee of the Bank, nor does it interfere with the Bank's right to discharge
the Executive. It also does not require the Executive to remain an employee nor
interfere with the Executive's right to terminate employment at any time.

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        7.4     Non-Transferability. Benefits under this Agreement cannot be
sold, transferred, assigned, pledged, attached, or encumbered in any manner.

        7.5     Successors; Binding Agreement. The Bank will require any
successor (whether direct or indirect, by purchase, merger, consolidation, or
otherwise) to all or substantially all of the business or assets of the Bank, by
an assumption agreement in form and substance satisfactory to the Executive, to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Bank would be required to perform this Agreement if no
such succession had occurred. The Bank's failure to obtain an assumption
agreement before effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to the Change-in-Control benefit
provided in Section 2.4.

        7.6     Tax Withholding. The Bank shall withhold any taxes that are
required to be withheld from the benefits provided under this Agreement.

        7.7     Applicable Law. This Agreement and all rights hereunder shall be
governed by the laws of the State of North Carolina, except to the extent
preempted by the laws of the United States of America.

        7.8     Unfunded Arrangement. The Executive and Beneficiary are general
unsecured creditors of the Bank for the payment of benefits under this
Agreement. The benefits represent the mere promise by the Bank to pay benefits.
Rights to benefits are not subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by
creditors. Any insurance on the Executive's life is a general asset of the Bank
to which the Executive and Beneficiary have no preferred or secured claim.

        7.9     Entire Agreement. This Agreement and the Split Dollar Agreement
attached as Addendum A constitute the entire agreement between the Bank and the
Executive concerning the subject matter hereof. No rights are granted to the
Executive under this Agreement other than those specifically set forth herein.
This Agreement supersedes and replaces in its entirety the June 25, 2001
Executive Supplemental Retirement Plan Executive Agreement, and from and after
the Effective Date of this Agreement the June 25, 2001 Executive Supplemental
Retirement Plan Executive Agreement shall be of no further force or effect.

        7.10    Severability. If for any reason any provision of this Agreement
is held invalid, such invalidity shall not affect any other provision of this
Agreement not held invalid, and each such other provision shall continue in full
force and effect to the full extent consistent with law. If any provision of
this Agreement is held invalid in part, such invalidity shall not affect the
remainder of the provision not held invalid, and the remainder of such provision
together with all other provisions of this Agreement shall continue in full
force and effect to the full extent consistent with law.

        7.11    Headings. Caption headings and subheadings herein are included
solely for convenience of reference and shall not affect the meaning or
interpretation of any provision of this Agreement.

        7.12    Notices. All notices, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered by hand or mailed, certified or registered mail, return
receipt requested, with postage prepaid, to the following addresses or to such
other address as either party may designate by like notice.

                                       165
<PAGE>

        (a)     If to the Bank, to:
                Board of Directors
                Citizens South Bank
                519 South New Hope Road
                Gastonia, North Carolina 28054-4040
                        Attention: Corporate Secretary

        (b)     If to the Executive, to:
                Gary F. Hoskins
                Citizens South Bank
                519 South New Hope Road
                Gastonia, North Carolina 28054-4040

and to such other or additional person or persons as either party shall have
designated to the other party in writing by like notice.

        7.13    Payment of Legal Fees. The Bank is aware that after a Change in
Control management of the Bank could cause or attempt to cause the Bank to
refuse to comply with its obligations under this Agreement, or could institute
or cause or attempt to cause the Bank to institute litigation seeking to have
this Agreement declared unenforceable, or could take or attempt to take other
action to deny Executive the benefits intended under this Agreement. In these
circumstances, the purpose of this Agreement would be frustrated. It is the
intention of the Bank that the Executive not be required to incur the expenses
associated with the enforcement of his rights under this Agreement, whether by
litigation or other legal action, because the cost and expense thereof would
substantially detract from the benefits intended to be granted to the Executive
hereunder. It is the intention of the Bank that the Executive not be forced to
negotiate settlement of his rights under this Agreement under threat of
incurring expenses. Accordingly, if after a Change in Control occurs it appears
to the Executive that (a) the Bank has failed to comply with any of its
obligations under this Agreement, or (b) the Bank or any other person has taken
any action to declare this Agreement void or unenforceable, or instituted any
litigation or other legal action designed to deny, diminish, or to recover from
the Executive the benefits intended to be provided to the Executive hereunder,
the Bank irrevocably authorizes the Executive from time to time to retain
counsel of his choice, at the expense of the Bank as provided in this Section
7.13, to represent the Executive in connection with the initiation or defense of
any litigation or other legal action, whether by or against the Bank or any
director, officer, stockholder, or other person affiliated with the Bank, in any
jurisdiction. Notwithstanding any existing or previous attorney-client
relationship between the Bank and any counsel chosen by the Executive under this
Section 7.13, the Bank irrevocably consents to the Executive entering into an
attorney-client relationship with that counsel, and the Bank and the Executive
agree that a confidential relationship shall exist between the Executive and
that counsel. The fees and expenses of counsel selected from time to time by the
Executive as provided in this section shall be paid or reimbursed to the
Executive by the Bank on a regular, periodic basis upon presentation by the
Executive of a statement or statements prepared by such counsel in accordance
with such counsel's customary practices, up to a maximum aggregate amount of
$100,000. The Bank's obligation to pay the Executive's legal fees provided by
this Section 7.13 operates separately from and in addition to any legal fee
reimbursement obligation the Bank may have with the Executive under any separate
employment, severance, or other agreement between the Executive and the Bank.

                                       166
<PAGE>

        7.14    Termination or Modification of Agreement Because of Changes in
Law, Rules or Regulations. The Bank is entering into this Agreement on the
assumption that certain existing tax laws, rules, and regulations will continue
in effect in their current form. If that assumption materially changes and the
change has a material detrimental effect on this Agreement, then the Bank
reserves the right to terminate or modify this Agreement accordingly, subject to
the written consent of the Executive, which shall not be unreasonably withheld.
This Section 7.14 shall become null and void effective immediately if a Change
in Control occurs.

                                    ARTICLE 8
                           ADMINISTRATION OF AGREEMENT

        8.1     Plan Administrator Duties. This Agreement shall be administered
by a Plan Administrator consisting of the board or such committee or person(s)
as the board shall appoint. The Executive may be a member of the Plan
Administrator. The Plan Administrator shall also have the discretion and
authority to (a) make, amend, interpret, and enforce all appropriate rules and
regulations for the administration of this Agreement and (b) decide or resolve
any and all questions, including interpretations of this Agreement, as may arise
in connection with the Agreement.

        8.2     Agents. In the administration of this Agreement, the Plan
Administrator may employ agents and delegate to them such administrative duties
as it sees fit (including acting through a duly appointed representative) and
may from time to time consult with counsel, who may be counsel to the Bank.

        8.3     Binding Effect of Decisions. The decision or action of the Plan
Administrator with respect to any question arising out of or in connection with
the administration, interpretation, and application of the Agreement and the
rules and regulations promulgated hereunder shall be final and conclusive and
binding upon all persons having any interest in the Agreement. No Executive or
Beneficiary shall be deemed to have any right, vested or nonvested, regarding
the continued use of any previously adopted assumptions, including but not
limited to the discount rate and calculation method described in Section 1.1.

        8.4     Indemnity of Plan Administrator. The Bank shall indemnify and
hold harmless the members of the Plan Administrator against any and all claims,
losses, damages, expenses, or liabilities arising from any action or failure to
act with respect to this Agreement, except in the case of willful misconduct by
the Plan Administrator or any of its members.

        8.5     Bank Information. To enable the Plan Administrator to perform
its functions, the Bank shall supply full and timely information to the Plan
Administrator on all matters relating to the date and circumstances of the
retirement, Disability, death, or Termination of Employment of the Executive and
such other pertinent information as the Plan Administrator may reasonably
require.

        IN WITNESS WHEREOF, the Executive and a duly authorized officer of the
Bank have executed this Salary Continuation Agreement as of the date first
written above.

EXECUTIVE:                                   BANK:
                                             Citizens South Bank

/s/ Gary F. Hoskins                          By:  /s/ Kim S. Price
                                                  ------------------------------
                                             Its: President

                                             And By: /s/ Paul L. Teem, Jr.
                                             Its:    Executive Vice President
                                                     and Secretary

                                       167
<PAGE>

                             BENEFICIARY DESIGNATION
                               CITIZENS SOUTH BANK
                          SALARY CONTINUATION AGREEMENT

        I, Gary F. Hoskins, designate the following as beneficiary of any death
benefits under this Salary Continuation Agreement

        Primary:

_____________________________________________________________.

        Contingent:

_____________________________________________________________.

        NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE
TRUSTEE(S) AND THE EXACT NAME AND DATE OF THE TRUST AGREEMENT.

        I understand that I may change these beneficiary designations by filing
a new written designation with the Bank. I further understand that the
designations will be automatically revoked if the beneficiary predeceases me, or
if I have named my spouse as beneficiary and our marriage is subsequently
dissolved.

        Signature:  /s/ Gary F. Hoskins

        Date:    January 3, 2004

        Accepted by the Bank this 3rd day of January, 2004.

                By: /s/ Kim S. Price

                Print Name: Kim S. Price

                Title:   President

                                       168
<PAGE>

                                   SCHEDULE A
                               CITIZENS SOUTH BANK
                          SALARY CONTINUATION AGREEMENT

                                 GARY F. HOSKINS

<TABLE>
<CAPTION>
                                                         VESTED EARLY
                     AGE AT                              TERMINATION       DISABILITY ANNUAL     CHANGE-IN-      NORMAL RETIREMENT
        PLAN YEAR     PLAN    ACCRUAL                   ANNUAL BENEFIT      BENEFIT PAYABLE    CONTROL BENEFIT    BENEFIT PAYABLE
PLAN     ENDING       YEAR    BALANCE      PERCENT     PAYABLE AT NORMAL       AT NORMAL         PAYABLE IN        AFTER NORMAL
YEAR   DECEMBER 31,   END     8.50% (1)    VESTED (2)  RETIREMENT AGE (3)  RETIREMENT AGE (3)    A LUMP SUM      RETIREMENT DATE (4)
-----  ------------  ------  ----------    ----------  ------------------  ------------------  ---------------  --------------------
  <S>   <C>            <C>   <C>                <C>     <C>                 <C>                 <C>              <C>
   1       2004        41    $   22,735          30%    $          4,810    $         16,034    $      63,807    $               0
   2       2005        42    $   26,660          40%    $          6,910    $         17,275    $      69,447    $               0
   3       2006        43    $   31,102          50%    $          9,258    $         18,516    $      75,585    $               0
   4       2007        44    $   36,120          60%    $         11,855    $         19,758    $      82,267    $               0
   5       2008        45    $   41,783          70%    $         14,700    $         20,999    $      89,538    $               0
   6       2009        46    $   48,165          71%    $         15,791    $         22,241    $      97,453    $               0
   7       2010        47    $   55,348          72%    $         16,907    $         23,482    $     106,066    $               0
   8       2011        48    $   63,425          73%    $         18,048    $         24,724    $     115,442    $               0
   9       2012        49    $   72,497          74%    $         19,214    $         25,965    $     125,646    $               0
  10       2013        50    $   82,678          75%    $         20,405    $         27,206    $     136,752    $               0
  11       2014        51    $   94,092          75%    $         21,336    $         28,448    $     148,839    $               0
  12       2015        52    $  106,878          75%    $         22,267    $         29,689    $     161,995    $               0
  13       2016        53    $  121,189          75%    $         23,198    $         30,931    $     176,314    $               0
  14       2017        54    $  137,195          75%    $         24,129    $         32,172    $     191,899    $               0
  15       2018        55    $  155,084          75%    $         25,060    $         33,413    $     208,861    $               0
  16       2019        56    $  175,063          75%    $         25,991    $         34,655    $     227,322    $               0
  17       2020        57    $  197,362          75%    $         26,922    $         35,896    $     247,416    $               0
  18       2021        58    $  222,236          75%    $         27,853    $         37,138    $     269,285    $               0
  19       2022        59    $  249,965          75%    $         28,784    $         38,379    $     293,087    $               0
  20       2023        60    $  280,860          75%    $         29,715    $         39,621    $     318,993    $               0
  21       2024        61    $  315,263          80%    $         32,690    $         40,862    $     347,190    $               0
  22       2025        62    $  353,554          85%    $         35,788    $         42,103    $     377,878    $               0
  23       2026        63    $  396,151          90%    $         39,010    $         43,345    $     411,279    $               0
  24       2027        64    $  443,516          95%    $         42,357    $         44,586    $     447,632    $               0
        April 2028     65    $  460,451(5)      100%    $         45,000    $         45,000    $     460,451    $               0
  25       2028        65    $  456,227                                                                          $          30,000
</TABLE>

                                       169
<PAGE>

<TABLE>
<CAPTION>
                                                         VESTED EARLY
                     AGE AT                              TERMINATION       DISABILITY ANNUAL     CHANGE-IN-      NORMAL RETIREMENT
        PLAN YEAR     PLAN    ACCRUAL                   ANNUAL BENEFIT      BENEFIT PAYABLE    CONTROL BENEFIT    BENEFIT PAYABLE
PLAN     ENDING       YEAR    BALANCE      PERCENT     PAYABLE AT NORMAL       AT NORMAL         PAYABLE IN        AFTER NORMAL
YEAR   DECEMBER 31,   END     8.50% (1)    VESTED (2)  RETIREMENT AGE (3)  RETIREMENT AGE (3)    A LUMP SUM      RETIREMENT DATE (4)
-----  ------------  ------  ----------    ----------  ------------------  ------------------  ---------------  --------------------
  <S>   <C>            <C>   <C>                <C>     <C>                 <C>                 <C>              <C>
  26       2029        66    $  448,807                                                                          $          45,600
  27       2030        67    $  439,776                                                                          $          46,512
  28       2031        68    $  428,974                                                                          $          47,442
  29       2032        69    $  416,223                                                                          $          48,391
  30       2033        70    $  401,331                                                                          $          49,359
  31       2034        71    $  384,089                                                                          $          50,346
  32       2035        72    $  364,270                                                                          $          51,353
  33       2036        73    $  341,622                                                                          $          52,380
  34       2037        74    $  315,876                                                                          $          53,428
  35       2038        75    $  286,736                                                                          $          54,496
  36       2039        76    $  253,879                                                                          $          55,586
  37       2040        77    $  216,953                                                                          $          56,698
  38       2041        78    $  175,576                                                                          $          57,832
  39       2042        79    $  129,330                                                                          $          58,988
  40       2043        80    $   77,762                                                                          $          60,168
  41       2044        81    $   20,376                                                                          $          61,372
  42    April 2045     82    $        0                                                                          $          20,592
</TABLE>

        (1)     Calculations are approximations. Benefit calculations are based
on prior year-end accrual balances. The accrual balance reflects payment at the
beginning of each month during retirement, beginning May 1, 2028.

        (2)     For purposes of determining the Executive's Early Termination
benefit under Section 2.2, vesting is determined as follows. The executive is
100% vested on his 65th birthday if Termination of Employment occurs on or after
his 65th birthday. The executive is 75% vested on his 60th birthday if
Termination of Employment occurs on or after his 60th birthday, vesting in
additional 5% increments on his 61st through 65th birthdays provided he remains
employed by the Bank on those dates. The Executive may not be more than 75%
vested until his 61st birthday. The Executive is 30% vested as of the January 1,
2004 Effective Date of the Salary Continuation Agreement. On January 1, 2005 and
on January 1 of each Plan Year thereafter the Executive becomes vested in an
additional 10% increment until he is 70% vested, provided the Executive remains
employed by the Bank. On January 1 of each Plan Year after the year in which the
Executive becomes 70% vested, he becomes vested in an additional 1% increment
until he is 75% vested or until he attains age 60, whichever first occurs,
provided the Executive remains employed by the Bank.

                                       170
<PAGE>

        (3)     The Early Termination benefit and the Disability benefit are
calculated as an annual payment stream of the Accrual Balance (or vested Accrual
Balance) that exists at the end of the year preceding the year in which Early
Termination or Disability occurs, using a standard discount rate (8.50%). Under
section 2.2.1 and section 2.3.1 of the Salary Continuation Agreement, the Early
Termination benefit and the Disability benefit amount increase annually by 2% to
offset inflation, beginning in the year after payment of the benefit commences.
The Early Termination and Disability benefits continue for the Executive's
lifetime and are included for illustrative purposes only.

        (4)     The Normal Retirement annual benefit under section 2.1 of the
Salary Continuation Agreement continues for the Executive's lifetime. This
illustration merely shows the Normal Retirement annual benefit until the
Executive attains age 82. The Normal Retirement annual benefit in 2028 consists
of eight monthly payments. The Normal Retirement annual benefit in 2045 consists
of four monthly payments. The illustrated Normal Retirement annual benefit
figures reflect the annual 2% increase to offset inflation. Consistent with
section 2.1.1 of the Salary Continuation Agreement, this illustration assumes
that the 2% annual increase occurs in May of each year, beginning in May 2029.

        (5)     Projected retirement occurs on April 26, 2028, with the first
normal monthly retirement benefit paid on May 1, 2028.

                                       171