| [ x ] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|-------|-----------------------------------------------------------------------------------------|

| [  ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|-----------|-------------------------------------------------------------------------------------------|

| Delaware                               |                                                       | 54-2069979             |
|---------------------------------------------|------------------------------------------------------------|------------------------|
| (State or other jurisdiction of             |                                                       | (I.R.S. Employer       |
| incorporation or organization)              |                                                       | Identification Number) |
|                                        |                                                       |                   |
|  519 South New Hope Road, Gastonia, NC |                                                       |  28054            |
| (Address of principal executive offices)    |                                                       | (Zip code)             |
|                                        |                                                       |                   |
|                                        | (704) 868-5200                                             |                   |
|                                        | (Registrant’s telephone number, including area code) |                   |

----

|  Large accelerated filer [  ]                              |   |   Accelerated filer [  ]       |   |
|---------------------------------------------------------------------------|--------|---------------------------------------------------------|--------|
|                                                                      |   |                                                    |   |
|  Non-accelerated filer [  ]       |   |  Smaller Reporting Company [ x ]    |   |

----

| Part I.  Financial Information             | Page                                                                                               |
|------------------------------------------------------|----------------------------------------------------------------------------------------------------|
|                                                 |                                                                                               |   |
| Item 1.   Financial Statements (unaudited) |                                                                                               |
|                                                 |                                                                                               |   |
|                                                 |  Consolidated Statements of Financial Condition- March 31, 2011 and December 31, 2010         | 1 |
|                                                 |                                                                                               |   |
|                                                 |  Consolidated Statements of Operations - Three Months Ended March 31, 2011 and 2010           | 2 |
|                                                 |                                                                                               |   |
|                                                 | Consolidated Statements of Shareholders’ Equity - Three Months Ended March 31, 2011 and 2010 | 3 |
|                                                 |                                                                                               |   |
|                                                 |  Consolidated Statements of Cash Flows - Three Months Ended March 31, 2011 and 2010           | 4 |
|                                                 |                                                                                               |   |
|                                                 |  Notes to Consolidated Financial Statements                                                   | 5 |
|                                                 |                                                                                               |   |

| Item 2.  Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations | 23     |
|-----------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                  |   |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk                                               | 32     |
|                                                                                                                  |   |
| Item 4.  Controls and Procedures                                                                            | 32     |
|                                                                                                                  |   |
| Part II.  Other Information                                                                                 |   |
|                                                                                                                  |   |
| Item 1.  Legal Proceedings                                                                                  | 33     |
|                                                                                                                  |   |
| Item 1A.  Risk Factors                                                                                      | 33     |
|                                                                                                                  |   |
| Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds                                        | 33     |
|                                                                                                                  |   |
| Item 6.  Exhibits                                                                                           | 33     |
|                                                                                                                  |   |
| Signatures                                                                                                            |   |
|                                                                                                                  |   |
| Certifications                                                                                                        |   |
|                                                                                                                  |   |

----

Part 

Item 

| CITIZENS SOUTH BANKING CORPORATION                              |   |           |      |   |              |   |
|-----------------------------------------------------------------|--------|----------------|-----------|--------|-------------------|--------|
| CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION                  |   |           |      |   |
|                                                            |   |           |      |   |              |   |
|                                                            |   |           |      |   |              |   |
|                                                            |   | March 31, 2011 |      |   | December 31, 2010 |   |
| (Dollars in thousands, except per share)                        |   | (unaudited)    |      |   |              |   |
|                                                            |   |           |      |   |              |   |
| ASSETS                                                          |   |           |      |   |              |   |
| Cash and cash equivalents:                                      |   |           |      |   |              |   |
| Cash and due from banks                                         |   | $              | 10,398    |   |              | $      | 15,110 |   |
| Interest-earning bank balances                                  |   |           | 57,359    |   |              |   | 105,789 |   |
| Cash and cash equivalents                                       |   |           | 67,757    |   |              |   | 120,899 |   |
| Investment securities available for sale, at fair value         |   |           | 71,117    |   |              |   | 74,308 |   |
| Investment securities held to maturity, at amortized cost       |   |           | 82,889    |   |              |   | 37,278 |   |
| Federal Home Loan Bank stock, at cost                           |   |           | 5,715     |   |              |   | 5,715 |   |
| Presold loans in process of settlement                          |   |           | 1,255     |   |              |   | 4,034 |   |
| Loans:                                                          |   |           |      |   |              |   |   |   |
| Covered by FDIC loss-share agreements                           |   |           | 137,758   |   |              |   | 147,576 |   |
| Not covered by FDIC loss-share agreements                       |   |           | 586,897   |   |              |   | 588,934 |   |
| Allowance for loan losses                                       |   |           | (12,006   | )      |              |   | (11,924 | ) |
| Net loans                                                       |   |           | 712,649   |   |              |   | 724,586 |   |
| Other real estate owned                                         |   |           | 16,584    |   |              |   | 14,652 |   |
| Premises and equipment, net                                     |   |           | 23,587    |   |              |   | 23,785 |   |
| FDIC loss share receivable                                      |   |           | 25,611    |   |              |   | 24,848 |   |
| Accrued interest receivable                                     |   |           | 2,829     |   |              |   | 3,001 |   |
| Bank-owned life insurance                                       |   |           | 18,386    |   |              |   | 18,230 |   |
| Intangible assets                                               |   |           | 1,551     |   |              |   | 1,690 |   |
| Other assets                                                    |   |           | 11,514    |   |              |   | 11,461 |   |
| Total assets                                                    |   | $              | 1,041,444 |   |              | $      | 1,064,487 |   |
|                                                            |   |           |      |   |              |   |   |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY                            |   |           |      |   |              |   |   |   |
| Deposits                                                        |   | $              | 832,803   |   |              | $      | 850,456 |   |
| Securities sold under repurchase agreements                     |   |           | 11,389    |   |              |   | 9,432 |   |
| Borrowed money                                                  |   |           | 96,257    |   |              |   | 101,246 |   |
| Other liabilities                                               |   |           | 8,719     |   |              |   | 9,910 |   |
| Total liabilities                                               |   |           | 949,168   |   |              |   | 971,044 |   |
| Commitments and contingencies                                   |   |           |      |   |              |   |   |   |
| Shareholders' Equity                                            |   |           |      |   |              |   |   |   |
| Preferred stock, $0.01 par value, Authorized: 1,000,000 shares; |   |           |      |   |              |   |   |   |
| Issued and outstanding: 20,500 shares                           |   |           | 20,692    |   |              |   | 20,672 |   |
| Common stock, $0.01 par value, Authorized: 20,000,000 shares;   |   |           |      |   |              |   |   |   |
| Issued: 11,561,464 shares; Outstanding: 11,508,750 shares       |   |           | 124       |   |              |   | 124 |   |
| Additional paid-in-capital                                      |   |           | 63,064    |   |              |   | 63,000 |   |
| Retained earnings, substantially restricted                     |   |           | 8,382     |   |              |   | 9,663 |   |
| Accumulated other comprehensive income (loss)                   |   |           | 14        |   |              |   | (16 | ) |
| Total shareholders' equity                                      |   |           | 92,276    |   |              |   | 93,443 |   |
| Total liabilities and shareholders' equity                      |   | $              | 1,041,444 |   |              | $      | 1,064,487 |   |

----

| CITIZENS SOUTH BANKING CORPORATION                  |   |               |   |   |
|-----------------------------------------------------|--------|--------------------|--------|--------|
| CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)   |   |
|                                                |   |               |   |   |   |   |
|                                                |   | Three Months Ended |   |
|                                                |   | March 31, 2011     |   |   | March 31, 2010 |   |
| (Dollars in thousands, except per share data)       |   |               |   |   |
|                                                |   |               |   |   |   |   |
| Interest Income:                                    |   |               |   |   |   |   |
| Interest and fees on loans                          |   | $                  | 9,461  |   |   | $ | 8,254 |   |
| Investment securities:                              |   |               |   |   |   |   |   |   |
| Taxable interest income                             |   |               | 790    |   |   |   | 617 |   |
| Tax-exempt interest income                          |   |               | 69     |   |   |   | 191 |   |
| Other interest income                               |   |               | 67     |   |   |   | 50 |   |
| Total interest income                               |   |               | 10,387 |   |   |   | 9,112 |   |
| Interest Expense:                                   |   |               |   |   |   |   |   |   |
| Deposits                                            |   |               | 2,002  |   |   |   | 2,264 |   |
| Repurchase agreements                               |   |               | 18     |   |   |   | 28 |   |
| Borrowed money                                      |   |               | 835    |   |   |   | 1,101 |   |
| Total interest expense                              |   |               | 2,855  |   |   |   | 3,393 |   |
|                                                |   |               |   |   |   |   |   |   |
| Net interest income                                 |   |               | 7,532  |   |   |   | 5,719 |   |
| Provision for loan losses                           |   |               | 3,000  |   |   |   | 3,050 |   |
| Net interest income after provision for loan losses |   |               | 4,532  |   |   |   | 2,669 |   |
| Noninterest Income:                                 |   |               |   |   |   |   |   |   |
| Service charges on deposit accounts                 |   |               | 957    |   |   |   | 799 |   |
| Mortgage banking income                             |   |               | 237    |   |   |   | 210 |   |
| Commissions on sales of financial products          |   |               | 67     |   |   |   | 118 |   |
| Income from bank-owned life insurance               |   |               | 182    |   |   |   | 189 |   |
| Gain (loss) from acquisition                        |   |               | (255   | )      |   |   | 18,733 |   |
| Gain on sale of investments, available for sale     |   |               | -      |   |   |   | 33 |   |
| Gain (loss) on sale of other assets                 |   |               | 12     |   |   |   | (62 | ) |
| Other income                                        |   |               | 278    |   |   |   | 165 |   |
| Total noninterest income                            |   |               | 1,478  |   |   |   | 20,185 |   |
| Noninterest Expense:                                |   |               |   |   |   |   |   |   |
| Compensation and benefits                           |   |               | 3,648  |   |   |   | 2,643 |   |
| Occupancy and equipment                             |   |               | 828    |   |   |   | 683 |   |
| Office supplies                                     |   |               | 70     |   |   |   | 41 |   |
| Advertising and business development                |   |               | 54     |   |   |   | 57 |   |
| Professional services                               |   |               | 253    |   |   |   | 234 |   |
| Telephone and communications                        |   |               | 97     |   |   |   | 72 |   |
| Data processing                                     |   |               | 183    |   |   |   | 140 |   |
| Deposit insurance                                   |   |               | 334    |   |   |   | 260 |   |
| Amortization of intangible assets                   |   |               | 139    |   |   |   | 65 |   |
| Valuation adjustment on other real estate owned     |   |               | 509    |   |   |   | 484 |   |
| Acquisition and integration expenses                |   |               | 45     |   |   |   | 787 |   |
| Other expenses                                      |   |               | 1,512  |   |   |   | 890 |   |
| Total noninterest expense                           |   |               | 7,672  |   |   |   | 6,356 |   |
|                                                |   |               |   |   |   |   |   |   |
| Income before income tax expense (benefit)          |   |               | (1,662 | )      |   |   | 16,498 |   |
| Income tax expense (benefit)                        |   |               | (771   | )      |   |   | 6,201 |   |
| Net income (loss)                                   |   |               | (891   | )      |   |   | 10,297 |   |
| Dividends on preferred stock                        |   |               | 256    |   |   |   | 257 |   |
|                                                |   |               |   |   |   |   |   |   |
| Net income (loss) available to common stockholders  |   | $                  | (1,147 | )      |   | $ | 10,040 |   |
|                                                |   |               |   |   |   |   |   |   |
| Basic earnings (loss) per common share              |   | $                  | (0.10  | )      |   | $ | 1.29 |   |
| Diluted earnings (loss) per common share            |   |               | (0.10  | )      |   |   | 1.29 |   |

----

CITIZENS 

|                                               |   |      |   |   |   |   |   |       |   |   | Retained      |   |   | Accumulated   |   |   |          |   |
|----------------------------------------------------|--------|-----------|--------|--------|--------|--------|--------|------------|--------|--------|---------------|--------|--------|---------------|--------|--------|---------------|--------|
|                                               |   |      |   |   |   |   |   | Additional |   |   | Earnings      |   |   | Other         |   |   | Total         |   |
|                                               |   | Preferred |   |   | Common |   |   | Paid-in    |   |   | Substantially |   |   | Comprehensive |   |   | Shareholders' |   |
|                                               |   | Stock     |   |   | Stock  |   |   | Capital    |   |   | Restricted    |   |   | Income (Loss) |   |   | Equity        |   |
| (Dollars in thousands)                             |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |
|                                               |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |
| Balances, January 1, 2010                          |   | $         | 20,589 |   |   | $      | 91     |       |   | $      | 48,528        |   |   | $             | 3,411  |   |          | $      | (297 | ) |   | $ | 72,322 |   |
|                                               |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
| Comprehensive results:                             |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
| Net income                                         |   |      | -      |   |   |   | -      |       |   |   | -             |   |   |          | 10,297 |   |          |   | - |   |   |   | 10,297 |   |
| Other comprehensive results, net of tax            |   |      | -      |   |   |   | -      |       |   |   | -             |   |   |          | -      |   |          |   | 128 |   |   |   | 128 |   |
| Issuance of common stock                           |   |      | -      |   |   |   | 15     |       |   |   | 5,745         |   |   |          | -      |   |          |   | - |   |   |   | 5,760 |   |
| Issuance of preferred stock                        |   |      | 8,280  |   |   |   | -      |       |   |   | -             |   |   |          | -      |   |          |   | - |   |   |   | 8,280 |   |
| Accretion of discount on preferred stock           |   |      | 21     |   |   |   | -      |       |   |   | -             |   |   |          | (21    | )      |          |   | - |   |   |   | - |   |
| Allocation from shares purchased with loan to ESOP |   |      | -      |   |   |   | -      |       |   |   | 46            |   |   |          | -      |   |          |   | - |   |   |   | 46 |   |
| Vesting of Recognition and Retention Plan ("RRP")  |   |      | -      |   |   |   | -      |       |   |   | 90            |   |   |          | -      |   |          |   | - |   |   |   | 90 |   |
| Stock-based compensation                           |   |      | -      |   |   |   | -      |       |   |   | 24            |   |   |          | -      |   |          |   | - |   |   |   | 24 |   |
| Preferred stock dividends                          |   |      | -      |   |   |   | -      |       |   |   | -             |   |   |          | (257   | )      |          |   | - |   |   |   | (257 | ) |
| Cash dividends declared on common stock            |   |      | -      |   |   |   | -      |       |   |   | -             |   |   |          | (300   | )      |          |   | - |   |   |   | (300 | ) |
|                                               |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   | - |   |
| Balances, March 31, 2010                           |   | $         | 28,890 |   |   | $      | 106    |       |   | $      | 54,433        |   |   | $             | 13,130 |   |          | $      | (169 | ) |   | $ | 96,390 |   |
|                                               |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
|                                               |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
|                                               |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
| Balances, January 1, 2011                          |   | $         | 20,672 |   |   | $      | 124    |       |   | $      | 63,000        |   |   | $             | 9,663  |   |          | $      | (16 | ) |   | $ | 93,443 |   |
|                                               |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
| Comprehensive results:                             |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   |   |   |
| Net loss                                           |   |      | -      |   |   |   | -      |       |   |   | -             |   |   |          | (891   | )      |          |   | - |   |   |   | (891 | ) |
| Other comprehensive results, net of tax            |   |      | -      |   |   |   | -      |       |   |   | -             |   |   |          | -      |   |          |   | 30 |   |   |   | 30 |   |
| Accretion of discount on preferred stock           |   |      | 20     |   |   |   | -      |       |   |   | -             |   |   |          | (20    | )      |          |   | - |   |   |   | - |   |
| Allocation from shares purchased with loan to ESOP |   |      | -      |   |   |   | -      |       |   |   | 11            |   |   |          | -      |   |          |   | - |   |   |   | 11 |   |
| Vesting of RRP                                     |   |      | -      |   |   |   | -      |       |   |   | 25            |   |   |          | -      |   |          |   | - |   |   |   | 25 |   |
| Stock-based compensation                           |   |      | -      |   |   |   | -      |       |   |   | 28            |   |   |          | -      |   |          |   | - |   |   |   | 28 |   |
| Preferred stock dividends                          |   |      | -      |   |   |   | -      |       |   |   | -             |   |   |          | (256   | )      |          |   | - |   |   |   | (256 | ) |
| Cash dividends declared on common stock            |   |      | -      |   |   |   | -      |       |   |   | -             |   |   |          | (114   | )      |          |   | - |   |   |   | (114 | ) |
|                                               |   |      |   |   |   |   |   |       |   |   |          |   |   |          |   |   |          |   |   |   |   |   | - |   |
| Balances, March 31, 2011                           |   | $         | 20,692 |   |   | $      | 124    |       |   | $      | 63,064        |   |   | $             | 8,382  |   |          | $      | 14 |   |   | $ | 92,276 |   |

----

| CITIZENS SOUTH BANKING CORPORATION                                                |   |               |    |   |           |   |
|-----------------------------------------------------------------------------------|--------|--------------------|---------|--------|----------------|--------|
| CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)                                 |   |               |    |   |
|                                                                              |   | Three Months Ended |    |
|                                                                              |   | March 31, 2011     |    |   | March 31, 2010 |   |
| (Dollars in thousands)                                                            |   |               |    |   |           |   |
|                                                                              |   |               |    |   |           |   |
| Cash flows from operating activities:                                             |   |               |    |   |           |   |
| Net income (loss)                                                                 |   | $                  | (891    | )      |           | $      | 10,297 |   |
| Reconciliation of net income to net cash provided by operating activities:        |   |               |    |   |           |
| Provision for loan losses                                                         |   |               | 3,000   |   |           |   | 3,050 |   |
| Depreciation of premises and equipment                                            |   |               | 322     |   |           |   | 260 |   |
| Gain on sale of investment securities available for sale                          |   |               | -       |   |           |   | (33 | ) |
| (Gain) loss on sale of other assets                                               |   |               | (12     | )      |           |   | 62 |   |
| (Gain) loss on acquisition                                                        |   |               | 255     |   |           |   | (18,733 | ) |
| Valuation adjustment on other real estate owned                                   |   |               | 509     |   |           |   | 484 |   |
| Net purchase accounting adjustments - discount accretion                          |   |               | (2,562  | )      |           |   | - |   |
| Deferred loan origination fees                                                    |   |               | 60      |   |           |   | 40 |   |
| Amortization of intangible assets                                                 |   |               | 139     |   |           |   | 65 |   |
| Allocation of shares to the ESOP                                                  |   |               | 11      |   |           |   | 46 |   |
| Vesting of shares issued for the RRP                                              |   |               | 25      |   |           |   | 90 |   |
| Stock-based compensation expense                                                  |   |               | 28      |   |           |   | 24 |   |
| Decrease in accrued interest receivable                                           |   |               | 172     |   |           |   | 110 |   |
| (Increase) decrease in other assets                                               |   |               | (6,020  | )      |           |   | 2,387 |   |
| Increase (decrease) in other liabilities                                          |   |               | (1,379  | )      |           |   | 1,958 |   |
| Net cash provided by (used in) operating activities                               |   |               | (6,343  | )      |           |   | 107 |   |
|                                                                              |   |               |    |   |           |   |   |   |
| Cash flows from investing activities:                                             |   |               |    |   |           |   |   |   |
| Net decrease in loans made to customers                                           |   |               | 11,438  |   |           |   | 4,366 |   |
| Net (increase) decrease in loans available for sale                               |   |               | 2,779   |   |           |   | (1,650 | ) |
| Proceeds from sales of investment securities available for sale                   |   |               | 1,065   |   |           |   | 9,389 |   |
| Proceeds from sales of other real estate owned                                    |   |               | 2,347   |   |           |   | 611 |   |
| Proceeds from maturities/issuer calls of investment securities available for sale |   |               | 2,175   |   |           |   | 6,115 |   |
| Proceeds from maturities/issuer calls of investment securities held to maturity   |   |               | 3,103   |   |           |   | 5,152 |   |
| Purchases of investment securities available for sale                             |   |               | -       |   |           |   | (3,853 | ) |
| Purchases of investment securities held to maturity                               |   |               | (48,714 | )      |           |   | (11,025 | ) |
| Net cash received in acquisition of Bank of Hiawassee                             |   |               | -       |   |           |   | 95,058 |   |
| Purchases of premises and equipment                                               |   |               | (125    | )      |           |   | (51 | ) |
| Net cash provided by (used in) investment activities                              |   |               | (25,932 | )      |           |   | 104,112 |   |
|                                                                              |   |               |    |   |           |   |   |   |
| Cash flows from financing activities:                                             |   |               |    |   |           |   |   |   |
| Net decrease in deposits                                                          |   |               | (17,653 | )      |           |   | (17,438 | ) |
| Cash dividends paid to common stockholders                                        |   |               | (114    | )      |           |   | (300 | ) |
| Cash dividends paid to preferred stockholders                                     |   |               | (256    | )      |           |   | (257 | ) |
| Issuance of common stock                                                          |   |               | -       |   |           |   | 5,760 |   |
| Issuance of preferred stock                                                       |   |               | -       |   |           |   | 8,280 |   |
| Net increase (decrease) in borrowed money and repurchase agreements               |   |               | (3,032  | )      |           |   | 574 |   |
| Increase (decrease) in advances from borrowers for insurance and taxes            |   |               | 188     |   |           |   | 139 |   |
| Net cash used in financing activities                                             |   |               | (20,867 | )      |           |   | (3,242 | ) |
|                                                                              |   |               |    |   |           |   |   |   |
| Net increase (decrease) in cash and cash equivalents                              |   |               | (53,142 | )      |           |   | 100,977 |   |
| Cash and cash equivalents at beginning of year                                    |   |               | 120,899 |   |           |   | 53,180 |   |
| Cash and cash equivalents at end of year                                          |   | $                  | 67,757  |   |           | $      | 154,157 |   |
|                                                                              |   |               |    |   |           |   |   |   |
| Supplemental non-cash investing activity:                                         |   |               |    |   |           |   |   |   |
| Foreclosed loans transferred to other real estate owned                           |   | $                  | 4,956   |   |           | $      | 1,514 |   |

----

CITIZENS 

----

----

|                                                                          |   | Three Months                                     |       |
|-------------------------------------------------------------------------------|--------|--------------------------------------------------|------------|
|                                                                          |   | Ended March 31,                                  |       |
|                                                                          |   | 2011                                             |       |   | 2010 |   |
|                                                                          |   | (Dollars in thousands, except per share amounts) |       |
|                                                                          |   |                                             |       |   |   |   |
| Net income (loss) available to common stockholders                            |   | $                                                | (1,147     | ) |   | $ | 10,040 |   |
|                                                                          |   |                                             |       |   |   |   |   |   |
| Basic EPS                                                                     |   | $                                                | (0.10      | ) |   | $ | 1.29 |   |
|                                                                          |   |                                             |       |   |   |   |   |   |
| Shares used in the computation of basic EPS:                                  |   |                                             |       |   |   |   |   |   |
| Weighted average number of shares outstanding                                 |   |                                             | 11,491,734 |   |   |   | 7,786,819 |   |
|                                                                          |   |                                             |       |   |   |   |   |   |
| Incremental shares from assumed exercise of stockoptions and restricted stock |   |                                             | -          |   |   |   | - |   |
| Weighted average number of shares outstanding - diluted                       |   |                                             | 11,491,734 |   |   |   | 7,786,819 |   |
|                                                                          |   |                                             |       |   |   |   |   |   |
| Diluted EPS                                                                   |   | $                                                | (0.10      | ) |   | $ | 1.29 |   |

----

|                                                       |   | Three Months           |   |
|------------------------------------------------------------|--------|------------------------|--------|
|                                                       |   | Ended March 31,        |   |
|                                                       |   | 2011                   |   |   | 2010 |   |
|                                                       |   | (Dollars in thousands) |   |
|                                                       |   |                   |   |   |   |   |
| Net income (loss)                                          |   | $                      | (891   | ) |   | $ | 10,297 |   |
|                                                       |   |                   |   |   |   |   |   |   |
| Other comprehensive income:                                |   |                   |   |   |   |   |   |   |
| Investment securities, available for sale:                 |   |                   |   |   |   |   |   |   |
| Unrealized holding gains arising during period             |   |                   | 49     |   |   |   | 253 |   |
| Tax expense                                                |   |                   | (19    | ) |   |   | (98 | ) |
| Reclassification for realized gains included in net income |   |                   | -      |   |   |   | (33 | ) |
| Tax benefit                                                |   |                   | -      |   |   |   | 13 |   |
| Other comprehensive income                                 |   |                   | 30     |   |   |   | 135 |   |
| Total comprehensive income (loss)                          |   | $                      | (861   | ) |   | $ | 10,432 |   |

----

|                               |   |                   |    |   | Gross      |   |   | Gross      |   |   |       |   |
|------------------------------------|--------|------------------------|---------|--------|------------|--------|--------|------------|--------|--------|------------|--------|
|                               |   | Carrying               |    |   | Unrealized |   |   | Unrealized |   |   | Estimated  |   |
|                               |   | Value                  |    |   | Gains      |   |   | Losses     |   |   | Fair Value |   |
|                               |   | (Dollars in thousands) |    |   |       |   |   |       |   |
| March 31, 2011                     |   |                   |    |   |       |   |   |       |   |   |       |   |
| Available for sale:                |   |                   |    |   |       |   |   |       |   |   |       |   |
| U.S. Government Agency obligations |   | $                      | 19,262  |   |       | $      | 21     |       |   | $      | 108        |   |   | $ | 19,175 |   |
| Municipal bonds                    |   |                   | 11,550  |   |       |   | 22     |       |   |   | 72         |   |   |   | 11,500 |   |
| Mortgage-backed securities         |   |                   | 38,567  |   |       |   | 207    |       |   |   | 117        |   |   |   | 38,657 |   |
| Other securities                   |   |                   | 1,716   |   |       |   | 149    |       |   |   | 80         |   |   |   | 1,785 |   |
| Subtotal                           |   |                   | 71,095  |   |       |   | 399    |       |   |   | 377        |   |   |   | 71,117 |   |
|                               |   |                   |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| Held to maturity:                  |   |                   |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| U.S. Treasury obligations          |   |                   | 9,960   |   |       |   | -      |       |   |   | 39         |   |   |   | 9,921 |   |
| U.S. Government Agency obligations |   |                   | 8,998   |   |       |   | 5      |       |   |   | 118        |   |   |   | 8,885 |   |
| Mortgage-backed securities         |   |                   | 59,931  |   |       |   | 712    |       |   |   | 179        |   |   |   | 60,464 |   |
| Other securities                   |   |                   | 4,000   |   |       |   | -      |       |   |   | 85         |   |   |   | 3,915 |   |
| Subtotal                           |   |                   | 82,889  |   |       |   | 717    |       |   |   | 421        |   |   |   | 83,185 |   |
|                               |   |                   |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| Total at March 31, 2011            |   | $                      | 153,984 |   |       | $      | 1,116  |       |   | $      | 798        |   |   | $ | 154,302 |   |
|                               |   |                   |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
|                               |   |                   |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
|                               |   |                   |    |   |       | Gross  |   |       | Gross  |   |       |   |   |   |
|                               |   | Carrying               |    |   | Unrealized |   |   | Unrealized |   |   | Estimated  |   |
|                               |   | Value                  |    |   | Gains      |   |   | Losses     |   |   | Fair Value |   |
|                               |   | (Dollars in thousands) |    |   |       |   |   |       |   |   |       |
| December 31, 2010                  |   |                   |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| Available for sale:                |   |                   |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| U.S. Government Agency obligations |   | $                      | 19,297  |   |       | $      | 23     |       |   | $      | 122        |   |   | $ | 19,198 |   |
| Municipal bonds                    |   |                   | 11,602  |   |       |   | 40     |       |   |   | 128        |   |   |   | 11,514 |   |
| Mortgage-backed securities         |   |                   | 40,655  |   |       |   | 293    |       |   |   | 175        |   |   |   | 40,773 |   |
| Other securities                   |   |                   | 2,781   |   |       |   | 110    |       |   |   | 68         |   |   |   | 2,823 |   |
| Subtotal                           |   |                   | 74,335  |   |       |   | 466    |       |   |   | 493        |   |   |   | 74,308 |   |
|                               |   |                   |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| Held to maturity:                  |   |                   |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| U.S. Treasury obligations          |   |                   | 9,955   |   |       |   | -      |       |   |   | 38         |   |   |   | 9,917 |   |
| U.S. Government Agency obligations |   |                   | 8,509   |   |       |   | 4      |       |   |   | 129        |   |   |   | 8,384 |   |
| Mortgage-backed securities         |   |                   | 14,814  |   |       |   | 641    |       |   |   | 37         |   |   |   | 15,418 |   |
| Other securities                   |   |                   | 4,000   |   |       |   | -      |       |   |   | 81         |   |   |   | 3,919 |   |
| Subtotal                           |   |                   | 37,278  |   |       |   | 645    |       |   |   | 285        |   |   |   | 37,638 |   |
|                               |   |                   |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| Total at December 31, 2010         |   | $                      | 111,613 |   |       | $      | 1,111  |       |   | $      | 778        |   |   | $ | 111,946 |   |

----

|                               |   | Less than 12 months    |   |   | 12 months or more |   |   | Total  |   |
|------------------------------------|--------|------------------------|--------|--------|-------------------|--------|--------|--------|--------|
|                               |   | Fair                   |   |   | Unrealized        |   |   | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
|                               |   | Value                  |   |   | Loss              |   |   | Value  |   |   | Loss |   |   | Value |   |   | Loss |   |
|                               |   | (Dollars in thousands) |   |
| March 31, 2011                     |   |                   |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available for sale:                |   |                   |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government Agency obligations |   | $                      | 16,061 |   |              | $      | 108    |   |   | $ | - |   |   | $ | - |   |   | $ | 16,061 |   |   | $ | 108 |   |
| Municipals bonds                   |   |                   | 6,400  |   |              |   | 72     |   |   |   | - |   |   |   | - |   |   |   | 6,400 |   |   |   | 72 |   |
| Mortgage-backed securities         |   |                   | 10,502 |   |              |   | 116    |   |   |   | 104 |   |   |   | 1 |   |   |   | 10,606 |   |   |   | 117 |   |
| Other securities                   |   |                   | 166    |   |              |   | 9      |   |   |   | 101 |   |   |   | 71 |   |   |   | 267 |   |   |   | 80 |   |
|    Subtotal         |   |                   | 33,129 |   |              |   | 305    |   |   |   | 205 |   |   |   | 72 |   |   |   | 33,334 |   |   |   | 377 |   |
|                               |   |                   |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Held to maturity:                  |   |                   |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasury obligations          |   |                   | 9,920  |   |              | $      | 39     |   |   | $ | - |   |   | $ | - |   |   | $ | 9,920 |   |   | $ | 39 |   |
| U.S. Government Agency obligations |   |                   | 5,882  |   |              |   | 118    |   |   |   | - |   |   |   | - |   |   |   | 5,882 |   |   |   | 118 |   |
| Municipals bonds                   |   |                   | -      |   |              |   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Mortgage-backed securities         |   |                   | 30,977 |   |              |   | 179    |   |   |   | - |   |   |   | - |   |   |   | 30,977 |   |   |   | 179 |   |
| Other securities                   |   |                   | 3,915  |   |              |   | 85     |   |   |   | - |   |   |   | - |   |   |   | 3,915 |   |   |   | 85 |   |
|    Subtotal         |   |                   | 50,694 |   |              |   | 421    |   |   |   | 0 |   |   |   | 0 |   |   |   | 50,694 |   |   |   | 421 |   |
| Total at March 31,2011             |   | $                      | 83,823 |   |              | $      | 726    |   |   | $ | 205 |   |   | $ | 72 |   |   | $ | 84,028 |   |   | $ | 798 |   |
|                               |   |                   |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                               |   |                   |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2010                  |   |                   |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available for sale:                |   |                   |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government Agency obligations |   | $                      | 18,113 |   |              | $      | 122    |   |   | $ | - |   |   | $ | - |   |   | $ | 18,113 |   |   | $ | 122 |   |
| Municipals bonds                   |   |                   | 8,376  |   |              |   | 128    |   |   |   | - |   |   |   | - |   |   |   | 8,376 |   |   |   | 128 |   |
| Mortgage-backed securities         |   |                   | 9,395  |   |              |   | 174    |   |   |   | 108 |   |   |   | 1 |   |   |   | 9,503 |   |   |   | 175 |   |
| Other securities                   |   |                   | 0      |   |              |   | 0      |   |   |   | 104 |   |   |   | 68 |   |   |   | 104 |   |   |   | 68 |   |
|    Subtotal         |   |                   | 35,884 |   |              |   | 424    |   |   |   | 212 |   |   |   | 69 |   |   |   | 36,096 |   |   |   | 493 |   |
|                               |   |                   |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Held to maturity:                  |   |                   |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasury obligations          |   |                   | 9,917  |   |              | $      | 38     |   |   | $ | - |   |   | $ | - |   |   | $ | 9,917 |   |   | $ | 38 |   |
| U.S. Government Agency obligations |   |                   | 5,881  |   |              |   | 129    |   |   |   | - |   |   |   | - |   |   |   | 5,881 |   |   |   | 129 |   |
| Municipals bonds                   |   |                   | -      |   |              |   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Mortgage-backed securities         |   |                   | 3,049  |   |              |   | 37     |   |   |   | - |   |   |   | - |   |   |   | 3,049 |   |   |   | 37 |   |
| Other securities                   |   |                   | 3,919  |   |              |   | 81     |   |   |   | - |   |   |   | - |   |   |   | 3,919 |   |   |   | 81 |   |
|    Subtotal         |   |                   | 22,766 |   |              |   | 285    |   |   |   | 0 |   |   |   | 0 |   |   |   | 22,766 |   |   |   | 285 |   |
| Total at December 30,2010          |   | $                      | 58,650 |   |              | $      | 709    |   |   | $ | 212 |   |   | $ | 69 |   |   | $ | 58,862 |   |   | $ | 778 |   |

----

|                           |   | March 31, 2011         |    |   | December 31, 2010 |   |
|--------------------------------|--------|------------------------|---------|--------|-------------------|--------|
|                           |   | Amount                 |    |   | % of TotalLoans   |   |   | Amount |   |   | % of TotalLoans |   |
|                           |   | (Dollars in thousands) |    |   |              |   |   |   |   |
|                           |   |                   |    |   |              |   |   |   |   |   |   |   |
| Real estate:                   |   |                   |    |   |              |   |   |   |   |   |   |   |
| One-to-four family residential |   | $                      | 140,814 |   |              |   | 19 | % |   | $ | 133,769 |   |   |   | 18 | % |
| Multifamily residential        |   |                   | 22,330  |   |              |   | 3 | % |   |   | 23,667 |   |   |   | 3 | % |
| Construction                   |   |                   | 18,983  |   |              |   | 3 | % |   |   | 20,421 |   |   |   | 3 | % |
| Land and development           |   |                   | 85,403  |   |              |   | 12 | % |   |   | 92,724 |   |   |   | 13 | % |
| Other commercial real estate   |   |                   | 284,569 |   |              |   | 39 | % |   |   | 286,601 |   |   |   | 39 | % |
| Consumer real estate           |   |                   | 114,810 |   |              |   | 16 | % |   |   | 118,021 |   |   |   | 16 | % |
| Total real estate              |   |                   | 666,909 |   |              |   | 92 | % |   |   | 675,203 |   |   |   | 92 | % |
| Commercial business            |   |                   | 46,253  |   |              |   | 6 | % |   |   | 48,053 |   |   |   | 7 | % |
| Other consumer                 |   |                   | 11,493  |   |              |   | 2 | % |   |   | 13,254 |   |   |   | 2 | % |
| Total loans                    |   | $                      | 724,655 |   |              |   | 100 | % |   | $ | 736,510 |   |   |   | 100 | % |

----

| March 31, 2011                                        |   | 30 to 89Days PastDue   |   |   | 90+ DaysPast Due(Still Accruing) |   |   | Loans onNonaccrual |   |   | Current |   |   | TotalOutstanding |    |
|-------------------------------------------------------|--------|------------------------|--------|--------|----------------------------------|--------|--------|--------------------|--------|--------|---------|--------|--------|------------------|---------|
|                                                  |   | (Dollars in thousands) |   |
|                                                  |   |                   |   |   |                             |   |   |               |   |   |    |   |   |             |    |
| Not covered by FDIC loss-share agreements             |   |                   |   |   |                             |   |   |               |   |   |    |   |   |             |    |
| Real estate:                                          |   |                   |   |   |                             |   |   |               |   |   |    |   |   |             |    |
| One-to-four family residential                        |   | $                      | 372    |   |                             | $      | -      |               |   | $      | 2,373   |   |   | $                | 106,617 |   |   | $ | 109,362 |   |
| Multifamily residential                               |   |                   | -      |   |                             |   | -      |               |   |   | -       |   |   |             | 20,291  |   |   |   | 20,291 |   |
| Construction                                          |   |                   | -      |   |                             |   | -      |               |   |   | 72      |   |   |             | 18,911  |   |   |   | 18,983 |   |
| Land and development                                  |   |                   | 186    |   |                             |   | 296    |               |   |   | 11,036  |   |   |             | 46,809  |   |   |   | 58,327 |   |
| Other commercial real estate                          |   |                   | 3,984  |   |                             |   | -      |               |   |   | 9,637   |   |   |             | 220,622 |   |   |   | 234,243 |   |
| Consumer real estate                                  |   |                   | 1,070  |   |                             |   | 100    |               |   |   | 909     |   |   |             | 104,292 |   |   |   | 106,371 |   |
| Total real estate                                     |   |                   | 5,612  |   |                             |   | 396    |               |   |   | 24,027  |   |   |             | 517,542 |   |   |   | 547,577 |   |
| Commercial business                                   |   |                   | 61     |   |                             |   | -      |               |   |   | 309     |   |   |             | 33,650  |   |   |   | 34,020 |   |
| Other consumer                                        |   |                   | 19     |   |                             |   | 3      |               |   |   | 22      |   |   |             | 5,256   |   |   |   | 5,300 |   |
| Total loans not covered by FDIC loss-share agreements |   | $                      | 5,692  |   |                             | $      | 399    |               |   | $      | 24,358  |   |   | $                | 556,448 |   |   | $ | 586,897 |   |

| March 31, 2011                                   |   | 30 to 89Days PastDue   |   |   | 90+ DaysPast Due(Still Accruing) |   |   | Loans onNonaccrual |   |   | Current |   |   | TotalOutstanding |    |
|--------------------------------------------------|--------|------------------------|--------|--------|----------------------------------|--------|--------|--------------------|--------|--------|---------|--------|--------|------------------|---------|
|                                             |   | (Dollars in thousands) |   |
|                                             |   |                   |   |   |                             |   |   |               |   |   |    |   |   |             |    |
| Covered by FDIC loss-share agreements            |   |                   |   |   |                             |   |   |               |   |   |    |   |   |             |    |
| Real estate:                                     |   |                   |   |   |                             |   |   |               |   |   |    |   |   |             |    |
| One-to-four family residential                   |   | $                      | 2,709  |   |                             | $      | 84     |               |   | $      | 3,745   |   |   | $                | 24,914  |   |   | $ | 31,452 |   |
| Multifamily residential                          |   |                   | -      |   |                             |   | -      |               |   |   | 430     |   |   |             | 1,609   |   |   |   | 2,039 |   |
| Construction                                     |   |                   | -      |   |                             |   | -      |               |   |   | -       |   |   |             | -       |   |   |   | - |   |
| Land and development                             |   |                   | 212    |   |                             |   | -      |               |   |   | 9,486   |   |   |             | 17,378  |   |   |   | 27,076 |   |
| Other commercial real estate                     |   |                   | 3,358  |   |                             |   | 351    |               |   |   | 8,840   |   |   |             | 37,777  |   |   |   | 50,326 |   |
| Consumer real estate                             |   |                   | 323    |   |                             |   | -      |               |   |   | 264     |   |   |             | 7,852   |   |   |   | 8,439 |   |
| Total real estate                                |   |                   | 6,602  |   |                             |   | 435    |               |   |   | 22,765  |   |   |             | 89,530  |   |   |   | 119,332 |   |
| Commercial business                              |   |                   | 196    |   |                             |   | -      |               |   |   | 1,008   |   |   |             | 11,029  |   |   |   | 12,233 |   |
| Other consumer                                   |   |                   | 206    |   |                             |   | -      |               |   |   | 183     |   |   |             | 5,804   |   |   |   | 6,193 |   |
| Total loans covered by FDIC loss-shareagreements |   | $                      | 7,004  |   |                             | $      | 435    |               |   | $      | 23,956  |   |   | $                | 106,363 |   |   | $ | 137,758 |   |

----

| March 31, 2011                 |   | 30 to 89Days PastDue   |   |   | 90+ DaysPast Due(Still Accruing) |   |   | Loans onNonaccrual |   |   | Current |   |   | TotalOutstanding |    |
|--------------------------------|--------|------------------------|--------|--------|----------------------------------|--------|--------|--------------------|--------|--------|---------|--------|--------|------------------|---------|
|                           |   | (Dollars in thousands) |   |
|                           |   |                   |   |   |                             |   |   |               |   |   |    |   |   |             |    |
| Total loans                    |   |                   |   |   |                             |   |   |               |   |   |    |   |   |             |    |
| Real estate:                   |   |                   |   |   |                             |   |   |               |   |   |    |   |   |             |    |
| One-to-four family residential |   | $                      | 3,081  |   |                             | $      | 84     |               |   | $      | 6,118   |   |   | $                | 131,531 |   |   | $ | 140,814 |   |
| Multifamily residential        |   |                   | -      |   |                             |   | -      |               |   |   | 430     |   |   |             | 21,900  |   |   |   | 22,330 |   |
| Construction                   |   |                   | -      |   |                             |   | -      |               |   |   | 72      |   |   |             | 18,911  |   |   |   | 18,983 |   |
| Land and development           |   |                   | 398    |   |                             |   | 296    |               |   |   | 20,522  |   |   |             | 64,187  |   |   |   | 85,403 |   |
| Other commercial real estate   |   |                   | 7,342  |   |                             |   | 351    |               |   |   | 18,477  |   |   |             | 258,399 |   |   |   | 284,569 |   |
| Consumer real estate           |   |                   | 1,393  |   |                             |   | 100    |               |   |   | 1,173   |   |   |             | 112,144 |   |   |   | 114,810 |   |
| Total real estate              |   |                   | 12,214 |   |                             |   | 831    |               |   |   | 46,792  |   |   |             | 607,072 |   |   |   | 666,909 |   |
| Commercial business            |   |                   | 257    |   |                             |   | -      |               |   |   | 1,317   |   |   |             | 44,679  |   |   |   | 46,253 |   |
| Other consumer                 |   |                   | 225    |   |                             |   | 3      |               |   |   | 205     |   |   |             | 11,060  |   |   |   | 11,493 |   |
| Total loans                    |   | $                      | 12,696 |   |                             | $      | 834    |               |   | $      | 48,314  |   |   | $                | 662,811 |   |   | $ | 724,655 |   |

| December 31, 2010                                     |   | 30 to 89Days PastDue   |   |   | 90+ DaysPast Due(Still Accruing) |   |   | Loans onNonaccrual |   |   | Current |   |   | TotalOutstanding |    |
|-------------------------------------------------------|--------|------------------------|--------|--------|----------------------------------|--------|--------|--------------------|--------|--------|---------|--------|--------|------------------|---------|
|                                                  |   | (Dollars in thousands) |   |
|                                                  |   |                   |   |   |                             |   |   |               |   |   |    |   |   |             |    |
| Not covered by FDIC loss-share agreements             |   |                   |   |   |                             |   |   |               |   |   |    |   |   |             |    |
| Real estate:                                          |   |                   |   |   |                             |   |   |               |   |   |    |   |   |             |    |
| One-to-four family residential                        |   | $                      | 1,299  |   |                             | $      | -      |               |   | $      | 1,864   |   |   | $                | 97,851  |   |   | $ | 101,014 |   |
| Multifamily residential                               |   |                   | -      |   |                             |   | -      |               |   |   | -       |   |   |             | 20,674  |   |   |   | 20,674 |   |
| Construction                                          |   |                   | 630    |   |                             |   | -      |               |   |   | 14      |   |   |             | 19,570  |   |   |   | 20,214 |   |
| Land and development                                  |   |                   | 2,801  |   |                             |   | 2,000  |               |   |   | 559     |   |   |             | 57,527  |   |   |   | 62,887 |   |
| Other commercial real estate                          |   |                   | 7,899  |   |                             |   | -      |               |   |   | 9,161   |   |   |             | 217,423 |   |   |   | 234,483 |   |
| Consumer real estate                                  |   |                   | 1,047  |   |                             |   | -      |               |   |   | 2,513   |   |   |             | 105,634 |   |   |   | 109,194 |   |
| Total real estate                                     |   |                   | 13,676 |   |                             |   | 2,000  |               |   |   | 14,111  |   |   |             | 518,679 |   |   |   | 548,466 |   |
| Commercial business                                   |   |                   | 61     |   |                             |   | -      |               |   |   | 287     |   |   |             | 34,645  |   |   |   | 34,993 |   |
| Other consumer                                        |   |                   | 50     |   |                             |   | -      |               |   |   | 16      |   |   |             | 5,409   |   |   |   | 5,475 |   |
| Total loans not covered by FDIC loss-share agreements |   | $                      | 13,787 |   |                             | $      | 2,000  |               |   | $      | 14,414  |   |   | $                | 558,733 |   |   | $ | 588,934 |   |

----

| December 31, 2010                                 |   | 30 to 89Days PastDue   |   |   | 90+ DaysPast Due(Still Accruing) |   |   | Loans onNonaccrual |   |   | Current |   |   | TotalOutstanding |    |
|---------------------------------------------------|--------|------------------------|--------|--------|----------------------------------|--------|--------|--------------------|--------|--------|---------|--------|--------|------------------|---------|
|                                              |   | (Dollars in thousands) |   |
|                                              |   |                   |   |   |                             |   |   |               |   |   |    |   |   |             |    |
| Covered by FDIC loss-share agreements             |   |                   |   |   |                             |   |   |               |   |   |    |   |   |             |    |
| Real estate:                                      |   |                   |   |   |                             |   |   |               |   |   |    |   |   |             |    |
| One-to-four family residential                    |   | $                      | 1,973  |   |                             | $      | -      |               |   | $      | 3,468   |   |   | $                | 27,314  |   |   | $ | 32,755 |   |
| Multifamily residential                           |   |                   | -      |   |                             |   | -      |               |   |   | -       |   |   |             | 2,993   |   |   |   | 2,993 |   |
| Construction                                      |   |                   | -      |   |                             |   | -      |               |   |   | 49      |   |   |             | 158     |   |   |   | 207 |   |
| Land and development                              |   |                   | 549    |   |                             |   | -      |               |   |   | 9,904   |   |   |             | 19,385  |   |   |   | 29,838 |   |
| Other commercial real estate                      |   |                   | 2,090  |   |                             |   | 472    |               |   |   | 9,471   |   |   |             | 40,084  |   |   |   | 52,117 |   |
| Consumer real estate                              |   |                   | 51     |   |                             |   | 37     |               |   |   | 213     |   |   |             | 8,526   |   |   |   | 8,827 |   |
| Total real estate                                 |   |                   | 4,663  |   |                             |   | 509    |               |   |   | 23,105  |   |   |             | 98,460  |   |   |   | 126,737 |   |
| Commercial business                               |   |                   | 376    |   |                             |   | 17     |               |   |   | 1,051   |   |   |             | 11,616  |   |   |   | 13,060 |   |
| Other consumer                                    |   |                   | 728    |   |                             |   | -      |               |   |   | 860     |   |   |             | 6,191   |   |   |   | 7,779 |   |
| Total loans covered by FDIC loss-share agreements |   | $                      | 5,767  |   |                             | $      | 526    |               |   | $      | 25,016  |   |   | $                | 116,267 |   |   | $ | 147,576 |   |

| December 31, 2010                                 |   | 30 to 89Days PastDue   |   |   | 90+ DaysPast Due(Still Accruing) |   |   | Loans onNonaccrual |   |   | Current |   |   | TotalOutstanding |    |
|---------------------------------------------------|--------|------------------------|--------|--------|----------------------------------|--------|--------|--------------------|--------|--------|---------|--------|--------|------------------|---------|
|                                              |   | (Dollars in thousands) |   |   |                             |   |   |               |   |   |    |   |
|                                              |   |                   |   |   |                             |   |   |               |   |   |    |   |   |             |    |
| Total loans                                       |   |                   |   |   |                             |   |   |               |   |   |    |   |   |             |    |
| Real estate:                                      |   |                   |   |   |                             |   |   |               |   |   |    |   |   |             |    |
| One-to-four family residential                    |   | $                      | 3,272  |   |                             | $      | -      |               |   | $      | 5,332   |   |   | $                | 125,165 |   |   | $ | 133,769 |   |
| Multifamily residential                           |   |                   | -      |   |                             |   | -      |               |   |   | -       |   |   |             | 23,667  |   |   |   | 23,667 |   |
| Construction                                      |   |                   | 630    |   |                             |   | -      |               |   |   | 63      |   |   |             | 19,728  |   |   |   | 20,421 |   |
| Land and development                              |   |                   | 3,350  |   |                             |   | 2,000  |               |   |   | 10,463  |   |   |             | 76,912  |   |   |   | 92,725 |   |
| Other commercial real estate                      |   |                   | 9,989  |   |                             |   | 472    |               |   |   | 18,632  |   |   |             | 257,507 |   |   |   | 286,600 |   |
| Consumer real estate                              |   |                   | 1,098  |   |                             |   | 37     |               |   |   | 2,726   |   |   |             | 114,160 |   |   |   | 118,021 |   |
| Total real estate                                 |   |                   | 18,339 |   |                             |   | 2,509  |               |   |   | 37,216  |   |   |             | 617,139 |   |   |   | 675,203 |   |
| Commercial business                               |   |                   | 437    |   |                             |   | 17     |               |   |   | 1,338   |   |   |             | 46,261  |   |   |   | 48,053 |   |
| Other consumer                                    |   |                   | 778    |   |                             |   | -      |               |   |   | 876     |   |   |             | 11,600  |   |   |   | 13,254 |   |
| Total loans covered by FDIC loss-share agreements |   | $                      | 19,554 |   |                             | $      | 2,526  |               |   | $      | 39,430  |   |   | $                | 675,000 |   |   | $ | 736,510 |   |

|                           |   | Legal Balance          |   |   | Write-down |   |   | Book Balance |   |
|--------------------------------|--------|------------------------|--------|--------|------------|--------|--------|--------------|--------|
|                           |   | (Dollars in thousands) |   |
|                           |   |                   |   |   |       |   |   |         |   |
| One-to-four family residential |   | $                      | 1,084  |   |       | $      | 454    |         |   | $ | 630 |   |
| Construction                   |   |                   | 247    |   |       |   | 22     |         |   |   | 225 |   |
| Land and development           |   |                   | 12,610 |   |       |   | 3,573  |         |   |   | 9,037 |   |
| Other commercial real estate   |   |                   | 11,244 |   |       |   | 3,693  |         |   |   | 7,551 |   |
| Consumer real estate           |   |                   | 538    |   |       |   | 387    |         |   |   | 151 |   |
| Total impaired loans           |   | $                      | 25,723 |   |       | $      | 8,129  |         |   | $ | 17,594 |   |

----

| Note 5 - Impaired Loans        |   |                   |   |   |       |   |   |         |   |   |             |   |
|--------------------------------|--------|------------------------|--------|--------|------------|--------|--------|--------------|--------|--------|------------------|--------|
|                           |   |                   |   |   |       |   |   |         |   |   |             |   |
|                           |   |                   |   |   |       |   |   |         |   |   |             |   |
|                           |   | Legal Balance          |   |   | Write-down |   |   | Book Balance |   |   | RelatedAllowance |   |
|                           |   | (Dollars in thousands) |   |
|                           |   |                   |   |   |       |   |   |         |   |   |             |   |
| One-to-four family residential |   | $                      | 964    |   |       | $      | 200    |         |   | $      | 764              |   |   | $ | - |   |
| Land and development           |   |                   | 10,982 |   |       |   | 2,162  |         |   |   | 8,820            |   |   |   | 416 |   |
| Other commercial real estate   |   |                   | 9,147  |   |       |   | 3,022  |         |   |   | 6,125            |   |   |   | - |   |
| Consumer real estate           |   |                   | 692    |   |       |   | 486    |         |   |   | 206              |   |   |   | - |   |
| Total impaired loans           |   | $                      | 21,785 |   |       | $      | 5,870  |         |   | $      | 15,915           |   |   | $ | 416 |   |

|                           |   |                   |    |   | Criticized Loans |   |   |        |   |
|--------------------------------|--------|------------------------|---------|--------|------------------|--------|--------|-------------|--------|
| March 31, 2011                 |   | Pass                   |    |   | SpecialMention   |   |   | Substandard |   |   | Doubtful |   |   | TotalOutstanding |   |
|                           |   | (Dollars in thousands) |    |
|                           |   |                   |    |   |             |   |   |        |   |   |   |   |   |   |   |
| Real estate:                   |   |                   |    |   |             |   |   |        |   |   |   |   |   |   |   |
| One-to-four family residential |   | $                      | 107,639 |   |             | $      | 662    |        |   | $ | 1,061 |   |   | $ | - |   |   | $ | 109,362 |   |
| Multifamily residential        |   |                   | 20,020  |   |             |   | 271    |        |   |   | - |   |   |   | - |   |   |   | 20,291 |   |
| Construction                   |   |                   | 18,686  |   |             |   | 225    |        |   |   | 72 |   |   |   | - |   |   |   | 18,983 |   |
| Land and development           |   |                   | 33,133  |   |             |   | 8,815  |        |   |   | 16,312 |   |   |   | 67 |   |   |   | 58,327 |   |
| Other commercial real estate   |   |                   | 201,866 |   |             |   | 9,813  |        |   |   | 22,564 |   |   |   | - |   |   |   | 234,243 |   |
| Consumer real estate           |   |                   | 103,626 |   |             |   | 255    |        |   |   | 2,409 |   |   |   | 81 |   |   |   | 106,371 |   |
| Total real estate              |   |                   | 484,970 |   |             |   | 20,041 |        |   |   | 42,418 |   |   |   | 148 |   |   |   | 547,577 |   |
| Commercial business            |   |                   | 33,299  |   |             |   | 408    |        |   |   | 313 |   |   |   | - |   |   |   | 34,020 |   |
| Other consumer                 |   |                   | 5,264   |   |             |   | -      |        |   |   | 36 |   |   |   | - |   |   |   | 5,300 |   |
| Total loans                    |   | $                      | 523,533 |   |             | $      | 20,449 |        |   | $ | 42,767 |   |   | $ | 148 |   |   | $ | 586,897 |   |

----

|                           |   |                   |    |   | Criticized Loans |   |   |        |   |
|--------------------------------|--------|------------------------|---------|--------|------------------|--------|--------|-------------|--------|
| December 31, 2010              |   | Pass                   |    |   | SpecialMention   |   |   | Substandard |   |   | Doubtful |   |   | Total Outstanding |   |
|                           |   | (Dollars in thousands) |    |
|                           |   |                   |    |   |             |   |   |        |   |   |   |   |   |   |   |
| Real estate:                   |   |                   |    |   |             |   |   |        |   |   |   |   |   |   |   |
| One-to-four family residential |   | $                      | 131,072 |   |             | $      | 1,167  |        |   | $ | 1,530 |   |   | $ | - |   |   | $ | 133,769 |   |
| Multifamily residential        |   |                   | 23,394  |   |             |   | 273    |        |   |   | - |   |   |   | - |   |   |   | 23,667 |   |
| Construction                   |   |                   | 18,488  |   |             |   | 1,933  |        |   |   | - |   |   |   | - |   |   |   | 20,421 |   |
| Land and development           |   |                   | 66,104  |   |             |   | 10,533 |        |   |   | 16,012 |   |   |   | 75 |   |   |   | 92,724 |   |
| Other commercial real estate   |   |                   | 257,770 |   |             |   | 7,882  |        |   |   | 20,949 |   |   |   | - |   |   |   | 286,601 |   |
| Consumer real estate           |   |                   | 113,036 |   |             |   | 1,327  |        |   |   | 3,523 |   |   |   | 135 |   |   |   | 118,021 |   |
| Total real estate              |   |                   | 609,864 |   |             |   | 23,115 |        |   |   | 42,014 |   |   |   | 210 |   |   |   | 675,203 |   |
| Commercial business            |   |                   | 47,423  |   |             |   | 376    |        |   |   | 254 |   |   |   | - |   |   |   | 48,053 |   |
| Other consumer                 |   |                   | 11,200  |   |             |   | -      |        |   |   | 2,054 |   |   |   | - |   |   |   | 13,254 |   |
| Total loans                    |   | $                      | 668,487 |   |             | $      | 23,491 |        |   | $ | 44,322 |   |   | $ | 210 |   |   | $ | 736,510 |   |

----

|                          |                      |   | Three Months           |   |
|-------------------------------|---------------------------|--------|------------------------|--------|
|                          |                      |   | Ended March 31,        |   |
|                          |                      |   | 2011                   |   |   | 2010 |   |
|                          |                      |   | (Dollars in thousands) |   |
|                          |                      |   |                   |   |   |   |   |
| Balance - Beginning of period |                      | $      | 11,924                 |   |   | $ | 9,189 |   |
| Add:                          | Provision for loan losses |   |                   | 3,000  |   |   |   | 3,050 |   |
|                          | Loan recoveries           |   |                   | 118    |   |   |   | 50 |   |
| Less:                         | Loan charge-offs          |   |                   | 3,036  |   |   |   | 3,059 |   |
| Balance - End of period       |                      | $      | 12,006                 |   |   | $ | 9,230 |   |

----

|                       |   | March 31, 2011         |    |   | December 31, 2010 |   |
|----------------------------|--------|------------------------|---------|--------|-------------------|--------|
|                       |   | (Dollars in thousands) |    |
|                       |   |                   |    |   |              |   |
| Noninterest-bearing demand |   | $                      | 78,342  |   |              | $      | 70,056 |   |
| Interest-bearing demand    |   |                   | 169,482 |   |              |   | 172,414 |   |
| Money market deposit       |   |                   | 142,307 |   |              |   | 142,538 |   |
| Savings                    |   |                   | 17,565  |   |              |   | 17,004 |   |
| Time deposits              |   |                   | 425,107 |   |              |   | 448,444 |   |
| Total deposits             |   | $                      | 832,803 |   |              | $      | 850,456 |   |

|                                   |   | March 31, 2011         |   |   | December 31, 2010 |   |
|----------------------------------------|--------|------------------------|--------|--------|-------------------|--------|
|                                   |   | (Dollars in thousands) |   |
|                                   |   |                   |   |   |              |   |
| Loan commitments                       |   |                   |   |   |              |   |
| Residential mortgage loans             |   | $                      | 16,841 |   |              | $      | 14,530 |   |
| Non-residential mortgage loans         |   |                   | 5,225  |   |              |   | 2,500 |   |
| Commercial loans                       |   |                   | 545    |   |              |   | 731 |   |
| Consumer loans                         |   |                   | 1,053  |   |              |   | 765 |   |
| Total loan commitments                 |   | $                      | 23,664 |   |              | $      | 18,526 |   |
|                                   |   |                   |   |   |              |   |   |   |
| Unused lines of credit                 |   |                   |   |   |              |   |   |   |
| Commercial                             |   | $                      | 14,909 |   |              | $      | 13,000 |   |
| Consumer                               |   |                   | 75,963 |   |              |   | 73,655 |   |
| Total unused lines of credit           |   | $                      | 90,872 |   |              | $      | 86,655 |   |
|                                   |   |                   |   |   |              |   |   |   |
| Undisbursed Construction Loan Proceeds |   | $                      | 1,088  |   |              | $      | 524 |   |

----

----

|                                                   |   | Level 1                |   |   | Level 2 |   |   | Level 3 |   |   | Total  |   |
|--------------------------------------------------------|--------|------------------------|--------|--------|---------|--------|--------|---------|--------|--------|--------|--------|
|                                                   |   | (Dollars in thousands) |   |
| March 31, 2011                                         |   |                   |   |   |    |   |   |    |   |   |   |   |
| Investment securities, available for sale              |   | $                      | -      |   |    | $      | 69,733 |    |   | $      | 1,384  |   |   | $ | 71,117 |   |
| Investment securities, held for sale                   |   |                   | 9,960  |   |    |   | 72,929 |    |   |   | -      |   |   |   | 82,889 |   |
| Investment securities, rabbi trusts                    |   |                   | -      |   |    |   | 280    |    |   |   | -      |   |   |   | 280 |   |
|                                                   |   |                   |   |   |    |   |   |    |   |   |   |   |   |   |   |   |
| December 31, 2010                                      |   |                   |   |   |    |   |   |    |   |   |   |   |   |   |   |   |
| Investment securities, available for sale              |   | $                      | -      |   |    | $      | 71,285 |    |   | $      | 3,023  |   |   | $ | 74,308 |   |
| Investment securities, held for sale                   |   |                   | 9,955  |   |    |   | 27,323 |    |   |   | -      |   |   |   | 37,278 |   |
| Investment securities, rabbi trusts                    |   |                   | -      |   |    |   | 731    |    |   |   | -      |   |   |   | 731 |   |
|                                                   |   |                   |   |   |    |   |   |    |   |   |   |   |   |   |   |   |
| Assets Recorded at Fair Value on a Nonrecurring Basis: |   |                   |   |   |    |   |   |    |   |   |   |   |   |   |   |   |
|                                                   |   |                   |   |   |    |   |   |    |   |   |   |   |   |   |   |   |
| March 31, 2011                                         |   |                   |   |   |    |   |   |    |   |   |   |   |   |   |   |   |
| Presold loans in process of settlement                 |   | $                      | -      |   |    | $      | 1,255  |    |   | $      | -      |   |   | $ | 1,255 |   |
| Impaired loans                                         |   |                   | -      |   |    |   | -      |    |   |   | 17,594 |   |   |   | 17,594 |   |
| Other real estate owned                                |   |                   | -      |   |    |   | -      |    |   |   | 16,584 |   |   |   | 16,584 |   |
|                                                   |   |                   |   |   |    |   |   |    |   |   |   |   |   |   |   |   |
| December 31, 2010                                      |   |                   |   |   |    |   |   |    |   |   |   |   |   |   |   |   |
| Presold loans in process of settlement                 |   | $                      | -      |   |    | $      | 4,034  |    |   | $      | -      |   |   | $ | 4,034 |   |
| Impaired loans                                         |   |                   | -      |   |    |   | -      |    |   |   | 15,916 |   |   |   | 15,916 |   |
| Other real estate owned                                |   |                   | -      |   |    |   | -      |    |   |   | 14,652 |   |   |   | 14,652 |   |

----

|                                        |   | March 31, 2011         |    |   | December 31, 2010 |   |
|---------------------------------------------|--------|------------------------|---------|--------|-------------------|--------|
|                                        |   | Carrying               |    |   | Estimated         |   |   | Carrying |   |   | Estimated |   |
|                                        |   | Amount                 |    |   | Fair Value        |   |   | Amount |   |   | Fair Value |   |
|                                        |   | (Dollars in thousands) |    |
| Financial assets:                           |   |                   |    |   |              |   |   |   |   |   |   |   |
| Cash and due from banks                     |   | $                      | 10,398  |   |              | $      | 10,398 |   |   | $ | 15,110 |   |   | $ | 15,110 |   |
| Interest-earning bank balances              |   |                   | 57,359  |   |              |   | 57,359 |   |   |   | 105,789 |   |   |   | 105,789 |   |
| Investment securities                       |   |                   | 154,006 |   |              |   | 154,302 |   |   |   | 111,586 |   |   |   | 111,946 |   |
| Federal Home Loan Bank stock                |   |                   | 5,715   |   |              |   | 5,715 |   |   |   | 5,715 |   |   |   | 5,715 |   |
| Presold loans in process of settlement      |   |                   | 1,255   |   |              |   | 1,255 |   |   |   | 4,034 |   |   |   | 4,034 |   |
| Net loans receivable                        |   |                   | 724,655 |   |              |   | 740,848 |   |   |   | 736,510 |   |   |   | 751,219 |   |
| Accrued interest receivable                 |   |                   | 2,829   |   |              |   | 2,829 |   |   |   | 3,001 |   |   |   | 3,001 |   |
| Bank-owned life insurance                   |   |                   | 18,386  |   |              |   | 18,386 |   |   |   | 18,230 |   |   |   | 18,230 |   |
|                                        |   |                   |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                      |   |                   |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Demand deposits                             |   |                   | 247,824 |   |              |   | 247,824 |   |   |   | 242,470 |   |   |   | 242,470 |   |
| Money market accounts                       |   |                   | 142,307 |   |              |   | 142,307 |   |   |   | 142,538 |   |   |   | 142,538 |   |
| Savings                                     |   |                   | 17,565  |   |              |   | 17,565 |   |   |   | 17,004 |   |   |   | 17,004 |   |
| Time deposits                               |   |                   | 425,107 |   |              |   | 427,982 |   |   |   | 448,444 |   |   |   | 451,853 |   |
| Securities sold under repurchase agreements |   |                   | 11,389  |   |              |   | 11,389 |   |   |   | 9,432 |   |   |   | 9,432 |   |
| Borrowed money                              |   |                   | 96,257  |   |              |   | 103,618 |   |   |   | 101,246 |   |   |   | 109,092 |   |

----

----

ITEM 

----

| Quarterly Financial Highlights (unaudited)                           |   | At and For the Quarters Ended |       |
|----------------------------------------------------------------------|--------|-------------------------------|------------|
|                                                                 |   | 2011                          |       |   | 2010 |   |
|                                                                 |   | March 31                      |       |   | December 31 |   |   | September 30 |   |   | June 30 |   |   | March 31 |   |
| (Dollars in thousands, except per share data)                        |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                 |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Summary of Operations:                                               |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest income - taxable equivalent                                 |   | $                             | 10,457     |   |   | $ | 11,055 |   |   | $ | 11,675 |   |   | $ | 12,308 |   |   | $ | 9,210 |   |
| Interest expense                                                     |   |                          | 2,855      |   |   |   | 3,411 |   |   |   | 3,790 |   |   |   | 4,083 |   |   |   | 3,393 |   |
|    Net interest income - taxable equivalent           |   |                          | 7,602      |   |   |   | 7,644 |   |   |   | 7,885 |   |   |   | 8,225 |   |   |   | 5,817 |   |
| Less: Taxable-equivalent adjustment                                  |   |                          | 70         |   |   |   | 70 |   |   |   | 79 |   |   |   | 114 |   |   |   | 98 |   |
|    Net interest income                                |   |                          | 7,532      |   |   |   | 7,574 |   |   |   | 7,806 |   |   |   | 8,111 |   |   |   | 5,719 |   |
| Provision for loan losses                                            |   |                          | 3,000      |   |   |   | 5,000 |   |   |   | 3,000 |   |   |   | 3,000 |   |   |   | 3,050 |   |
| Net interest income after loan loss provision                        |   |                          | 4,532      |   |   |   | 2,574 |   |   |   | 4,806 |   |   |   | 5,111 |   |   |   | 2,669 |   |
| Noninterest income                                                   |   |                          | 1,478      |   |   |   | 2,274 |   |   |   | 2,290 |   |   |   | 2,415 |   |   |   | 20,185 |   |
| Noninterest expense                                                  |   |                          | 7,672      |   |   |   | 7,918 |   |   |   | 7,781 |   |   |   | 7,279 |   |   |   | 6,356 |   |
|    Net income (loss) before income taxes              |   |                          | (1,662     | ) |   |   | (3,070 | ) |   |   | (685 | ) |   |   | 247 |   |   |   | 16,498 |   |
| Income tax expense (benefit)                                         |   |                          | (771       | ) |   |   | (1,331 | ) |   |   | (413 | ) |   |   | (108 | ) |   |   | 6,201 |   |
|    Net income (loss)                                  |   |                          | (891       | ) |   |   | (1,739 | ) |   |   | (272 | ) |   |   | 355 |   |   |   | 10,297 |   |
| Dividends on preferred stock                                         |   |                          | 256        |   |   |   | 256 |   |   |   | 256 |   |   |   | 257 |   |   |   | 257 |   |
|    Net income (loss) available to common shareholders |   | $                             | (1,147     | ) |   | $ | (1,995 | ) |   | $ | (528 | ) |   | $ | 98 |   |   | $ | 10,040 |   |
|                                                                 |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Per Common Share Data:                                               |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income:                                                          |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Basic                                                    |   | $                             | (0.10      | ) |   | $ | (0.18 | ) |   | $ | (0.05 | ) |   | $ | 0.01 |   |   | $ | 1.29 |   |
|   Diluted                                                  |   |                          | (0.10      | ) |   |   | (0.18 | ) |   |   | (0.05 | ) |   |   | 0.01 |   |   |   | 1.29 |   |
| Weighted average shares outstanding:                                 |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Basic                                                    |   |                          | 11,491,734 |   |   |   | 11,173,174 |   |   |   | 10,844,386 |   |   |   | 9,077,042 |   |   |   | 7,786,819 |   |
|   Diluted                                                  |   |                          | 11,491,734 |   |   |   | 11,173,174 |   |   |   | 10,844,386 |   |   |   | 9,077,042 |   |   |   | 7,786,819 |   |
| End of period shares outstanding                                     |   |                          | 11,508,750 |   |   |   | 11,508,750 |   |   |   | 10,964,146 |   |   |   | 10,965,941 |   |   |   | 9,125,942 |   |
| Cash dividends declared                                              |   | $                             | 0.01       |   |   | $ | 0.01 |   |   | $ | 0.04 |   |   | $ | 0.04 |   |   | $ | 0.04 |   |
| Book value                                                           |   |                          | 6.22       |   |   |   | 6.32 |   |   |   | 6.86 |   |   |   | 6.91 |   |   |   | 7.39 |   |
| Tangible book value                                                  |   |                          | 6.09       |   |   |   | 6.17 |   |   |   | 6.70 |   |   |   | 6.73 |   |   |   | 7.16 |   |
|                                                                 |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selected End of Period Balances:                                     |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                         |   | $                             | 1,041,444  |   |   | $ | 1,064,487 |   |   | $ | 1,087,558 |   |   | $ | 1,077,431 |   |   | $ | 1,132,652 |   |
| Loans, net                                                           |   |                          | 724,655    |   |   |   | 736,510 |   |   |   | 754,740 |   |   |   | 776,234 |   |   |   | 787,643 |   |
| Investment securities                                                |   |                          | 154,006    |   |   |   | 111,586 |   |   |   | 87,255 |   |   |   | 97,678 |   |   |   | 100,161 |   |
| Deposits                                                             |   |                          | 832,803    |   |   |   | 850,456 |   |   |   | 865,786 |   |   |   | 853,526 |   |   |   | 884,127 |   |
| Shareholders' equity                                                 |   |                          | 92,276     |   |   |   | 93,443 |   |   |   | 95,682 |   |   |   | 96,410 |   |   |   | 96,390 |   |
|                                                                 |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selected Quarterly Average Balances:                                 |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                         |   | $                             | 1,053,747  |   |   | $ | 1,075,338 |   |   | $ | 1,080,680 |   |   | $ | 1,105,788 |   |   | $ | 873,418 |   |
| Loans, net                                                           |   |                          | 726,346    |   |   |   | 747,054 |   |   |   | 767,381 |   |   |   | 780,209 |   |   |   | 599,826 |   |
| Investment securities                                                |   |                          | 135,645    |   |   |   | 100,691 |   |   |   | 91,361 |   |   |   | 100,501 |   |   |   | 89,020 |   |
| Deposits                                                             |   |                          | 841,387    |   |   |   | 853,185 |   |   |   | 853,902 |   |   |   | 859,408 |   |   |   | 614,007 |   |
| Shareholders' equity                                                 |   |                          | 93,533     |   |   |   | 94,761 |   |   |   | 96,258 |   |   |   | 96,282 |   |   |   | 78,292 |   |
|                                                                 |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selected Financial Performance Ratios (annualized):                  |   |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return on average assets                                             |   |                          | -0.44      | % |   |   | -0.74 | % |   |   | -0.20 | % |   |   | 0.04 | % |   |   | 4.66 | % |
| Return on average common equity                                      |   |                          | -6.39      | % |   |   | -10.68 | % |   |   | -2.77 | % |   |   | 0.56 | % |   |   | 73.21 | % |
| Noninterest income to average total assets  (1)            |   |                          | 0.56       | % |   |   | 0.85 | % |   |   | 0.85 | % |   |   | 0.87 | % |   |   | 9.24 | % |
| Noninterest expense to average total assets (2)                      |   |                          | 2.91       | % |   |   | 2.95 | % |   |   | 2.88 | % |   |   | 2.63 | % |   |   | 2.91 | % |
| Efficiency ratio  (1) (2)                                  |   |                          | 84.49      | % |   |   | 79.83 | % |   |   | 76.47 | % |   |   | 68.41 | % |   |   | 24.44 | % |

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| Quarterly Financial Highlights (unaudited)                                             |   | At and For the Quarters Ended |   |
|----------------------------------------------------------------------------------------|--------|-------------------------------|--------|
|                                                                                   |   | 2011                          |   |   | 2010 |   |
|                                                                                   |   | March 31                      |   |   | December 31 |   |   | September 30 |   |   | June 30 |   |   | March 31 |   |
| (Dollars in thousands, except per share data)                                          |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Interest Margin (annualized):                                                      |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Yield on earning assets                                                                |   |                          | 4.62   | % |   |   | 4.68 | % |   |   | 4.91 | % |   |   | 4.96 | % |   |   | 5.02 | % |
| Cost of funds                                                                          |   |                          | 1.32   | % |   |   | 1.51 | % |   |   | 1.66 | % |   |   | 1.72 | % |   |   | 2.01 | % |
| Net Interest spread                                                                    |   |                          | 3.30   | % |   |   | 3.17 | % |   |   | 3.25 | % |   |   | 3.24 | % |   |   | 3.01 | % |
| Net interest margin (taxable equivalent)                                               |   |                          | 3.42   | % |   |   | 3.25 | % |   |   | 3.42 | % |   |   | 3.48 | % |   |   | 3.22 | % |
|                                                                                   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Credit Quality Information and Ratios:                                                 |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Past due loans (30-89 days) accruing - non-covered                                     |   | $                             | 5,692  |   |   | $ | 13,787 |   |   | $ | 6,602 |   |   | $ | 10,145 |   |   | $ | 7,003 |   |
| Past due loans - non-covered to total non-covered loans                                |   |                          | 0.97   | % |   |   | 2.34 | % |   |   | 1.11 | % |   |   | 1.68 | % |   |   | 1.15 | % |
|                                                                                   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Past due loans (30-89 days) accruing - covered by FDIC loss-share (3)                  |   | $                             | 7,006  |   |   | $ | 5,767 |   |   | $ | 8,701 |   |   | $ | 5,257 |   |   | $ | 11,030 |   |
| Past due loans - covered to total covered loans                                        |   |                          | 5.09   | % |   |   | 3.91 | % |   |   | 5.43 | % |   |   | 3.07 | % |   |   | 6.09 | % |
|                                                                                   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses - beginning of period                                        |   | $                             | 11,924 |   |   | $ | 10,752 |   |   | $ | 9,796 |   |   | $ | 9,230 |   |   | $ | 9,189 |   |
| Add: Provision for loan losses                                                         |   |                          | 3,000  |   |   |   | 5,000 |   |   |   | 3,000 |   |   |   | 3,000 |   |   |   | 3,050 |   |
| Less: Net charge-offs                                                                  |   |                          | 2,918  |   |   |   | 3,828 |   |   |   | 2,044 |   |   |   | 2,433 |   |   |   | 3,009 |   |
| Allowance for loan losses - end of period                                              |   |                          | 12,006 |   |   |   | 11,924 |   |   |   | 10,752 |   |   |   | 9,797 |   |   |   | 9,230 |   |
|                                                                                   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses to total non-covered loans                                   |   |                          | 2.05   | % |   |   | 2.02 | % |   |   | 1.81 | % |   |   | 1.62 | % |   |   | 1.52 | % |
| Net charge-offs to average non-covered loans (annualized)                              |   |                          | 1.99   | % |   |   | 2.59 | % |   |   | 1.36 | % |   |   | 1.61 | % |   |   | 1.98 | % |
| Nonperforming non-covered loans to non-covered loans                                   |   |                          | 4.15   | % |   |   | 2.79 | % |   |   | 3.33 | % |   |   | 2.15 | % |   |   | 2.26 | % |
| Nonperforming non-covered assets to total assets                                       |   |                          | 3.15   | % |   |   | 2.26 | % |   |   | 2.61 | % |   |   | 1.97 | % |   |   | 1.78 | % |
| Nonperforming non-covered assets to total non-covered loansand other real estate owned |   |                          | 5.51   | % |   |   | 4.03 | % |   |   | 4.71 | % |   |   | 3.46 | % |   |   | 3.30 | % |
|                                                                                   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonperforming Assets:                                                                  |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonperforming non-covered loans:                                                       |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One-to-four family residential                                                         |   | $                             | 2,373  |   |   | $ | 1,864 |   |   | $ | 2,068 |   |   | $ | 1,646 |   |   | $ | 1,618 |   |
| Construction                                                                           |   |                          | 72     |   |   |   | 14 |   |   |   | 163 |   |   |   | 896 |   |   |   | 443 |   |
| Acquisition and development                                                            |   |                          | 4,675  |   |   |   | 2,560 |   |   |   | 340 |   |   |   | 691 |   |   |   | 2,890 |   |
| Commercial land                                                                        |   |                          | 4,653  |   |   |   | 4,360 |   |   |   | 5,034 |   |   |   | 3,252 |   |   |   | 6,148 |   |
| Other commercial real estate                                                           |   |                          | 9,636  |   |   |   | 4,800 |   |   |   | 9,566 |   |   |   | 4,127 |   |   |   | 1,422 |   |
| Commercial business                                                                    |   |                          | 309    |   |   |   | 287 |   |   |   | 720 |   |   |   | 742 |   |   |   | 131 |   |
| Consumer                                                                               |   |                          | 2,639  |   |   |   | 2,529 |   |   |   | 1,930 |   |   |   | 1,652 |   |   |   | 1,083 |   |
| Total nonperforming non-covered loans                                                  |   |                          | 24,357 |   |   |   | 16,414 |   |   |   | 19,821 |   |   |   | 13,006 |   |   |   | 13,735 |   |
| Total nonperforming loans covered by FDIC loss-share (4)                               |   |                          | 24,391 |   |   |   | 25,541 |   |   |   | 22,416 |   |   |   | 24,924 |   |   |   | 18,148 |   |
| Other real estate owned - non-covered                                                  |   |                          | 8,463  |   |   |   | 7,650 |   |   |   | 8,557 |   |   |   | 8,239 |   |   |   | 6,462 |   |
| Other real estate owned - covered by FDIC loss-share                                   |   |                          | 8,121  |   |   |   | 7,002 |   |   |   | 3,183 |   |   |   | 2,343 |   |   |   | 933 |   |
| Total nonperforming assets                                                             |   | $                             | 65,332 |   |   | $ | 56,607 |   |   | $ | 53,977 |   |   | $ | 48,512 |   |   | $ | 39,278 |   |
|                                                                                   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital Ratios:                                                                        |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tangible common equity                                                                 |   |                          | 6.73   | % |   |   | 6.69 | % |   |   | 6.74 | % |   |   | 6.86 | % |   |   | 5.78 | % |
| Total Risk-Based Capital (Bank only)                                                   |   |                          | 16.70  | % |   |   | 16.80 | % |   |   | 16.83 | % |   |   | 16.78 | % |   |   | 15.53 | % |
| Tier 1 Risk-Based Capital (Bank only)                                                  |   |                          | 15.44  | % |   |   | 15.54 | % |   |   | 15.58 | % |   |   | 15.52 | % |   |   | 14.47 | % |
| Tier 1 Total Capital (Bank only)                                                       |   |                          | 9.89   | % |   |   | 9.74 | % |   |   | 9.58 | % |   |   | 9.74 | % |   |   | 9.18 | % |

----

| (1) | Includes the gain on acquisition of Bank of Hiawassee of $18.7 million for the quarter ended March 31, 2010.  Subsequent adjustments in the amounts of $605,000, $193,000, $148,000 and ($255,000) were made for the quarters ended June 30, 2010, September 30, 2010, December 31, 2010, and March 31, 2011, respectively. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Includes acquisition and integration expenses of $787,000, $94,000, $141,000, $42,000 and $45,000 for the quarters ended March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, and March 31, 2011, respectively.                                                                                                      |
| (3) | The contractual balance of past due loans covered by  FDIC loss-share agreements totaled $13.8 million, $6.4 million, $14.8 million, $7.0 million and $7.7 million at March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, and March 31, 2011, respectively.                                               |
| (4) | The contractual balance of nonperforming loans covered by  FDIC loss-share agreements totaled $29.0 million, $35.4 million, $29.1 million, $31.2 million and $28.7 million at March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, and March 31, 2011 respectively.                                        |

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|                                            |   | Three Months Ended     |   |   |           |   |
|-------------------------------------------------|--------|------------------------|--------|--------|----------------|--------|
|                                            |   | March 31, 2011         |   |   | March 31, 2010 |   |   | Variance |   |
|                                            |   | (Dollars in thousands) |   |
| Noninterest income:                             |   |                   |   |   |           |   |   |   |   |
| Service charges on deposit accounts             |   | $                      | 957    |   |           | $      | 799 |   |   | $ | 158 |   |
| Mortgage banking income                         |   |                   | 237    |   |           |   | 210 |   |   |   | 27 |   |
| Commissions on sales of financial products      |   |                   | 67     |   |           |   | 118 |   |   |   | (51 | ) |
| Income from bank-owned life insurance           |   |                   | 182    |   |           |   | 189 |   |   |   | (7 | ) |
| Gain (loss) from acquisition                    |   |                   | (255   | )      |           |   | 18,733 |   |   |   | (18,988 | ) |
| Gain on sale of investments, available for sale |   |                   | -      |   |           |   | 33 |   |   |   | (33 | ) |
| Gain (loss) on sale of other assets             |   |                   | 12     |   |           |   | (62 | ) |   |   | 74 |   |
| Other income                                    |   |                   | 278    |   |           |   | 165 |   |   |   | 113 |   |
| Total noninterest income                        |   | $                      | 1,478  |   |           | $      | 20,185 |   |   | $ | (18,707 | ) |

----

|                                            |   | Three Months Ended     |   |   |           |   |
|-------------------------------------------------|--------|------------------------|--------|--------|----------------|--------|
|                                            |   | March 31, 2011         |   |   | March 31, 2010 |   |   | Variance |   |
|                                            |   | (Dollars in thousands) |   |
| Noninterest Expense:                            |   |                   |   |   |           |   |   |   |   |
| Compensation and benefits                       |   | $                      | 3,648  |   |           | $      | 2,643 |   |   | $ | 1,005 |   |
| Occupancy and equipment                         |   |                   | 828    |   |           |   | 683 |   |   |   | 145 |   |
| Office supplies                                 |   |                   | 70     |   |           |   | 41 |   |   |   | 29 |   |
| Advertising and business development            |   |                   | 54     |   |           |   | 57 |   |   |   | (3 | ) |
| Professional services                           |   |                   | 253    |   |           |   | 234 |   |   |   | 19 |   |
| Telephone and communications                    |   |                   | 97     |   |           |   | 72 |   |   |   | 25 |   |
| Data processing                                 |   |                   | 183    |   |           |   | 140 |   |   |   | 43 |   |
| Deposit insurance                               |   |                   | 334    |   |           |   | 260 |   |   |   | 74 |   |
| Amortization of intangible assets               |   |                   | 139    |   |           |   | 65 |   |   |   | 74 |   |
| Valuation adjustment on other real estate owned |   |                   | 509    |   |           |   | 484 |   |   |   | 25 |   |
| Acquisition and integration expenses            |   |                   | 45     |   |           |   | 787 |   |   |   | (742 | ) |
| Other expenses                                  |   |                   | 1,512  |   |           |   | 890 |   |   |   | 622 |   |
| Total noninterest expense                       |   | $                      | 7,672  |   |           | $      | 6,356 |   |   | $ | 1,316 |   |

----

----

|                                               |   |                   |    |   |                |   |   | Minimum Requirements to |   |
|----------------------------------------------------|--------|------------------------|---------|--------|---------------------|--------|--------|-------------------------|--------|
|                                               |   | Actual                 |    |   | be Well Capitalized |   |
|                                               |   | Amount                 |    |   | Ratio               |   |   | Amount                  |   |   | Ratio |   |
|                                               |   | (Dollars in thousands) |    |
| Regulatory Capital Ratios:                         |   |                   |    |   |                |   |   |                    |   |   |   |   |
| Total risk-based capital (to risk-weighted assets) |   | $                      | 111,007 |   |                |   | 16.70  | %                       |   | $ | 66,477 |   |   |   | 10.00 | % |
| Tier 1 capital (to risk-weighted assets)           |   |                   | 102,628 |   |                |   | 15.44  | %                       |   |   | 39,886 |   |   |   | 6.00 | % |
| Tier 1 capital (to adjusted total assets)          |   |                   | 102,628 |   |                |   | 9.89   | %                       |   |   | 51,877 |   |   |   | 5.00 | % |
| Tangible capital (to adjusted total assets)        |   |                   | 102,628 |   |                |   | 9.89   | %                       |   |   | 31,126 |   |   |   | 3.00 | % |

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SIGNATURES

|               | Citizens South Banking Corporation |                                                            |
|--------------------|------------------------------------|-----------------------------------------------------------------|
|               |                               |                                                            |   |
|               |                               |                                                            |   |
| Date: May 13, 2011 | By:                                | /s/ Kim S. Price                                                |   |
|               |                               | Kim S. Price                                                    |
|               |                               | President and Chief Executive Officer                           |
|               |                               |                                                            |   |
|               |                               |                                                            |   |
| Date: May 13, 2011 | By:                                | /s/ Gary F. Hoskins                                             |   |
|               |                               | Gary F. Hoskins                                                 |
|               |                               | Executive Vice President, Chief Financial Officer and Treasurer |

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