Endorsement Split Dollar Agreement - CITIZENS SOUTH BANKING CORP - 3-16-2005

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Endorsement Split Dollar Agreement - CITIZENS SOUTH BANKING CORP - 3-16-2005 Powered By Docstoc
					EXHIBIT 10.19 ENDORSEMENT SPLIT DOLLAR AGREEMENT WITH MICHAEL R. MAGUIRE THIS ENDORSEMENT SPLIT DOLLAR AGREEMENT (this Agreement) is entered into as of this 1st day of January, 2004 by and between Citizens South Bank, a federally chartered savings bank located in Gastonia, North Carolina (the Bank), and Michael R. Maguire, its Senior Vice President and Chief Credit Officer (the Executive). This Agreement shall append the Split Dollar Policy Endorsement entered into on even date herewith or as subsequently amended, by and between the aforementioned parties. WHEREAS, to encourage the Executive to remain an employee of the Bank, the Bank entered into an Executive Supplemental Retirement Plan Executive Agreement dated as of June 25, 2001 with the Executive, and an accompanying Life Insurance Endorsement Method Split Dollar Plan Agreement, and WHEREAS, having negotiated and agreed to miscellaneous changes in the terms and conditions of the Executive Supplemental Retirement Plan Executive Agreement and the accompanying Life Insurance Endorsement Method Split Dollar Plan Agreement, the Bank and the Executive are entering into a Salary Continuation Agreement dated as of the date hereof, superseding and replacing in its entirety the Executive Supplemental Retirement Plan Executive Agreement, and the Bank and the Executive intend that this Endorsement Split Dollar Agreement shall be attached as Addendum A to the January 1, 2004 Salary Continuation Agreement, superseding and replacing in its entirety the Life Insurance Endorsement Method Split Dollar Plan Agreement, and that from and after the Effective Date the Life Insurance Endorsement Method Split Dollar Plan Agreement shall be of no further force or effect. NOW THEREFORE, in consideration of these premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Executive and the Bank hereby agree as follows. ARTICLE 1 GENERAL DEFINITIONS Capitalized terms not otherwise defined in this Agreement are used herein as defined in the Salary Continuation Agreement dated as of the date of this Agreement between the Bank and the Executive. The following terms shall have the meanings specified: 1.1 Administrator means the administrator described in Article 7. 1.2 Executive's Interest means the benefit set forth in Section 2.2. 1.3 Insured means the Executive. 1.4 Insurer means each life insurance carrier in which there is a Split Dollar Policy Endorsement attached to this Agreement. 1.5 Net Death Proceeds means the total death proceeds of the Policy minus the cash surrender value. 1.6 Policy means the specific life insurance policy or policies issued by the Insurer(s). 270

1.7 Split Dollar Policy Endorsement means the form required by the Administrator or the Insurer to indicate the Executive's interest, if any, in a Policy on such Executive's life. ARTICLE 2 POLICY OWNERSHIP/INTERESTS

1.7 Split Dollar Policy Endorsement means the form required by the Administrator or the Insurer to indicate the Executive's interest, if any, in a Policy on such Executive's life. ARTICLE 2 POLICY OWNERSHIP/INTERESTS 2.1 Bank Ownership. The Bank is the sole owner of the Policy and shall have the right to exercise all incidents of ownership. The Bank shall be the beneficiary of the remaining death proceeds of the Policy after the Executive Interest has been paid according to Section 2.2 below. 2.2 Executive's Interest. The Executive shall have the right to designate the beneficiary of the Executive's Interest. If at the time of Termination of Employment the Executive is entitled to benefits under the Salary Continuation Agreement in effect at the time of Termination of Employment, or if Termination of Employment occurs because of the Executive's death (except under Section 5.2 of the Salary Continuation Agreement), then the beneficiary designated in accordance with the Split Dollar Policy Endorsement shall be entitled to an amount (the Executive's Interest) equal to the product of (a) 100% of the Net Death Proceeds multiplied by (b) the percentage in which the Executive is vested under the Salary Continuation Agreement (which shall be deemed to be 100% in any case in which benefits under the Salary Continuation Agreement are determined without regard to vesting). Without limiting the generality of the foregoing, the Executive shall be considered to be 100% vested under the Salary Continuation Agreement if Termination of Employment occurs because of Disability, or if benefits are payable under Section 2.4 of the Salary Continuation Agreement because of Termination of Employment within 12 months after a Change in Control, or if the Executive has become 100% vested under Section 1.17 of the Salary Continuation Agreement, or if the Executive dies in active service to the Bank. The Executive or the Executive's transferee shall also have the right to elect and change settlement options that may be permitted for the Executive's Interest. 2.3 Option to Purchase. Upon termination of this Agreement, the Bank shall not sell, surrender or transfer ownership of the Policy without first giving the Executive or the Executive's transferee the option to purchase the Policy for a period of 60 days from written notice of such intention. The purchase price shall be an amount equal to the cash surrender value of the Policy. 271

2.4 Comparable Coverage. The Bank may replace the Policy with a comparable insurance policy to cover the benefit provided under this Agreement, in which case the Bank and the Executive shall execute a new Split Dollar Policy Endorsement for the comparable insurance policy. 2.5 Internal Revenue Code Section 1035 Exchanges. The Executive recognizes and agrees that the Bank may after this Split Dollar Agreement is adopted wish to exchange the Policy of life insurance on the Executive's life for another contract of life insurance insuring the Executive's life. Provided that the Policy is replaced (or intended to be replaced) with a comparable policy of life insurance, the Executive agrees to provide medical information and cooperate with medical insurance-related testing required by a prospective insurer for implementing the Policy or, if necessary, for modifying or updating to a comparable insurer. ARTICLE 3 PREMIUMS 3.1 Premium Payment. The Bank shall pay any premiums due on the Policy. 3.2 Economic Benefit. The Administrator shall annually determine the economic benefit attributable to the Executive based on the amount of the current term rate for the Executive's age multiplied by the aggregate death benefit payable to the Executive's beneficiary. The current term rate is the minimum amount required to be imputed under applicable Internal Revenue Service authority. 3.3 Imputed Income. The Bank shall impute the economic benefit to the Executive on an annual basis.

2.4 Comparable Coverage. The Bank may replace the Policy with a comparable insurance policy to cover the benefit provided under this Agreement, in which case the Bank and the Executive shall execute a new Split Dollar Policy Endorsement for the comparable insurance policy. 2.5 Internal Revenue Code Section 1035 Exchanges. The Executive recognizes and agrees that the Bank may after this Split Dollar Agreement is adopted wish to exchange the Policy of life insurance on the Executive's life for another contract of life insurance insuring the Executive's life. Provided that the Policy is replaced (or intended to be replaced) with a comparable policy of life insurance, the Executive agrees to provide medical information and cooperate with medical insurance-related testing required by a prospective insurer for implementing the Policy or, if necessary, for modifying or updating to a comparable insurer. ARTICLE 3 PREMIUMS 3.1 Premium Payment. The Bank shall pay any premiums due on the Policy. 3.2 Economic Benefit. The Administrator shall annually determine the economic benefit attributable to the Executive based on the amount of the current term rate for the Executive's age multiplied by the aggregate death benefit payable to the Executive's beneficiary. The current term rate is the minimum amount required to be imputed under applicable Internal Revenue Service authority. 3.3 Imputed Income. The Bank shall impute the economic benefit to the Executive on an annual basis. ARTICLE 4 ASSIGNMENT The Executive may irrevocably assign without consideration all of the Executive's Interest in this Agreement to any person, entity, or trust established by the Executive or the Executive's spouse. If the Executive transfers all of the Executive's Interest, then all of the Executive's Interest in the Agreement shall be vested in the Executive's transferee, who shall be substituted as a party hereunder and the Executive shall have no further interest in this Agreement. ARTICLE 5 INSURER The Insurer shall be bound only by the terms of the Policy. Any payments the Insurer makes or actions it takes in accordance with the Policy shall fully discharge it from all claims, suits and demands of all entities or persons. The Insurer shall not be bound by or be deemed to have notice of the provisions of this Agreement. 272

ARTICLE 6 CLAIMS AND REVIEW PROCEDURES 6.1 Claims Procedure. Any person or entity who has not received benefits under this Agreement that he or she believes should be paid (the claimant) shall make a claim for such benefits as follows: 6.1.1 Initiation Written Claim. The claimant initiates a claim by submitting to the Administrator a written claim for the benefits. 6.1.2 Timing of Administrator Response. The Administrator shall respond to such claimant within 90 days after receiving the claim. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.

ARTICLE 6 CLAIMS AND REVIEW PROCEDURES 6.1 Claims Procedure. Any person or entity who has not received benefits under this Agreement that he or she believes should be paid (the claimant) shall make a claim for such benefits as follows: 6.1.1 Initiation Written Claim. The claimant initiates a claim by submitting to the Administrator a written claim for the benefits. 6.1.2 Timing of Administrator Response. The Administrator shall respond to such claimant within 90 days after receiving the claim. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision. 6.1.3 Notice of Decision. If the Administrator denies part or all of the claim, the Administrator shall notify the claimant in writing of such denial. The Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth: (a) The specific reasons for the denial, (b) A reference to the specific provisions of this Agreement on which the denial is based, (c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed, (d) An explanation of the Agreement's review procedures and the time limits applicable to such procedures, and (e) A statement of the claimant's right to bring a civil action under ERISA section 502(a) following an adverse benefit determination on review. 6.2 Review Procedure. If the Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Administrator of the denial, as follows 6.2.1 Initiation Written Request. To initiate the review, within 60 days after receiving the Administrator's notice of denial the claimant must file with the Administrator a written request for review. 6.2.2 Additional Submissions Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. Upon request and free of charge, the Administrator shall also provide the claimant reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits. 6.2.3 Considerations on Review. In considering the review, the Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. 273

6.2.4 Timing of Administrator Response. The Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision. 6.2.5 Notice of Decision. The Administrator shall notify the claimant in writing of its decision on review. The Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth (a) The specific reasons for the denial,

6.2.4 Timing of Administrator Response. The Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision. 6.2.5 Notice of Decision. The Administrator shall notify the claimant in writing of its decision on review. The Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth (a) The specific reasons for the denial, (b) A reference to the specific provisions of the Agreement on which the denial is based, (c) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits, and (d) A statement of the claimant's right to bring a civil action under ERISA section 502(a). ARTICLE 7 ADMINISTRATION OF AGREEMENT 7.1 Administrator Duties. This Agreement shall be administered by an Administrator, which shall consist of the board or such committee as the board shall appoint. The Executive may be a member of the Administrator. The Administrator shall also have the discretion and authority to (a) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Agreement and (b) decide or resolve any and all questions, including interpretations of this Agreement, as may arise in connection with the Agreement. 7.2 Agents. In the administration of this Agreement, the Administrator may employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel, who may be counsel to the Bank. 7.3 Binding Effect of Decisions. The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation, and application of this Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement. 7.4 Indemnity of Administrator. The Bank shall indemnify and hold harmless the members of the Administrator against any and all claims, losses, damages, expenses, or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Administrator or any of its members. 274

7.5 Information. To enable the Administrator to perform its functions, the Bank shall supply full and timely information to the Administrator on all matters relating to the date and circumstances of the retirement, death, or Termination of Employment of the Executive and such other pertinent information as the Administrator may reasonably require. ARTICLE 8 MISCELLANEOUS 8.1 Binding Effect. This Agreement shall bind the Executive and the Bank and their beneficiaries, survivors, executors, administrators, and transferees, and any Policy beneficiary. 8.2 Amendment and Termination of Agreement. This Agreement may be amended or terminated solely by a written agreement signed by the Bank and the Executive. However, this Agreement will automatically terminate and the Executive's Interest shall be forfeited if benefits under the Salary Continuation Agreement are neither paid nor payable because of termination under Article 5 of the Salary Continuation Agreement. This Agreement shall

7.5 Information. To enable the Administrator to perform its functions, the Bank shall supply full and timely information to the Administrator on all matters relating to the date and circumstances of the retirement, death, or Termination of Employment of the Executive and such other pertinent information as the Administrator may reasonably require. ARTICLE 8 MISCELLANEOUS 8.1 Binding Effect. This Agreement shall bind the Executive and the Bank and their beneficiaries, survivors, executors, administrators, and transferees, and any Policy beneficiary. 8.2 Amendment and Termination of Agreement. This Agreement may be amended or terminated solely by a written agreement signed by the Bank and the Executive. However, this Agreement will automatically terminate and the Executive's Interest shall be forfeited if benefits under the Salary Continuation Agreement are neither paid nor payable because of termination under Article 5 of the Salary Continuation Agreement. This Agreement shall also terminate upon the occurrence of any one of the following (a) surrender, lapse, or other termination of the Policy by the Bank, or (b) distribution of the death benefit proceeds in accordance with Section 2.2 above. 8.3 Successors; Binding Agreement. By an assumption agreement in form and substance satisfactory to the Executive, the Bank shall require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of the Bank to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform this Agreement if no succession had occurred. 8.4 No Guarantee of Employment. This Agreement is not an employment policy or contract. It does not give the Executive the right to remain an employee of the Bank, nor does it interfere with the Bank's right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive's right to terminate employment at any time. 8.5 Applicable Law. This Agreement and all rights hereunder shall be governed by and construed according to the laws of the State of North Carolina, except to the extent preempted by the laws of the United States of America. 8.6 Entire Agreement. This Agreement and the Salary Continuation Agreement constitute the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive by this Agreement other than those specifically set forth herein. This Agreement supersedes and replaces in its entirety the Life Insurance Endorsement Method Split Dollar Plan Agreement, and from and after the Effective Date of this Agreement the Life Insurance Endorsement Method Split Dollar Plan Agreement shall be of no further force or effect. 275

8.7 Severability. If for any reason any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not held invalid, and each such other provision shall continue in full force and effect to the full extent consistent with law. If any provision of this Agreement is held invalid in part, such invalidity shall not affect the remainder of the provision not held invalid, and the remainder of the provision together with all other provisions of this Agreement shall continue in full force and effect to the full extent consistent with law. 8.8 Headings. Caption headings and subheadings herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. 8.9 Notices. All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt

8.7 Severability. If for any reason any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not held invalid, and each such other provision shall continue in full force and effect to the full extent consistent with law. If any provision of this Agreement is held invalid in part, such invalidity shall not affect the remainder of the provision not held invalid, and the remainder of the provision together with all other provisions of this Agreement shall continue in full force and effect to the full extent consistent with law. 8.8 Headings. Caption headings and subheadings herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. 8.9 Notices. All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. (a) If to the Bank, to:

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

Michael R. Maguire Citizens South Bank 519 South New Hope Road Gastonia, North Carolina 28054-4040 and to such other or additional person or persons as either party shall have designated to the other party in writing by like notice. IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have executed this Agreement as of the date first written above. EXECUTIVE: BANK: Citizens South Bank
/s/ Michael R. Maguire By: Its: /s/ Kim S. Price ---------------------------President

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

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AGREEMENT TO COOPERATE WITH INSURANCE UNDERWRITING INCIDENT TO INTERNAL

AGREEMENT TO COOPERATE WITH INSURANCE UNDERWRITING INCIDENT TO INTERNAL REVENUE CODE SECTION 1035 EXCHANGE I acknowledge that I have read the Endorsement Split Dollar Agreement and agree to be bound by its terms, particularly the covenant on my part set forth in section 2.5 of the Endorsement Split Dollar Agreement to provide medical information and cooperate with medical insurance-related testing required by an insurer to issue a comparable insurance policy to cover the benefit provided under this Endorsement Split Dollar Agreement.
/s/ Paul L. Teem, Jr. --------------------Witness /s/ Michael R. Maguire ---------------------------Executive

277

SPLIT DOLLAR POLICY ENDORSEMENT Insured: Michael R. Maguire Insurer: Policy No. Pursuant to the terms of the Citizens South Bank Endorsement Split Dollar Agreement dated as of January 1, 2004, the undersigned Owner requests that the above-referenced policy issued by the Insurer provides for the following beneficiary designation and limited contract ownership rights to the Insured: 1. Upon the death of the Insured, proceeds shall be paid in one sum to the Owner, its successors or assigns, to the extent of its interest in the policy. It is hereby provided that the Insurer may rely solely upon a statement from the Owner as to the amount of proceeds it is entitled to receive under this paragraph. 2. Any proceeds at the death of the Insured in excess of the amount paid under the provisions of the preceding paragraph shall be paid in one sum to:

PRIMARY BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER

CONTINGENT BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER The exclusive right to change the beneficiary for the proceeds payable under this paragraph, to elect any optional method of settlement for the proceeds paid under this paragraph which are available under the terms of the policy and to assign all rights and interests granted under this paragraph are hereby granted to the Insured. The sole signature of the Insured shall be sufficient to exercise said rights. The Owner retains all contract rights not granted to the Insured under this paragraph. 3. It is agreed by the undersigned that this designation and limited assignment of rights shall be subject in all respects to the contractual terms of the policy. 4. Any payment directed by the Owner under this endorsement shall be a full discharge of the Insurer, and such discharge shall be binding on all parties claiming any interest under the policy. The undersigned for the Owner is signing in a representative capacity and warrants that he or she has the authority to bind the entity on whose behalf this document is being executed. Signed at Gastonia, North Carolina, this 17th day of May, 2004.
INSURED: OWNER:

SPLIT DOLLAR POLICY ENDORSEMENT Insured: Michael R. Maguire Insurer: Policy No. Pursuant to the terms of the Citizens South Bank Endorsement Split Dollar Agreement dated as of January 1, 2004, the undersigned Owner requests that the above-referenced policy issued by the Insurer provides for the following beneficiary designation and limited contract ownership rights to the Insured: 1. Upon the death of the Insured, proceeds shall be paid in one sum to the Owner, its successors or assigns, to the extent of its interest in the policy. It is hereby provided that the Insurer may rely solely upon a statement from the Owner as to the amount of proceeds it is entitled to receive under this paragraph. 2. Any proceeds at the death of the Insured in excess of the amount paid under the provisions of the preceding paragraph shall be paid in one sum to:

PRIMARY BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER

CONTINGENT BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER The exclusive right to change the beneficiary for the proceeds payable under this paragraph, to elect any optional method of settlement for the proceeds paid under this paragraph which are available under the terms of the policy and to assign all rights and interests granted under this paragraph are hereby granted to the Insured. The sole signature of the Insured shall be sufficient to exercise said rights. The Owner retains all contract rights not granted to the Insured under this paragraph. 3. It is agreed by the undersigned that this designation and limited assignment of rights shall be subject in all respects to the contractual terms of the policy. 4. Any payment directed by the Owner under this endorsement shall be a full discharge of the Insurer, and such discharge shall be binding on all parties claiming any interest under the policy. The undersigned for the Owner is signing in a representative capacity and warrants that he or she has the authority to bind the entity on whose behalf this document is being executed. Signed at Gastonia, North Carolina, this 17th day of May, 2004.
INSURED: OWNER: Citizens South Bank Kim S. Price ------------------------------Its: President By:

/s/ Michael R. Maguire

278

SPLIT DOLLAR POLICY ENDORSEMENT Insured: Michael R. Maguire Insurer: Policy No. Pursuant to the terms of the Citizens South Bank Endorsement Split Dollar Agreement dated as of January 1, 2004, the undersigned Owner requests that the above-referenced policy issued by the Insurer provide for the

SPLIT DOLLAR POLICY ENDORSEMENT Insured: Michael R. Maguire Insurer: Policy No. Pursuant to the terms of the Citizens South Bank Endorsement Split Dollar Agreement dated as of January 1, 2004, the undersigned Owner requests that the above-referenced policy issued by the Insurer provide for the following beneficiary designation and limited contract ownership rights to the Insured: 1. Upon the death of the Insured, proceeds shall be paid in one sum to the Owner, its successors or assigns, to the extent of its interest in the policy. It is hereby provided that the Insurer may rely solely upon a statement from the Owner as to the amount of proceeds it is entitled to receive under this paragraph. 2. Any proceeds at the death of the Insured in excess of the amount paid under the provisions of the preceding paragraph shall be paid in one sum to:

PRIMARY BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER

CONTINGENT BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER The exclusive right to change the beneficiary for the proceeds payable under this paragraph, to elect any optional method of settlement for the proceeds paid under this paragraph which are available under the terms of the policy and to assign all rights and interests granted under this paragraph are hereby granted to the Insured. The sole signature of the Insured shall be sufficient to exercise said rights. The Owner retains all contract rights not granted to the Insured under this paragraph. 3. It is agreed by the undersigned that this designation and limited assignment of rights shall be subject in all respects to the contractual terms of the policy. 4. Any payment directed by the Owner under this endorsement shall be a full discharge of the Insurer, and such discharge shall be binding on all parties claiming any interest under the policy. The undersigned for the Owner is signing in a representative capacity and warrants that he or she has the authority to bind the entity on whose behalf this document is being executed. Signed at Gastonia, North Carolina, this 17th day of May, 2004.
INSURED: OWNER: Citizens South Bank

/s/ Michael R. Maguire

/s/ Kim S. Price ------------------------------Its: President

By:

279

EXHIBIT 10.20 ENDORSEMENT SPLIT DOLLAR AGREEMENT WITH DANIEL M. BOYD, IV THIS ENDORSEMENT SPLIT DOLLAR AGREEMENT (this Agreement) is entered into as of this 1st day of January, 2004 by and between Citizens South Bank, a federally chartered savings bank located in Gastonia,

EXHIBIT 10.20 ENDORSEMENT SPLIT DOLLAR AGREEMENT WITH DANIEL M. BOYD, IV THIS ENDORSEMENT SPLIT DOLLAR AGREEMENT (this Agreement) is entered into as of this 1st day of January, 2004 by and between Citizens South Bank, a federally chartered savings bank located in Gastonia, North Carolina (the Bank), and Daniel M. Boyd, IV, its Executive Vice President (the Executive). This Agreement shall append the Split Dollar Policy Endorsement entered into on even date herewith or as subsequently amended, by and between the aforementioned parties. To encourage the Executive to remain an employee of the Bank, the Bank is willing to divide the death proceeds of a life insurance policy on the Executive's life. The Bank will pay life insurance premiums from its general assets. The Bank and the Executive agree as set forth herein. ARTICLE 1 GENERAL DEFINITIONS Capitalized terms not otherwise defined in this Agreement are used herein as defined in the Salary Continuation Agreement dated as of the date of this Agreement between the Bank and the Executive. The following terms shall have the meanings specified: 1.1 Administrator means the administrator described in Article 7. 1.2 Executive's Interest means the benefit set forth in Section 2.2. 1.3 Insured means the Executive. 1.4 Insurer means each life insurance carrier in which there is a Split Dollar Policy Endorsement attached to this Agreement. 1.5 Net Death Proceeds means the total death proceeds of the Policy minus the cash surrender value. 1.6 Policy means the specific life insurance policy or policies issued by the Insurer(s). 1.7 Split Dollar Policy Endorsement means the form required by the Administrator or the Insurer to indicate the Executive's interest, if any, in a Policy on such Executive's life. 280

ARTICLE 2 POLICY OWNERSHIP/INTERESTS 2.1 Bank Ownership. The Bank is the sole owner of the Policy and shall have the right to exercise all incidents of ownership. The Bank shall be the beneficiary of the remaining death proceeds of the Policy after the Executive Interest has been paid according to Section 2.2 below. 2.2 Executive's Interest. The Executive shall have the right to designate the beneficiary of the Executive's Interest. If at the time of Termination of Employment the Executive is entitled to benefits under the Salary Continuation Agreement in effect at the time of Termination of Employment, or if Termination of Employment occurs because of the Executive's death (except under Section 5.2 of the Salary Continuation Agreement), then the beneficiary designated in accordance with the Split Dollar Policy Endorsement shall be entitled to an amount (the Executive's Interest) equal to the product of (a) 100% of the Net Death Proceeds multiplied by (b) the percentage in which the Executive is vested under the Salary Continuation Agreement (which shall be deemed to be 100% in any case in which benefits under the Salary Continuation Agreement are determined without regard to vesting). Without limiting the generality of the foregoing, the Executive shall be considered to be 100% vested under the Salary Continuation Agreement if

ARTICLE 2 POLICY OWNERSHIP/INTERESTS 2.1 Bank Ownership. The Bank is the sole owner of the Policy and shall have the right to exercise all incidents of ownership. The Bank shall be the beneficiary of the remaining death proceeds of the Policy after the Executive Interest has been paid according to Section 2.2 below. 2.2 Executive's Interest. The Executive shall have the right to designate the beneficiary of the Executive's Interest. If at the time of Termination of Employment the Executive is entitled to benefits under the Salary Continuation Agreement in effect at the time of Termination of Employment, or if Termination of Employment occurs because of the Executive's death (except under Section 5.2 of the Salary Continuation Agreement), then the beneficiary designated in accordance with the Split Dollar Policy Endorsement shall be entitled to an amount (the Executive's Interest) equal to the product of (a) 100% of the Net Death Proceeds multiplied by (b) the percentage in which the Executive is vested under the Salary Continuation Agreement (which shall be deemed to be 100% in any case in which benefits under the Salary Continuation Agreement are determined without regard to vesting). Without limiting the generality of the foregoing, the Executive shall be considered to be 100% vested under the Salary Continuation Agreement if Termination of Employment occurs because of Disability, or if benefits are payable under Section 2.4 of the Salary Continuation Agreement because of Termination of Employment within 12 months after a Change in Control, or if the Executive has become 100% vested under Section 1.17 of the Salary Continuation Agreement, or if the Executive dies in active service to the Bank. The Executive or the Executive's transferee shall also have the right to elect and change settlement options that may be permitted for the Executive's Interest. 2.3 Option to Purchase. Upon termination of this Agreement, the Bank shall not sell, surrender or transfer ownership of the Policy without first giving the Executive or the Executive's transferee the option to purchase the Policy for a period of 60 days from written notice of such intention. The purchase price shall be an amount equal to the cash surrender value of the Policy. 2.4 Comparable Coverage. The Bank may replace the Policy with a comparable insurance policy to cover the benefit provided under this Agreement, in which case the Bank and the Executive shall execute a new Split Dollar Policy Endorsement for the comparable insurance policy. 2.5 Internal Revenue Code Section 1035 Exchanges. The Executive recognizes and agrees that the Bank may after this Split Dollar Agreement is adopted wish to exchange the Policy of life insurance on the Executive's life for another contract of life insurance insuring the Executive's life. Provided that the Policy is replaced (or intended to be replaced) with a comparable policy of life insurance, the Executive agrees to provide medical information and cooperate with medical insurance-related testing required by a prospective insurer for implementing the Policy or, if necessary, for modifying or updating to a comparable insurer. ARTICLE 3 PREMIUMS 3.1 Premium Payment. The Bank shall pay any premiums due on the Policy. 3.2 Economic Benefit. The Administrator shall annually determine the economic benefit attributable to the Executive based on the amount of the current term rate for the Executive's age multiplied by the aggregate death benefit payable to the Executive's beneficiary. The current term rate is the minimum amount required to be imputed under applicable Internal Revenue Service authority. 281

3.3 Imputed Income. The Bank shall impute the economic benefit to the Executive on an annual basis. ARTICLE 4 ASSIGNMENT

3.3 Imputed Income. The Bank shall impute the economic benefit to the Executive on an annual basis. ARTICLE 4 ASSIGNMENT The Executive may irrevocably assign without consideration all of the Executive's Interest in this Agreement to any person, entity, or trust established by the Executive or the Executive's spouse. If the Executive transfers all of the Executive's Interest, then all of the Executive's Interest in the Agreement shall be vested in the Executive's transferee, who shall be substituted as a party hereunder and the Executive shall have no further interest in this Agreement. ARTICLE 5 INSURER The Insurer shall be bound only by the terms of the Policy. Any payments the Insurer makes or actions it takes in accordance with the Policy shall fully discharge it from all claims, suits and demands of all entities or persons. The Insurer shall not be bound by or be deemed to have notice of the provisions of this Agreement. ARTICLE 6 CLAIMS AND REVIEW PROCEDURES 6.1 Claims Procedure. Any person or entity who has not received benefits under this Agreement that he or she believes should be paid (the claimant) shall make a claim for such benefits as follows: 6.1.1 Initiation - Written Claim. The claimant initiates a claim by submitting to the Administrator a written claim for the benefits. 6.1.2 Timing of Administrator Response. The Administrator shall respond to such claimant within 90 days after receiving the claim. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision. 6.1.3 Notice of Decision. If the Administrator denies part or all of the claim, the Administrator shall notify the claimant in writing of such denial. The Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth: (a) The specific reasons for the denial, (b) A reference to the specific provisions of this Agreement on which the denial is based, 282

(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed, (d) An explanation of the Agreement's review procedures and the time limits applicable to such procedures, and (e) A statement of the claimant's right to bring a civil action under ERISA section 502(a) following an adverse benefit determination on review. 6.2 Review Procedure. If the Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Administrator of the denial, as follows: 6.2.1 Initiation Written Request. To initiate the review, within 60 days after receiving the Administrator's notice of denial the claimant must file with the Administrator a written request for review. 6.2.2 Additional Submissions Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. Upon request and free of charge, the

(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed, (d) An explanation of the Agreement's review procedures and the time limits applicable to such procedures, and (e) A statement of the claimant's right to bring a civil action under ERISA section 502(a) following an adverse benefit determination on review. 6.2 Review Procedure. If the Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Administrator of the denial, as follows: 6.2.1 Initiation Written Request. To initiate the review, within 60 days after receiving the Administrator's notice of denial the claimant must file with the Administrator a written request for review. 6.2.2 Additional Submissions Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. Upon request and free of charge, the Administrator shall also provide the claimant reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits. 6.2.3 Considerations on Review. In considering the review, the Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. 6.2.4 Timing of Administrator Response. The Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision. 6.2.5 Notice of Decision. The Administrator shall notify the claimant in writing of its decision on review. The Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth (a) The specific reasons for the denial, (b) A reference to the specific provisions of the Agreement on which the denial is based, (c) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits, and (d) A statement of the claimant's right to bring a civil action under ERISA section 502(a). 283

ARTICLE 7 ADMINISTRATION OF AGREEMENT 7.1 Administrator Duties. This Agreement shall be administered by an Administrator, which shall consist of the board or such committee as the board shall appoint. The Executive may be a member of the Administrator. The Administrator shall also have the discretion and authority to (a) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Agreement and (b) decide or resolve any and all questions, including interpretations of this Agreement, as may arise in connection with the Agreement. 7.2 Agents. In the administration of this Agreement, the Administrator may employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel, who may be counsel to the Bank. 7.3 Binding Effect of Decisions. The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation, and application of this Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in

ARTICLE 7 ADMINISTRATION OF AGREEMENT 7.1 Administrator Duties. This Agreement shall be administered by an Administrator, which shall consist of the board or such committee as the board shall appoint. The Executive may be a member of the Administrator. The Administrator shall also have the discretion and authority to (a) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Agreement and (b) decide or resolve any and all questions, including interpretations of this Agreement, as may arise in connection with the Agreement. 7.2 Agents. In the administration of this Agreement, the Administrator may employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel, who may be counsel to the Bank. 7.3 Binding Effect of Decisions. The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation, and application of this Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement. 7.4 Indemnity of Administrator. The Bank shall indemnify and hold harmless the members of the Administrator against any and all claims, losses, damages, expenses, or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Administrator or any of its members. 7.5 Information. To enable the Administrator to perform its functions, the Bank shall supply full and timely information to the Administrator on all matters relating to the date and circumstances of the retirement, death, or Termination of Employment of the Executive and such other pertinent information as the Administrator may reasonably require. ARTICLE 8 MISCELLANEOUS 8.1 Binding Effect. This Agreement shall bind the Executive and the Bank and their beneficiaries, survivors, executors, administrators, and transferees, and any Policy beneficiary. 8.2 Amendment and Termination of Agreement. This Agreement may be amended or terminated solely by a written agreement signed by the Bank and the Executive. However, this Agreement will automatically terminate and the Executive's Interest shall be forfeited if benefits under the Salary Continuation Agreement are neither paid nor payable because of termination under Article 5 of the Salary Continuation Agreement. This Agreement shall also terminate upon the occurrence of any one of the following: (a) surrender, lapse, or other termination of the Policy by the Bank, or (b) distribution of the death benefit proceeds in accordance with Section 2.2 above. 284

8.3 Successors; Binding Agreement. By an assumption agreement in form and substance satisfactory to the Executive, the Bank shall require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of the Bank to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform this Agreement if no succession had occurred. 8.4 No Guarantee of Employment. This Agreement is not an employment policy or contract. It does not give the Executive the right to remain an employee of the Bank, nor does it interfere with the Bank's right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive's right to terminate employment at any time.

8.3 Successors; Binding Agreement. By an assumption agreement in form and substance satisfactory to the Executive, the Bank shall require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of the Bank to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform this Agreement if no succession had occurred. 8.4 No Guarantee of Employment. This Agreement is not an employment policy or contract. It does not give the Executive the right to remain an employee of the Bank, nor does it interfere with the Bank's right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive's right to terminate employment at any time. 8.5 Applicable Law. This Agreement and all rights hereunder shall be governed by and construed according to the laws of the State of North Carolina, except to the extent preempted by the laws of the United States of America. 8.6 Entire Agreement. This Agreement and the Salary Continuation Agreement constitute the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive by this Agreement other than those specifically set forth herein. 8.7 Severability. If for any reason any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not held invalid, and each such other provision shall continue in full force and effect to the full extent consistent with law. If any provision of this Agreement is held invalid in part, such invalidity shall not affect the remainder of the provision not held invalid, and the remainder of the provision together with all other provisions of this Agreement shall continue in full force and effect to the full extent consistent with law. 8.8 Headings. Caption headings and subheadings herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. 8.9 Notices. All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. (a) If to the Bank, to:

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

Daniel M. Boyd, IV Citizens South Bank 519 South New Hope Road Gastonia, North Carolina 28054-4040 285

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

and to such other or additional person or persons as either party shall have designated to the other party in writing by like notice. IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have executed this Agreement as of the date first written above. EXECUTIVE: BANK: Citizens South Bank
/s/ Daniel M. Boyd, IV By: Its: /s/ Kim S. Price ---------------------------President

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

286

AGREEMENT TO COOPERATE WITH INSURANCE UNDERWRITING INCIDENT TO INTERNAL REVENUE CODE SECTION 1035 EXCHANGE I acknowledge that I have read the Endorsement Split Dollar Agreement and agree to be bound by its terms, particularly the covenant on my part set forth in section 2.5 of the Endorsement Split Dollar Agreement to provide medical information and cooperate with medical insurance-related testing required by an insurer to issue a comparable insurance policy to cover the benefit provided under this Endorsement Split Dollar Agreement.
/s/ Paul L. Teem, Jr. --------------------Witness /s/ Daniel M. Boyd, IV ---------------------------Executive

287

SPLIT DOLLAR POLICY ENDORSEMENT Insured: Daniel M. Boyd, IV Insurer: Policy No. Pursuant to the terms of the Citizens South Bank Endorsement Split Dollar Agreement dated as of January 1, 2004, the undersigned Owner requests that the above-referenced policy issued by the Insurer provides for the following beneficiary designation and limited contract ownership rights to the Insured: 1. Upon the death of the Insured, proceeds shall be paid in one sum to the Owner, its successors or assigns, to the extent of its interest in the policy. It is hereby provided that the Insurer may rely solely upon a statement from the Owner as to the amount of proceeds it is entitled to receive under this paragraph. 2. Any proceeds at the death of the Insured in excess of the amount paid under the provisions of the preceding paragraph shall be paid in one sum to:

PRIMARY BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER

AGREEMENT TO COOPERATE WITH INSURANCE UNDERWRITING INCIDENT TO INTERNAL REVENUE CODE SECTION 1035 EXCHANGE I acknowledge that I have read the Endorsement Split Dollar Agreement and agree to be bound by its terms, particularly the covenant on my part set forth in section 2.5 of the Endorsement Split Dollar Agreement to provide medical information and cooperate with medical insurance-related testing required by an insurer to issue a comparable insurance policy to cover the benefit provided under this Endorsement Split Dollar Agreement.
/s/ Paul L. Teem, Jr. --------------------Witness /s/ Daniel M. Boyd, IV ---------------------------Executive

287

SPLIT DOLLAR POLICY ENDORSEMENT Insured: Daniel M. Boyd, IV Insurer: Policy No. Pursuant to the terms of the Citizens South Bank Endorsement Split Dollar Agreement dated as of January 1, 2004, the undersigned Owner requests that the above-referenced policy issued by the Insurer provides for the following beneficiary designation and limited contract ownership rights to the Insured: 1. Upon the death of the Insured, proceeds shall be paid in one sum to the Owner, its successors or assigns, to the extent of its interest in the policy. It is hereby provided that the Insurer may rely solely upon a statement from the Owner as to the amount of proceeds it is entitled to receive under this paragraph. 2. Any proceeds at the death of the Insured in excess of the amount paid under the provisions of the preceding paragraph shall be paid in one sum to:

PRIMARY BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER

CONTINGENT BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER The exclusive right to change the beneficiary for the proceeds payable under this paragraph, to elect any optional method of settlement for the proceeds paid under this paragraph which are available under the terms of the policy and to assign all rights and interests granted under this paragraph are hereby granted to the Insured. The sole signature of the Insured shall be sufficient to exercise said rights. The Owner retains all contract rights not granted to the Insured under this paragraph. 3. It is agreed by the undersigned that this designation and limited assignment of rights shall be subject in all respects to the contractual terms of the policy. 4. Any payment directed by the Owner under this endorsement shall be a full discharge of the Insurer, and such discharge shall be binding on all parties claiming any interest under the policy. The undersigned for the Owner is signing in a representative capacity and warrants that he or she has the authority to bind the entity on whose behalf this document is being executed. Signed at Gastonia, North Carolina, this 17th day of May, 2004.

SPLIT DOLLAR POLICY ENDORSEMENT Insured: Daniel M. Boyd, IV Insurer: Policy No. Pursuant to the terms of the Citizens South Bank Endorsement Split Dollar Agreement dated as of January 1, 2004, the undersigned Owner requests that the above-referenced policy issued by the Insurer provides for the following beneficiary designation and limited contract ownership rights to the Insured: 1. Upon the death of the Insured, proceeds shall be paid in one sum to the Owner, its successors or assigns, to the extent of its interest in the policy. It is hereby provided that the Insurer may rely solely upon a statement from the Owner as to the amount of proceeds it is entitled to receive under this paragraph. 2. Any proceeds at the death of the Insured in excess of the amount paid under the provisions of the preceding paragraph shall be paid in one sum to:

PRIMARY BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER

CONTINGENT BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER The exclusive right to change the beneficiary for the proceeds payable under this paragraph, to elect any optional method of settlement for the proceeds paid under this paragraph which are available under the terms of the policy and to assign all rights and interests granted under this paragraph are hereby granted to the Insured. The sole signature of the Insured shall be sufficient to exercise said rights. The Owner retains all contract rights not granted to the Insured under this paragraph. 3. It is agreed by the undersigned that this designation and limited assignment of rights shall be subject in all respects to the contractual terms of the policy. 4. Any payment directed by the Owner under this endorsement shall be a full discharge of the Insurer, and such discharge shall be binding on all parties claiming any interest under the policy. The undersigned for the Owner is signing in a representative capacity and warrants that he or she has the authority to bind the entity on whose behalf this document is being executed. Signed at Gastonia, North Carolina, this 17th day of May, 2004. INSURED: OWNER: Citizens South Bank
/s/ Daniel M. Boyd, IV By: Its: /s/ Kim S. Price -----------------------------President

288

SPLIT DOLLAR POLICY ENDORSEMENT Insured: Daniel M. Boyd, IV Insurer: Policy No.

SPLIT DOLLAR POLICY ENDORSEMENT Insured: Daniel M. Boyd, IV Insurer: Policy No. Pursuant to the terms of the Citizens South Bank Endorsement Split Dollar Agreement dated as of January 1, 2004, the undersigned Owner requests that the above-referenced policy issued by the Insurer provide for the following beneficiary designation and limited contract ownership rights to the Insured: 1. Upon the death of the Insured, proceeds shall be paid in one sum to the Owner, its successors or assigns, to the extent of its interest in the policy. It is hereby provided that the Insurer may rely solely upon a statement from the Owner as to the amount of proceeds it is entitled to receive under this paragraph. 2. Any proceeds at the death of the Insured in excess of the amount paid under the provisions of the preceding paragraph shall be paid in one sum to:

PRIMARY BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER

CONTINGENT BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER The exclusive right to change the beneficiary for the proceeds payable under this paragraph, to elect any optional method of settlement for the proceeds paid under this paragraph which are available under the terms of the policy and to assign all rights and interests granted under this paragraph are hereby granted to the Insured. The sole signature of the Insured shall be sufficient to exercise said rights. The Owner retains all contract rights not granted to the Insured under this paragraph. 3. It is agreed by the undersigned that this designation and limited assignment of rights shall be subject in all respects to the contractual terms of the policy. 4. Any payment directed by the Owner under this endorsement shall be a full discharge of the Insurer, and such discharge shall be binding on all parties claiming any interest under the policy. The undersigned for the Owner is signing in a representative capacity and warrants that he or she has the authority to bind the entity on whose behalf this document is being executed. Signed at Gastonia, North Carolina, this 17th day of May, 2004. INSURED: OWNER: Citizens South Bank
/s/ Daniel M. Boyd, IV By: Its: /s/ Kim S. Price -----------------------------President

289

EXHIBIT 10.21 ENDORSEMENT SPLIT DOLLAR AGREEMENT WITH V. BURTON BRINSON THIS ENDORSEMENT SPLIT DOLLAR AGREEMENT (this Agreement) is entered into as of this 1st day of

EXHIBIT 10.21 ENDORSEMENT SPLIT DOLLAR AGREEMENT WITH V. BURTON BRINSON THIS ENDORSEMENT SPLIT DOLLAR AGREEMENT (this Agreement) is entered into as of this 1st day of January, 2004 by and between Citizens South Bank, a federally chartered savings bank located in Gastonia, North Carolina (the Bank), and V. Burton Brinson, Jr., its Executive Vice President (the Executive). This Agreement shall append the Split Dollar Policy Endorsement entered into on even date herewith or as subsequently amended, by and between the aforementioned parties. To encourage the Executive to remain an employee of the Bank, the Bank is willing to divide the death proceeds of a life insurance policy on the Executive's life. The Bank will pay life insurance premiums from its general assets. The Bank and the Executive agree as set forth herein. ARTICLE 1 GENERAL DEFINITIONS Capitalized terms not otherwise defined in this Agreement are used herein as defined in the Salary Continuation Agreement dated as of the date of this Agreement between the Bank and the Executive. The following terms shall have the meanings specified: 1.1 Administrator means the administrator described in Article 7. 1.2 Executive's Interest means the benefit set forth in Section 2.2. 1.3 Insured means the Executive. 1.4 Insurer means each life insurance carrier in which there is a Split Dollar Policy Endorsement attached to this Agreement. 1.5 Net Death Proceeds means the total death proceeds of the Policy minus the cash surrender value. 1.6 Policy means the specific life insurance policy or policies issued by the Insurer(s). 1.7 Split Dollar Policy Endorsement means the form required by the Administrator or the Insurer to indicate the Executive's interest, if any, in a Policy on such Executive's life. 290

ARTICLE 2 POLICY OWNERSHIP/INTERESTS 2.1 Bank Ownership. The Bank is the sole owner of the Policy and shall have the right to exercise all incidents of ownership. The Bank shall be the beneficiary of the remaining death proceeds of the Policy after the Executive Interest has been paid according to Section 2.2 below. 2.2 Executive's Interest. The Executive shall have the right to designate the beneficiary of the Executive's Interest. If at the time of Termination of Employment the Executive is entitled to benefits under the Salary Continuation Agreement in effect at the time of Termination of Employment, or if Termination of Employment occurs because of the Executive's death (except under Section 5.2 of the Salary Continuation Agreement), then the beneficiary designated in accordance with the Split Dollar Policy Endorsement shall be entitled to an amount (the Executive's Interest) equal to the product of (a) 100% of the Net Death Proceeds multiplied by (b) the percentage in which the Executive is vested under the Salary Continuation Agreement (which shall be deemed to be 100% in any case in which benefits under the Salary Continuation Agreement are determined without regard to vesting). Without limiting the generality of the foregoing, the Executive shall be considered to be 100% vested under the Salary Continuation Agreement if

ARTICLE 2 POLICY OWNERSHIP/INTERESTS 2.1 Bank Ownership. The Bank is the sole owner of the Policy and shall have the right to exercise all incidents of ownership. The Bank shall be the beneficiary of the remaining death proceeds of the Policy after the Executive Interest has been paid according to Section 2.2 below. 2.2 Executive's Interest. The Executive shall have the right to designate the beneficiary of the Executive's Interest. If at the time of Termination of Employment the Executive is entitled to benefits under the Salary Continuation Agreement in effect at the time of Termination of Employment, or if Termination of Employment occurs because of the Executive's death (except under Section 5.2 of the Salary Continuation Agreement), then the beneficiary designated in accordance with the Split Dollar Policy Endorsement shall be entitled to an amount (the Executive's Interest) equal to the product of (a) 100% of the Net Death Proceeds multiplied by (b) the percentage in which the Executive is vested under the Salary Continuation Agreement (which shall be deemed to be 100% in any case in which benefits under the Salary Continuation Agreement are determined without regard to vesting). Without limiting the generality of the foregoing, the Executive shall be considered to be 100% vested under the Salary Continuation Agreement if Termination of Employment occurs because of Disability, or if benefits are payable under Section 2.4 of the Salary Continuation Agreement because of Termination of Employment within 12 months after a Change in Control, or if the Executive has become 100% vested under Section 1.17 of the Salary Continuation Agreement, or if the Executive dies in active service to the Bank. The Executive or the Executive's transferee shall also have the right to elect and change settlement options that may be permitted for the Executive's Interest. 2.3 Option to Purchase. Upon termination of this Agreement, the Bank shall not sell, surrender or transfer ownership of the Policy without first giving the Executive or the Executive's transferee the option to purchase the Policy for a period of 60 days from written notice of such intention. The purchase price shall be an amount equal to the cash surrender value of the Policy. 2.4 Comparable Coverage. The Bank may replace the Policy with a comparable insurance policy to cover the benefit provided under this Agreement, in which case the Bank and the Executive shall execute a new Split Dollar Policy Endorsement for the comparable insurance policy. 2.5 Internal Revenue Code Section 1035 Exchanges. The Executive recognizes and agrees that the Bank may after this Split Dollar Agreement is adopted wish to exchange the Policy of life insurance on the Executive's life for another contract of life insurance insuring the Executive's life. Provided that the Policy is replaced (or intended to be replaced) with a comparable policy of life insurance, the Executive agrees to provide medical information and cooperate with medical insurance-related testing required by a prospective insurer for implementing the Policy or, if necessary, for modifying or updating to a comparable insurer. ARTICLE 3 PREMIUMS 3.1 Premium Payment. The Bank shall pay any premiums due on the Policy. 3.2 Economic Benefit. The Administrator shall annually determine the economic benefit attributable to the Executive based on the amount of the current term rate for the Executive's age multiplied by the aggregate death benefit payable to the Executive's beneficiary. The current term rate is the minimum amount required to be imputed under applicable Internal Revenue Service authority. 291

3.3 Imputed Income. The Bank shall impute the economic benefit to the Executive on an annual basis. ARTICLE 4 ASSIGNMENT

3.3 Imputed Income. The Bank shall impute the economic benefit to the Executive on an annual basis. ARTICLE 4 ASSIGNMENT The Executive may irrevocably assign without consideration all of the Executive's Interest in this Agreement to any person, entity, or trust established by the Executive or the Executive's spouse. If the Executive transfers all of the Executive's Interest, then all of the Executive's Interest in the Agreement shall be vested in the Executive's transferee, who shall be substituted as a party hereunder and the Executive shall have no further interest in this Agreement. ARTICLE 5 INSURER The Insurer shall be bound only by the terms of the Policy. Any payments the Insurer makes or actions it takes in accordance with the Policy shall fully discharge it from all claims, suits and demands of all entities or persons. The Insurer shall not be bound by or be deemed to have notice of the provisions of this Agreement. ARTICLE 6 CLAIMS AND REVIEW PROCEDURES 6.1 Claims Procedure. Any person or entity who has not received benefits under this Agreement that he or she believes should be paid (the claimant) shall make a claim for such benefits as follows: 6.1.1 Initiation Written Claim. The claimant initiates a claim by submitting to the Administrator a written claim for the benefits. 6.1.2 Timing of Administrator Response. The Administrator shall respond to such claimant within 90 days after receiving the claim. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision. 6.1.3 Notice of Decision. If the Administrator denies part or all of the claim, the Administrator shall notify the claimant in writing of such denial. The Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth: (a) The specific reasons for the denial, (b) A reference to the specific provisions of this Agreement on which the denial is based, 292

(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed, (d) An explanation of the Agreement's review procedures and the time limits applicable to such procedures, and (e) A statement of the claimant's right to bring a civil action under ERISA section 502(a) following an adverse benefit determination on review. 6.2 Review Procedure. If the Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Administrator of the denial, as follows: 6.2.1 Initiation - Written Request. To initiate the review, within 60 days after receiving the Administrator's notice of denial the claimant must file with the Administrator a written request for review. 6.2.2 Additional Submissions - Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. Upon request and free of

(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed, (d) An explanation of the Agreement's review procedures and the time limits applicable to such procedures, and (e) A statement of the claimant's right to bring a civil action under ERISA section 502(a) following an adverse benefit determination on review. 6.2 Review Procedure. If the Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Administrator of the denial, as follows: 6.2.1 Initiation - Written Request. To initiate the review, within 60 days after receiving the Administrator's notice of denial the claimant must file with the Administrator a written request for review. 6.2.2 Additional Submissions - Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. Upon request and free of charge, the Administrator shall also provide the claimant reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits. 6.2.3 Considerations on Review. In considering the review, the Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. 6.2.4 Timing of Administrator Response. The Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision. 6.2.5 Notice of Decision. The Administrator shall notify the claimant in writing of its decision on review. The Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth (a) The specific reasons for the denial, (b) A reference to the specific provisions of the Agreement on which the denial is based, (c) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits, and (d) A statement of the claimant's right to bring a civil action under ERISA section 502(a). 293

ARTICLE 7 ADMINISTRATION OF AGREEMENT 7.1 Administrator Duties. This Agreement shall be administered by an Administrator, which shall consist of the board or such committee as the board shall appoint. The Executive may be a member of the Administrator. The Administrator shall also have the discretion and authority to (a) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Agreement and (b) decide or resolve any and all questions, including interpretations of this Agreement, as may arise in connection with the Agreement. 7.2 Agents. In the administration of this Agreement, the Administrator may employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel, who may be counsel to the Bank. 7.3 Binding Effect of Decisions. The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation, and application of this Agreement and the rules and

ARTICLE 7 ADMINISTRATION OF AGREEMENT 7.1 Administrator Duties. This Agreement shall be administered by an Administrator, which shall consist of the board or such committee as the board shall appoint. The Executive may be a member of the Administrator. The Administrator shall also have the discretion and authority to (a) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Agreement and (b) decide or resolve any and all questions, including interpretations of this Agreement, as may arise in connection with the Agreement. 7.2 Agents. In the administration of this Agreement, the Administrator may employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel, who may be counsel to the Bank. 7.3 Binding Effect of Decisions. The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation, and application of this Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement. 7.4 Indemnity of Administrator. The Bank shall indemnify and hold harmless the members of the Administrator against any and all claims, losses, damages, expenses, or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Administrator or any of its members. 7.5 Information. To enable the Administrator to perform its functions, the Bank shall supply full and timely information to the Administrator on all matters relating to the date and circumstances of the retirement, death, or Termination of Employment of the Executive and such other pertinent information as the Administrator may reasonably require. ARTICLE 8 MISCELLANEOUS 8.1 Binding Effect. This Agreement shall bind the Executive and the Bank and their beneficiaries, survivors, executors, administrators, and transferees, and any Policy beneficiary. 8.2 Amendment and Termination of Agreement. This Agreement may be amended or terminated solely by a written agreement signed by the Bank and the Executive. However, this Agreement will automatically terminate and the Executive's Interest shall be forfeited if benefits under the Salary Continuation Agreement are neither paid nor payable because of termination under Article 5 of the Salary Continuation Agreement. This Agreement shall also terminate upon the occurrence of any one of the following: (a) surrender, lapse, or other termination of the Policy by the Bank, or (b) distribution of the death benefit proceeds in accordance with Section 2.2 above. 294

8.3 Successors; Binding Agreement. By an assumption agreement in form and substance satisfactory to the Executive, the Bank shall require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of the Bank to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform this Agreement if no succession had occurred. 8.4 No Guarantee of Employment. This Agreement is not an employment policy or contract. It does not give the Executive the right to remain an employee of the Bank, nor does it interfere with the Bank's right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive's right to terminate employment at any time.

8.3 Successors; Binding Agreement. By an assumption agreement in form and substance satisfactory to the Executive, the Bank shall require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of the Bank to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform this Agreement if no succession had occurred. 8.4 No Guarantee of Employment. This Agreement is not an employment policy or contract. It does not give the Executive the right to remain an employee of the Bank, nor does it interfere with the Bank's right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive's right to terminate employment at any time. 8.5 Applicable Law. This Agreement and all rights hereunder shall be governed by and construed according to the laws of the State of North Carolina, except to the extent preempted by the laws of the United States of America. 8.6 Entire Agreement. This Agreement and the Salary Continuation Agreement constitute the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive by this Agreement other than those specifically set forth herein. 8.7 Severability. If for any reason any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not held invalid, and each such other provision shall continue in full force and effect to the full extent consistent with law. If any provision of this Agreement is held invalid in part, such invalidity shall not affect the remainder of the provision not held invalid, and the remainder of the provision together with all other provisions of this Agreement shall continue in full force and effect to the full extent consistent with law. 8.8 Headings. Caption headings and subheadings herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. 8.9 Notices. All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. (a) If to the Bank, to:

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

V. Burton Brinson, Jr. Citizens South Bank 519 South New Hope Road Gastonia, North Carolina 28054-4040 and to such other or additional person or persons as either party shall have designated to the other party in writing by like notice. 295

IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have executed this

IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have executed this Agreement as of the date first written above. EXECUTIVE: BANK: Citizens South Bank
/s/ V. Burton Brinson, Jr. By: Its: /s/ Kim S. Price ---------------------------President

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

296

AGREEMENT TO COOPERATE WITH INSURANCE UNDERWRITING INCIDENT TO INTERNAL REVENUE CODE SECTION 1035 EXCHANGE I acknowledge that I have read the Endorsement Split Dollar Agreement and agree to be bound by its terms, particularly the covenant on my part set forth in section 2.5 of the Endorsement Split Dollar Agreement to provide medical information and cooperate with medical insurance-related testing required by an insurer to issue a comparable insurance policy to cover the benefit provided under this Endorsement Split Dollar Agreement.
/s/ Paul L. Teem, Jr. --------------------Witness /s/ V. Burton Brinson, Jr. ---------------------------Executive

297

SPLIT DOLLAR POLICY ENDORSEMENT Insured: V. Burton Brinson, Jr. Insurer: Policy No. Pursuant to the terms of the Citizens South Bank Endorsement Split Dollar Agreement dated as of January 1, 2004, the undersigned Owner requests that the above-referenced policy issued by the Insurer provides for the following beneficiary designation and limited contract ownership rights to the Insured: 1. Upon the death of the Insured, proceeds shall be paid in one sum to the Owner, its successors or assigns, to the extent of its interest in the policy. It is hereby provided that the Insurer may rely solely upon a statement from the Owner as to the amount of proceeds it is entitled to receive under this paragraph. 2. Any proceeds at the death of the Insured in excess of the amount paid under the provisions of the preceding paragraph shall be paid in one sum to:

PRIMARY BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER

AGREEMENT TO COOPERATE WITH INSURANCE UNDERWRITING INCIDENT TO INTERNAL REVENUE CODE SECTION 1035 EXCHANGE I acknowledge that I have read the Endorsement Split Dollar Agreement and agree to be bound by its terms, particularly the covenant on my part set forth in section 2.5 of the Endorsement Split Dollar Agreement to provide medical information and cooperate with medical insurance-related testing required by an insurer to issue a comparable insurance policy to cover the benefit provided under this Endorsement Split Dollar Agreement.
/s/ Paul L. Teem, Jr. --------------------Witness /s/ V. Burton Brinson, Jr. ---------------------------Executive

297

SPLIT DOLLAR POLICY ENDORSEMENT Insured: V. Burton Brinson, Jr. Insurer: Policy No. Pursuant to the terms of the Citizens South Bank Endorsement Split Dollar Agreement dated as of January 1, 2004, the undersigned Owner requests that the above-referenced policy issued by the Insurer provides for the following beneficiary designation and limited contract ownership rights to the Insured: 1. Upon the death of the Insured, proceeds shall be paid in one sum to the Owner, its successors or assigns, to the extent of its interest in the policy. It is hereby provided that the Insurer may rely solely upon a statement from the Owner as to the amount of proceeds it is entitled to receive under this paragraph. 2. Any proceeds at the death of the Insured in excess of the amount paid under the provisions of the preceding paragraph shall be paid in one sum to:

PRIMARY BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER

CONTINGENT BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER The exclusive right to change the beneficiary for the proceeds payable under this paragraph, to elect any optional method of settlement for the proceeds paid under this paragraph which are available under the terms of the policy and to assign all rights and interests granted under this paragraph are hereby granted to the Insured. The sole signature of the Insured shall be sufficient to exercise said rights. The Owner retains all contract rights not granted to the Insured under this paragraph. 3. It is agreed by the undersigned that this designation and limited assignment of rights shall be subject in all respects to the contractual terms of the policy. 4. Any payment directed by the Owner under this endorsement shall be a full discharge of the Insurer, and such discharge shall be binding on all parties claiming any interest under the policy. The undersigned for the Owner is signing in a representative capacity and warrants that he or she has the authority to bind the entity on whose behalf this document is being executed. Signed at Gastonia, North Carolina, this 17th day of May, 2004.
INSURED: OWNER:

SPLIT DOLLAR POLICY ENDORSEMENT Insured: V. Burton Brinson, Jr. Insurer: Policy No. Pursuant to the terms of the Citizens South Bank Endorsement Split Dollar Agreement dated as of January 1, 2004, the undersigned Owner requests that the above-referenced policy issued by the Insurer provides for the following beneficiary designation and limited contract ownership rights to the Insured: 1. Upon the death of the Insured, proceeds shall be paid in one sum to the Owner, its successors or assigns, to the extent of its interest in the policy. It is hereby provided that the Insurer may rely solely upon a statement from the Owner as to the amount of proceeds it is entitled to receive under this paragraph. 2. Any proceeds at the death of the Insured in excess of the amount paid under the provisions of the preceding paragraph shall be paid in one sum to:

PRIMARY BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER

CONTINGENT BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER The exclusive right to change the beneficiary for the proceeds payable under this paragraph, to elect any optional method of settlement for the proceeds paid under this paragraph which are available under the terms of the policy and to assign all rights and interests granted under this paragraph are hereby granted to the Insured. The sole signature of the Insured shall be sufficient to exercise said rights. The Owner retains all contract rights not granted to the Insured under this paragraph. 3. It is agreed by the undersigned that this designation and limited assignment of rights shall be subject in all respects to the contractual terms of the policy. 4. Any payment directed by the Owner under this endorsement shall be a full discharge of the Insurer, and such discharge shall be binding on all parties claiming any interest under the policy. The undersigned for the Owner is signing in a representative capacity and warrants that he or she has the authority to bind the entity on whose behalf this document is being executed. Signed at Gastonia, North Carolina, this 17th day of May, 2004.
INSURED: OWNER: Citizens South Bank /s/ Kim S. Price ------------------------------Its: President By:

/s/ V. Burton Brinson, Jr.

298

SPLIT DOLLAR POLICY ENDORSEMENT Insured: V. Burton Brinson, Jr. Insurer: Policy No. Pursuant to the terms of the Citizens South Bank Endorsement Split Dollar Agreement dated as of January 1, 2004, the undersigned Owner requests that the above-referenced policy issued by the Insurer provide for the

SPLIT DOLLAR POLICY ENDORSEMENT Insured: V. Burton Brinson, Jr. Insurer: Policy No. Pursuant to the terms of the Citizens South Bank Endorsement Split Dollar Agreement dated as of January 1, 2004, the undersigned Owner requests that the above-referenced policy issued by the Insurer provide for the following beneficiary designation and limited contract ownership rights to the Insured: 1. Upon the death of the Insured, proceeds shall be paid in one sum to the Owner, its successors or assigns, to the extent of its interest in the policy. It is hereby provided that the Insurer may rely solely upon a statement from the Owner as to the amount of proceeds it is entitled to receive under this paragraph. 2. Any proceeds at the death of the Insured in excess of the amount paid under the provisions of the preceding paragraph shall be paid in one sum to:

PRIMARY BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER

CONTINGENT BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER The exclusive right to change the beneficiary for the proceeds payable under this paragraph, to elect any optional method of settlement for the proceeds paid under this paragraph which are available under the terms of the policy and to assign all rights and interests granted under this paragraph are hereby granted to the Insured. The sole signature of the Insured shall be sufficient to exercise said rights. The Owner retains all contract rights not granted to the Insured under this paragraph. 3. It is agreed by the undersigned that this designation and limited assignment of rights shall be subject in all respects to the contractual terms of the policy. 4. Any payment directed by the Owner under this endorsement shall be a full discharge of the Insurer, and such discharge shall be binding on all parties claiming any interest under the policy. The undersigned for the Owner is signing in a representative capacity and warrants that he or she has the authority to bind the entity on whose behalf this document is being executed. Signed at Gastonia, North Carolina, this 17th day of May, 2004.
INSURED: OWNER: Citizens South Bank /s/ Kim S. Price ------------------------------Its: President By:

/s/ V. Burton Brinson, Jr.

299

EXHIBIT 10.22 AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT WITH DAVID W. HOYLE, SR. THIS AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT (this Agreement) is made as of March 15, 2004, by and between Citizens South Bank, a federally chartered

EXHIBIT 10.22 AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT WITH DAVID W. HOYLE, SR. THIS AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT (this Agreement) is made as of March 15, 2004, by and between Citizens South Bank, a federally chartered savings bank (the Bank), and David W. Hoyle, Sr. (the Director). WHEREAS, to encourage the Director to remain a member of the Bank's board of directors, the Bank is willing to provide retirement benefits to the Director. The Bank will pay the benefits from its general assets, WHEREAS, none of the conditions or events included in the definition of the term golden parachute payment that is set forth in section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is contemplated insofar as the Bank is concerned, WHEREAS, the Director entered into a Deferred Compensation and Income Continuation Agreement with the Bank or its predecessor as of May 1, 1986, providing for specified retirement benefits for the Director, WHEREAS, the Director has agreed to miscellaneous changes in the terms and conditions of the May 1, 1986 Deferred Compensation and Income Continuation Agreement, and WHEREAS, the Director and the Bank intend that the May 1, 1986 Deferred Compensation and Income Continuation Agreement, as the same may have been amended, shall be of no further force or effect and shall be superseded in its entirety by this Agreement from and after the effective date of this Agreement. NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and acceptance of which are hereby acknowledged, the Director and the Bank hereby agree as follows. ARTICLE 1 DEFINITIONS Whenever used in this Agreement, the following words and phrases shall have the meanings specified: 1.1 Accrual Balance means the liability that should be accrued by the Bank under generally accepted accounting principles (GAAP) for the Bank's obligation to the Director under this Agreement, by applying Accounting Principles Board Opinion No. 12, as amended by Statement of Financial Accounting Standards No. 106, and the calculation method and discount rate specified hereinafter. The Accrual Balance shall be calculated assuming a level principal amount and interest as the discount rate is accrued each period. The principal accrual is determined such that when it is credited with interest each month, the Accrual Balance at Normal Retirement Age equals the present value of the normal retirement benefits. The discount rate means the rate used by the Plan Administrator for determining the Accrual 300

Balance. The rate is based on the yield on a 20-year corporate bond rated Aa by Moody's, rounded to the nearest 1/4%. The initial discount rate is 8.50%. However, the Plan Administrator, in its sole discretion, may adjust the discount rate to maintain the rate within reasonable standards according to GAAP. 1.2 Beneficiary means each designated person, or the estate of the Director, entitled to benefits, if any, upon the death of the Director, determined according to Article 4. 1.3 Beneficiary Designation Form means the form established from time to time by the Plan Administrator that the Director completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries. 1.4 Change in Control means any of the following events occur:

Balance. The rate is based on the yield on a 20-year corporate bond rated Aa by Moody's, rounded to the nearest 1/4%. The initial discount rate is 8.50%. However, the Plan Administrator, in its sole discretion, may adjust the discount rate to maintain the rate within reasonable standards according to GAAP. 1.2 Beneficiary means each designated person, or the estate of the Director, entitled to benefits, if any, upon the death of the Director, determined according to Article 4. 1.3 Beneficiary Designation Form means the form established from time to time by the Plan Administrator that the Director completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries. 1.4 Change in Control means any of the following events occur: (a) Merger: Citizens South Banking Corporation, a Delaware corporation of which the Bank is a wholly owned subsidiary, merges into or consolidates with another corporation, or merges another corporation into Citizens South Banking Corporation, and as a result less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of Citizens South Banking Corporation immediately before the merger or consolidation, (b) Acquisition of Significant Share Ownership: after the date of this Agreement a report on Schedule 13D, Schedule TO, or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of the combined voting power of Citizens South Banking Corporation's voting securities outstanding (but this clause (b) shall not apply to beneficial ownership of voting shares held by a subsidiary in a fiduciary capacity or beneficial ownership of voting shares held by an employee benefit plan of Citizens South Banking Corporation or any subsidiary(ies)). For purposes of this Agreement, subsidiary means an entity in which Citizens South Banking Corporation beneficially owns 50% or more of the outstanding voting securities, whether Citizens South Banking Corporation owns the shares directly or owns the shares indirectly through an intermediate subsidiary, (c) Change in Board Composition. during any period of two consecutive years, individuals who constitute Citizens South Banking Corporation's board of directors at the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however, that for purposes of this clause (c) each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period, or (d) Sale of Assets: Citizens South Banking Corporation sells to a third party all or substantially all of its assets. For this purpose, sale of all or substantially all of Citizens South Banking Corporation's assets includes sale of the shares or assets of the Bank alone. 301

1.5 Disability means, if the Director is covered by a Bank-sponsored disability policy, total disability as defined in such policy without regard to any waiting period. If the Director is not covered by such a policy, Disability means the Director suffers a sickness, accident or injury that, in the judgment of a physician satisfactory to the Bank, prevents the Director from performing substantially all of the Director's normal duties for the Bank. As a condition to receiving any Disability benefits, the Bank may require the Director to submit to such physical or mental evaluations and tests as the Bank's board of directors deems appropriate. 1.6 Early Termination means Termination of Service before the Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control. 1.7 Early Termination Date means the month, day, and year of Early Termination. 1.8 Effective Date means March 15, 2004. 1.9 Normal Retirement Age means the Director's 70th birthday.

1.5 Disability means, if the Director is covered by a Bank-sponsored disability policy, total disability as defined in such policy without regard to any waiting period. If the Director is not covered by such a policy, Disability means the Director suffers a sickness, accident or injury that, in the judgment of a physician satisfactory to the Bank, prevents the Director from performing substantially all of the Director's normal duties for the Bank. As a condition to receiving any Disability benefits, the Bank may require the Director to submit to such physical or mental evaluations and tests as the Bank's board of directors deems appropriate. 1.6 Early Termination means Termination of Service before the Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control. 1.7 Early Termination Date means the month, day, and year of Early Termination. 1.8 Effective Date means March 15, 2004. 1.9 Normal Retirement Age means the Director's 70th birthday. 1.10 Normal Retirement Date means the later of the Normal Retirement Age or Termination of Service. 1.11 Plan Administrator means the plan administrator described in Article 7. 1.12 Plan Year means each twelve-month period from the Effective Date of this Agreement. 1.13 Termination for Cause means the Director is not nominated by the board or nominating committee for reelection as a director after the expiration of his current term, or the Director is removed from the board of directors, in either case: (a) because of the Director's gross negligence or gross neglect of duties, or (b) because of the Director's commission of or plea of nolo contendere to a felony, or commission of or plea of nolo contendere to a misdemeanor involving moral turpitude, or (c) because of the Director's fraud, disloyalty, dishonesty, or willful violation of any applicable law or significant policy of the Bank committed in connection with the Director's service and resulting in an adverse effect on the Bank, or a breach of the Director's fiduciary duties for personal profit. For purposes of this Agreement, applicable laws include any statute, rule, regulatory order, statement of policy, or final cease-and-desist order of any governmental agency or body having regulatory authority over the Bank or Citizens South Banking Corporation, or, (d) because of the Director's intentional wrongful damage to the business or property of the Bank or its affiliates, including without limitation the reputation of the Bank or Citizens South Banking Corporation, which in the judgement of the Bank causes material harm to the Bank or affiliates, or 302

(e) because of the occurrence of any event that results in the Director being excluded from coverage, or having coverage limited for the Director as compared to other Directors of the Bank, under a blanket bond or other fidelity or insurance policy covering directors, officers, or employees, or (f) because the Director is removed from service or permanently prohibited from participating in the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act [12 U.S.C. 1818(e)(4) or (g)(1)]. 1.14 Termination of Service means the Director ceases to be a member of the Bank's board of directors for any reason whatsoever. For purposes of this Agreement, if there is a dispute over the service status of the Director or the date of the Director's Termination of Service, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred.

(e) because of the occurrence of any event that results in the Director being excluded from coverage, or having coverage limited for the Director as compared to other Directors of the Bank, under a blanket bond or other fidelity or insurance policy covering directors, officers, or employees, or (f) because the Director is removed from service or permanently prohibited from participating in the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act [12 U.S.C. 1818(e)(4) or (g)(1)]. 1.14 Termination of Service means the Director ceases to be a member of the Bank's board of directors for any reason whatsoever. For purposes of this Agreement, if there is a dispute over the service status of the Director or the date of the Director's Termination of Service, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred. ARTICLE 2 LIFETIME BENEFITS 2.1 Normal Retirement Benefit. For Termination of Service on or after Normal Retirement Age, the Bank shall pay to the Director the benefit described in this Section 2.1 instead of any other benefit under this Agreement.
2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is $46,524. 2.1.2 Payment of Benefit. The Bank shall pay the annual

benefit to the Director in 12 equal monthly installments payable on the first day of each month, beginning with the month after the Director's Normal Retirement Date. The annual benefit shall be paid to the Director for 10 years. 2.2 Early Termination Benefit. After Early Termination, the Bank shall pay to the Director a benefit consisting of 120 equal monthly payments. The benefit shall be payable on the first day of each month, beginning with the month after the Normal Retirement Age. The amount of the monthly payment shall be calculated based on the Accrual Balance existing on the date of the Director's Termination of Service. For illustrative purposes only, Schedule A attached to this Agreement shows the projected annual Early Termination benefit based on the Accrual Balance at each Plan Year end. 2.3 Disability Benefit. If the Director terminates service because of Disability before the Normal Retirement Age, the Bank shall pay to the Director the benefit described in Section 2.1 instead of any other benefit under this Agreement. The benefit shall be payable on the first day of each month, beginning with the month after the Normal Retirement Age. The annual benefit shall be paid to the Director for 10 years. 2.4 Change in Control Benefit. If the Director's service with the Bank terminates within one year after a Change in Control (except for Termination for Cause), the Bank shall pay to the Director the benefit described in this Section 2.4 instead of any other benefit under this Agreement. 2.4.1 Amount of Benefit. The benefit under this Section 2.4 is the Normal Retirement Age Accrual Balance required by Section 2.1, without reduction for the time value of money or other discount. 303

2.4.2 Payment of Benefit. The Bank shall pay this benefit to the Director in a single lump sum within 3 days after the Director's Termination of Service. 2.5 Contradiction in Terms of Agreement and Schedule A. If there is a contradiction in the terms of this Agreement and Schedule A attached hereto concerning the benefits due under Section 2.2, 2.3, or 2.4 hereof, then the actual amount of benefits prescribed by this Agreement shall control. ARTICLE 3

2.4.2 Payment of Benefit. The Bank shall pay this benefit to the Director in a single lump sum within 3 days after the Director's Termination of Service. 2.5 Contradiction in Terms of Agreement and Schedule A. If there is a contradiction in the terms of this Agreement and Schedule A attached hereto concerning the benefits due under Section 2.2, 2.3, or 2.4 hereof, then the actual amount of benefits prescribed by this Agreement shall control. ARTICLE 3 DEATH BENEFITS 3.1 Death in Active Service. If the Director dies while in active service to the Bank, instead of any other benefit under this Agreement the Bank shall pay to the Director's Beneficiary the normal retirement benefit set forth in Section 2.1 of this Agreement. The Bank shall pay the annual benefit to the Director's Beneficiary in 12 equal monthly installments payable on the first day of each month, beginning with the month after the Director's death. The annual benefit shall be paid to the Director's Beneficiary for 10 years. 3.2 Death After Termination of Service. If the Director dies after having terminated active service with the Bank but before receiving any or all of the benefits to which the Director is entitled under Article 2 of this Agreement, the Bank shall pay to the Director's Beneficiary the benefits set forth in Article 2 to which the Director was entitled at the time of death. The benefits shall be payable to the Director's Beneficiary at the same time and in the same amounts they would have been paid to the Director had the Director survived, except that benefit payments shall begin in the month immediately after the Director's death if payments to the Director had not already commenced by the date of the Director's death. ARTICLE 4 BENEFICIARIES 4.1 Beneficiary Designations. The Director shall have the right to designate at any time a Beneficiary to receive any benefits payable under this Agreement upon the death of the Director. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other benefit plan of the Bank in which the Director participates. 4.2 Beneficiary Designation: Change. The Director shall designate a Beneficiary by completing and signing the Beneficiary Designation Form and delivering it to the Plan Administrator or its designated agent. The Director's Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Director or if the Director names a spouse as Beneficiary and the marriage is subsequently dissolved. The Director shall have the right to change a Beneficiary by completing, signing, and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator's rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Director and accepted by the Plan Administrator before the Director's death. 304

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted, and acknowledged in writing by the Plan Administrator or its designated agent. 4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director's spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be made to the personal representative of the Director's estate. 4.5 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative, or person having the care or custody of the minor, incapacitated person, or incapable person. The Bank may require proof of incapacity, minority, or guardianship as it may deem appropriate before distribution of

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted, and acknowledged in writing by the Plan Administrator or its designated agent. 4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director's spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be made to the personal representative of the Director's estate. 4.5 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative, or person having the care or custody of the minor, incapacitated person, or incapable person. The Bank may require proof of incapacity, minority, or guardianship as it may deem appropriate before distribution of the benefit. Distribution shall completely discharge the Bank from all liability for the benefit. ARTICLE 5 GENERAL LIMITATIONS Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any benefit under this Agreement, and this Agreement shall terminate, if the Director's Termination of Service is the result of Termination for Cause. The board of directors or a duly authorized committee of the board shall have the sole and absolute right to determine whether the bases for denial of benefits for cause exist. Benefits may be denied for cause regardless of whether the Director continued to serve as a director after the board or committee made its determination not to nominate the Director for reelection. ARTICLE 6 CLAIMS AND REVIEW PROCEDURES 6.1 Claims Procedure. The Bank shall notify any person or entity that makes a claim for benefits under this Agreement (the Claimant) in writing, within 90 days of Claimant's written application for benefits, of his or her eligibility or noneligibility for benefits under the Agreement. If the Bank determines that the Claimant is not eligible for benefits or full benefits, the notice shall set forth (1) the specific reasons for such denial, (2) a specific reference to the provisions of the Agreement on which the denial is based, (3) a description of any additional information or material necessary for the Claimant to perfect his or her claim, and a description of why it is needed, and (4) an explanation of the Agreement's claims review procedure and other appropriate information as to the steps to be taken if the Claimant wishes to have the claim reviewed. If the Bank determines that there are special circumstances requiring additional time to make a decision, the Bank shall notify the Claimant of the special circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional 90 days. 6.2 Review Procedure. If the Claimant is determined by the Bank not to be eligible for benefits, or if the Claimant believes that he or she is entitled to greater or different benefits, the Claimant shall have the opportunity to have such claim reviewed by the Bank by filing a petition for review with the Bank within 60 days after receipt of the notice issued by the Bank. Said petition shall state the specific reasons, which the Claimant believes entitle him or her to benefits or to greater or different benefits. Within 60 days after receipt by the Bank of the petition, the Bank shall afford the Claimant (and 305

counsel, if any) an opportunity to present his or her position to the Bank verbally or in writing, and the Claimant (or counsel) shall have the right to review the pertinent documents. The Bank shall notify the Claimant of its decision in writing within the 60-day period, stating specifically the basis of its decision, written in a manner to be understood by the Claimant and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the 60-day period is not sufficient, the decision may be deferred for up to another 60 days at the election of the Bank, but notice of this deferral shall be given to the Claimant. ARTICLE 7 ADMINISTRATION OF AGREEMENT

counsel, if any) an opportunity to present his or her position to the Bank verbally or in writing, and the Claimant (or counsel) shall have the right to review the pertinent documents. The Bank shall notify the Claimant of its decision in writing within the 60-day period, stating specifically the basis of its decision, written in a manner to be understood by the Claimant and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the 60-day period is not sufficient, the decision may be deferred for up to another 60 days at the election of the Bank, but notice of this deferral shall be given to the Claimant. ARTICLE 7 ADMINISTRATION OF AGREEMENT 7.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator consisting of the Bank's board of directors or such committee or person(s) as the board shall appoint. The Director may be a member of the Plan Administrator. The Plan Administrator shall also have the discretion and authority to (a) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Agreement and (b) decide or resolve any and all questions, including interpretations of this Agreement, as may arise in connection with the Agreement. 7.2 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative), and may from time to time consult with counsel, who may be counsel to the Bank. 7.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation, and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement. No Director or Beneficiary shall be deemed to have any right, vested or nonvested, regarding the continued use of any previously adopted assumptions, including but not limited to the discount rate and calculation method employed in the determination of the Accrual Balance. 7.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses, or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members. 7.5 Bank Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Termination of Service of the Director, and such other pertinent information as the Plan Administrator may reasonably require. ARTICLE 8 MISCELLANEOUS 8.1 Amendment and Termination. This Agreement may be amended solely by a written agreement signed by the Bank and by the Director. Except as provided in Article 5, this Agreement may be terminated solely by a written agreement signed by the Bank and by the Director. 306

8.2 Binding Effect. This Agreement shall bind the Director and the Bank, and their beneficiaries, survivors, executors, successors, administrators, and transferees. 8.3 No Guarantee of Service. This Agreement is not a contract for services. It does not give the Director the right to remain a Director of the Bank, nor does the Agreement interfere with the rights of the Bank's shareholders not to re-elect the Director or the right of shareholders or the Board to remove an individual as a director of the Bank. The Agreement also does not require the Director to remain a director nor interfere with the Director's right to terminate services at any time. 8.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached,

8.2 Binding Effect. This Agreement shall bind the Director and the Bank, and their beneficiaries, survivors, executors, successors, administrators, and transferees. 8.3 No Guarantee of Service. This Agreement is not a contract for services. It does not give the Director the right to remain a Director of the Bank, nor does the Agreement interfere with the rights of the Bank's shareholders not to re-elect the Director or the right of shareholders or the Board to remove an individual as a director of the Bank. The Agreement also does not require the Director to remain a director nor interfere with the Director's right to terminate services at any time. 8.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached, or encumbered in any manner. 8.5 Successors; Binding Agreement. The Bank shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Bank, by an assumption agreement in form and substance satisfactory to the Director, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform this Agreement if no such succession had occurred. Failure of the Bank to obtain such assumption agreement before effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Director to the Change in Control benefit provided in Section 2.4. 8.6 Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement. 8.7 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of North Carolina, except to the extent preempted by the laws of the United States of America. 8.8 Unfunded Arrangement. The Director and beneficiary are general unsecured creditors of the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise by the Bank to pay benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Director's life is a general asset of the Bank to which the Director and beneficiary have no preferred or secured claim. 8.9 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Director concerning the subject matter hereof. No rights are granted to the Director under this Agreement other than those specifically set forth herein. The May 1, 1986 Deferred Compensation and Income Continuation Agreement, as the same may have been amended, shall be of no further force or effect and shall be superseded in its entirety by this Agreement from and after the effective date of this Agreement. 8.10 Severability. If for any reason any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not held invalid, and each such other provision shall continue in full force and effect to the full extent consistent with law. If any provision of this Agreement is held invalid in part, such invalidity shall not affect the remainder of such provision, and the remainder of such provision, together with all other provisions of this Agreement, shall continue in full force and effect to the full extent consistent with law. 307

8.11 Headings. The headings of Sections herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. 8.12 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. If to the Bank, notice shall be given to the board of directors, Citizens South Bank, 519 South New Hope Road, Gastonia, North Carolina 28054-4040, or to such other or additional person or persons as the Bank shall have designated to the Director in writing. If to the Director, notice shall be given to the Director at the address of the Director appearing on the Bank's records, or to such other or additional person or persons as the Director shall have designated to the Bank in writing.

8.11 Headings. The headings of Sections herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. 8.12 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. If to the Bank, notice shall be given to the board of directors, Citizens South Bank, 519 South New Hope Road, Gastonia, North Carolina 28054-4040, or to such other or additional person or persons as the Bank shall have designated to the Director in writing. If to the Director, notice shall be given to the Director at the address of the Director appearing on the Bank's records, or to such other or additional person or persons as the Director shall have designated to the Bank in writing. 8.13 Payment of Legal Fees. The Bank is aware that after a Change in Control management of the Bank could cause or attempt to cause the Bank to refuse to comply with its obligations under this Agreement, or could institute or cause or attempt to cause the Bank to institute litigation seeking to have this Agreement declared unenforceable, or could take or attempt to take other action to deny Director the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement would be frustrated. It is the intention of the Bank that the Director not be required to incur the expenses associated with the enforcement of his rights under this Agreement, whether by litigation or other legal action, because the cost and expense thereof would substantially detract from the benefits intended to be granted to the Director hereunder. It is the intention of the Bank that the Director not be forced to negotiate settlement of his rights under this Agreement under threat of incurring expenses. Accordingly, if after a Change in Control occurs it appears to the Director that (a) the Bank has failed to comply with any of its obligations under this Agreement, or (b) the Bank or any other person has taken any action to declare this Agreement void or unenforceable, or instituted any litigation or other legal action designed to deny, diminish, or to recover from the Director the benefits intended to be provided to the Director hereunder, the Bank irrevocably authorizes the Director from time to time to retain counsel of his choice, at the expense of the Bank as provided in this Section 8.13, to represent the Director in connection with the initiation or defense of any litigation or other legal action, whether by or against the Bank or any director, officer, stockholder, or other person affiliated with the Bank, in any jurisdiction. Notwithstanding any existing or previous attorneyclient relationship between the Bank and any counsel chosen by the Director under this Section 8.13, the Bank irrevocably consents to the Director entering into an attorney-client relationship with that counsel, and the Bank and the Director agree that a confidential relationship shall exist between the Director and that counsel. The fees and expenses of counsel selected from time to time by the Director as provided in this section shall be paid or reimbursed to the Director by the Bank on a regular, periodic basis upon presentation by the Director of a statement or statements prepared by such counsel in accordance with such counsel's customary practices, up to a maximum aggregate amount of $25,000. The Bank's obligation to pay the Director's legal fees provided by this Section 8.13 operates separately from and in addition to any legal fee reimbursement obligation the Bank may have with the Director under any separate employment, severance, or other agreement between the Director and the Bank. 8.14 Liquidated Damages. The parties hereto, before entering into this Agreement, have been concerned with the fact that substantial damages will be suffered by the Director in the event that the Bank shall fail to perform according to Section 2.4 of this Agreement following a Change in Control. Following a Change in Control, in the event of nonperformance by the Bank for a period of 30 days from the time payment was scheduled to be made pursuant to Section 2.4 of this Agreement, the Director shall 308

immediately be entitled to liquidated damages equal to 1 1/2 times the remaining Accrual Balance due to the Director under Section 2.4 of this Agreement. This provision shall not be applicable in the event that such nonpayment is the result of prohibition of such payment by law, regulation or order of a banking regulatory agency. IN WITNESS WHEREOF, the Director and a duly authorized Bank officer have executed this Amended Deferred Compensation and Income Continuation Agreement as of the date first written above. DIRECTOR CITIZENS SOUTH BANK
/s/ David W. Hoyle, Sr. By: Title: /s/ Kim S. Price ---------------------------President

309

BENEFICIARY DESIGNATION CITIZENS SOUTH BANK AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT I,__________________, designate the following as beneficiary of any death benefits under this Amended Deferred Compensation and Income Continuation Agreement: Primary: Contingent: Note: To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement. I understand that I may change these beneficiary designations by filing a new written designation with the Bank. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature: /s/ David W. Hoyle, Sr Date: March 15, 2004

Received by Citizens South Bank this 15th day of March, 2004.
By: /s/ Kim S. Price ---------------Title: President

310

SCHEDULE A CITIZENS SOUTH BANK AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT David W. Hoyle, Sr. Normal Retirement Age: 70

BENEFICIARY DESIGNATION CITIZENS SOUTH BANK AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT I,__________________, designate the following as beneficiary of any death benefits under this Amended Deferred Compensation and Income Continuation Agreement: Primary: Contingent: Note: To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement. I understand that I may change these beneficiary designations by filing a new written designation with the Bank. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature: /s/ David W. Hoyle, Sr Date: March 15, 2004

Received by Citizens South Bank this 15th day of March, 2004.
By: /s/ Kim S. Price ---------------Title: President

310

SCHEDULE A CITIZENS SOUTH BANK AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT David W. Hoyle, Sr. Normal Retirement Age: 70
EARLY TERMINATION ANNUAL BENEFIT ACCRUAL BALANCE PAYABLE AT NORMAL 8.50% (1) RETIREMENT AGE (2) -------------------------------$ 129,000 $ 19,058 $ 155,189 $ 22,927 $ 183,693 $ 27,138 $ 214,717 $ 31,721 $ 248,482 $ 36,710 $ 285,233 $ 42,139 $ 314,912(3) $ 46,524 CHANGE-INCONTROL BENEFIT PAYABLE IN A LUMP SUM --------------$ 314,912 $ 314,912 $ 314,912 $ 314,912 $ 314,912 $ 314,912 $ 314,912

PLAN YEAR ENDING DECEMBER 31, ------------2003 2004 2005 2006 2007 2008 February 2009

AGE AT PLAN YEAR END -------------64 65 66 67 68 69 70

(1) Calculations are approximations based on prior year-end Accrual Balances. The Accrual Balance reflects payment at the beginning of each month during retirement, beginning March 1, 2009. (2) Based on the present value of the current payment stream of the vested Accrual Balance at each year end using a standard discount rate (8.50%). The benefit amounts shown are for illustrative purposes only. Actual Early Termination benefits will be based on the Accrual Balance existing on the date of the Director's Termination

SCHEDULE A CITIZENS SOUTH BANK AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT David W. Hoyle, Sr. Normal Retirement Age: 70
EARLY TERMINATION ANNUAL BENEFIT ACCRUAL BALANCE PAYABLE AT NORMAL 8.50% (1) RETIREMENT AGE (2) -------------------------------$ 129,000 $ 19,058 $ 155,189 $ 22,927 $ 183,693 $ 27,138 $ 214,717 $ 31,721 $ 248,482 $ 36,710 $ 285,233 $ 42,139 $ 314,912(3) $ 46,524 CHANGE-INCONTROL BENEFIT PAYABLE IN A LUMP SUM --------------$ 314,912 $ 314,912 $ 314,912 $ 314,912 $ 314,912 $ 314,912 $ 314,912

PLAN YEAR ENDING DECEMBER 31, ------------2003 2004 2005 2006 2007 2008 February 2009

AGE AT PLAN YEAR END -------------64 65 66 67 68 69 70

(1) Calculations are approximations based on prior year-end Accrual Balances. The Accrual Balance reflects payment at the beginning of each month during retirement, beginning March 1, 2009. (2) Based on the present value of the current payment stream of the vested Accrual Balance at each year end using a standard discount rate (8.50%). The benefit amounts shown are for illustrative purposes only. Actual Early Termination benefits will be based on the Accrual Balance existing on the date of the Director's Termination of Service. (3) Projected retirement occurs on February 4, 2009, with the first normal monthly retirement benefit commencing March 1, 2009. 311

EXHIBIT 10.23 AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT WITH BEN R. RUDISILL, II THIS AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT (this Agreement) is made as of March 15, 2004, by and between Citizens South Bank, a federally chartered savings bank (the Bank), and Ben R. Rudisill, II (the Director). WHEREAS, to encourage the Director to remain a member of the Bank's board of directors, the Bank is willing to provide retirement benefits to the Director. The Bank will pay the benefits from its general assets, WHEREAS, none of the conditions or events included in the definition of the term golden parachute payment that is set forth in section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is contemplated insofar as the Bank is concerned, WHEREAS, the Director entered into a Deferred Compensation and Income Continuation Agreement with the Bank or its predecessor as of May 1, 1986, providing for specified retirement benefits for the Director, WHEREAS, the Director has agreed to miscellaneous changes in the terms and conditions of the May 1, 1986 Deferred Compensation and Income Continuation Agreement, and WHEREAS, the Director and the Bank intend that the May 1, 1986 Deferred Compensation and Income Continuation Agreement, as the same may have been amended, shall be of no further force or effect and shall be

EXHIBIT 10.23 AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT WITH BEN R. RUDISILL, II THIS AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT (this Agreement) is made as of March 15, 2004, by and between Citizens South Bank, a federally chartered savings bank (the Bank), and Ben R. Rudisill, II (the Director). WHEREAS, to encourage the Director to remain a member of the Bank's board of directors, the Bank is willing to provide retirement benefits to the Director. The Bank will pay the benefits from its general assets, WHEREAS, none of the conditions or events included in the definition of the term golden parachute payment that is set forth in section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is contemplated insofar as the Bank is concerned, WHEREAS, the Director entered into a Deferred Compensation and Income Continuation Agreement with the Bank or its predecessor as of May 1, 1986, providing for specified retirement benefits for the Director, WHEREAS, the Director has agreed to miscellaneous changes in the terms and conditions of the May 1, 1986 Deferred Compensation and Income Continuation Agreement, and WHEREAS, the Director and the Bank intend that the May 1, 1986 Deferred Compensation and Income Continuation Agreement, as the same may have been amended, shall be of no further force or effect and shall be superseded in its entirety by this Agreement from and after the effective date of this Agreement. NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and acceptance of which are hereby acknowledged, the Director and the Bank hereby agree as follows. ARTICLE 1 DEFINITIONS Whenever used in this Agreement, the following words and phrases shall have the meanings specified: 1.1 Accrual Balance means the liability that should be accrued by the Bank under generally accepted accounting principles (GAAP) for the Bank's obligation to the Director under this Agreement, by applying Accounting Principles Board Opinion No. 12, as amended by Statement of Financial Accounting Standards No. 106, and the calculation method and discount rate specified hereinafter. The Accrual Balance shall be calculated assuming a level principal amount and interest as the discount rate is accrued each period. The principal accrual is determined such that when it is credited with interest each month, the Accrual Balance at Normal Retirement Age equals the present value of the normal retirement 312

benefits. The discount rate means the rate used by the Plan Administrator for determining the Accrual Balance. The rate is based on the yield on a 20-year corporate bond rated Aa by Moody's, rounded to the nearest 1/4%. The initial discount rate is 8.50%. However, the Plan Administrator, in its sole discretion, may adjust the discount rate to maintain the rate within reasonable standards according to GAAP. 1.2 Beneficiary means each designated person, or the estate of the Director, entitled to benefits, if any, upon the death of the Director, determined according to Article 4. 1.3 Beneficiary Designation Form means the form established from time to time by the Plan Administrator that the Director completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries. 1.4 Change in Control means any of the following events occur:

benefits. The discount rate means the rate used by the Plan Administrator for determining the Accrual Balance. The rate is based on the yield on a 20-year corporate bond rated Aa by Moody's, rounded to the nearest 1/4%. The initial discount rate is 8.50%. However, the Plan Administrator, in its sole discretion, may adjust the discount rate to maintain the rate within reasonable standards according to GAAP. 1.2 Beneficiary means each designated person, or the estate of the Director, entitled to benefits, if any, upon the death of the Director, determined according to Article 4. 1.3 Beneficiary Designation Form means the form established from time to time by the Plan Administrator that the Director completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries. 1.4 Change in Control means any of the following events occur: (a) Merger: Citizens South Banking Corporation, a Delaware corporation of which the Bank is a wholly owned subsidiary, merges into or consolidates with another corporation, or merges another corporation into Citizens South Banking Corporation, and as a result less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of Citizens South Banking Corporation immediately before the merger or consolidation, (b) Acquisition of Significant Share Ownership: after the date of this Agreement a report on Schedule 13D, Schedule TO, or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of the combined voting power of Citizens South Banking Corporation's voting securities outstanding (but this clause (b) shall not apply to beneficial ownership of voting shares held by a subsidiary in a fiduciary capacity or beneficial ownership of voting shares held by an employee benefit plan of Citizens South Banking Corporation or any subsidiary(ies)). For purposes of this Agreement, "subsidiary means an entity in which Citizens South Banking Corporation beneficially owns 50% or more of the outstanding voting securities, whether Citizens South Banking Corporation owns the shares directly or owns the shares indirectly through an intermediate subsidiary, (c) Change in Board Composition. during any period of two consecutive years, individuals who constitute Citizens South Banking Corporation's board of directors at the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however, that for purposes of this clause (c) each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period, or (d) Sale of Assets: Citizens South Banking Corporation sells to a third party all or substantially all of its assets. For this purpose, sale of all or substantially all of Citizens South Banking Corporation's assets includes sale of the shares or assets of the Bank alone. 313

1.5 Disability means, if the Director is covered by a Bank-sponsored disability policy, total disability as defined in such policy without regard to any waiting period. If the Director is not covered by such a policy, Disability means the Director suffers a sickness, accident or injury that, in the judgment of a physician satisfactory to the Bank, prevents the Director from performing substantially all of the Director's normal duties for the Bank. As a condition to receiving any Disability benefits, the Bank may require the Director to submit to such physical or mental evaluations and tests as the Bank's board of directors deems appropriate. 1.6 Early Termination means Termination of Service before the Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control. 1.7 Early Termination Date means the month, day, and year of Early Termination. 1.8 Effective Date means March 15, 2004.

1.5 Disability means, if the Director is covered by a Bank-sponsored disability policy, total disability as defined in such policy without regard to any waiting period. If the Director is not covered by such a policy, Disability means the Director suffers a sickness, accident or injury that, in the judgment of a physician satisfactory to the Bank, prevents the Director from performing substantially all of the Director's normal duties for the Bank. As a condition to receiving any Disability benefits, the Bank may require the Director to submit to such physical or mental evaluations and tests as the Bank's board of directors deems appropriate. 1.6 Early Termination means Termination of Service before the Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control. 1.7 Early Termination Date means the month, day, and year of Early Termination. 1.8 Effective Date means March 15, 2004. 1.9 Normal Retirement Age means the Director's 70th birthday. 1.10 Normal Retirement Date means the later of the Normal Retirement Age or Termination of Service. 1.11 Plan Administrator means the plan administrator described in Article 7. 1.12 Plan Year means each twelve-month period from the Effective Date of this Agreement. 1.13 Termination for Cause means the Director is not nominated by the board or nominating committee for reelection as a director after the expiration of his current term, or the Director is removed from the board of directors, in either case: (a) because of the Director's gross negligence or gross neglect of duties, or (b) because of the Director's commission of or plea of nolo contendere to a felony, or commission of or plea of nolo contendere to a misdemeanor involving moral turpitude, or (c) because of the Director's fraud, disloyalty, dishonesty, or willful violation of any applicable law or significant policy of the Bank committed in connection with the Director's service and resulting in an adverse effect on the Bank, or a breach of the Director's fiduciary duties for personal profit. For purposes of this Agreement, applicable laws include any statute, rule, regulatory order, statement of policy, or final cease-and-desist order of any governmental agency or body having regulatory authority over the Bank or Citizens South Banking Corporation, or, (d) because of the Director's intentional wrongful damage to the business or property of the Bank or its affiliates, including without limitation the reputation of the Bank or Citizens South Banking Corporation, which in the judgement of the Bank causes material harm to the Bank or affiliates, or 314

(e) because of the occurrence of any event that results in the Director being excluded from coverage, or having coverage limited for the Director as compared to other Directors of the Bank, under a blanket bond or other fidelity or insurance policy covering directors, officers, or employees, or (f) because the Director is removed from service or permanently prohibited from participating in the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act [12 U.S.C. 1818(e)(4) or (g)(1)]. 1.14 Termination of Service means the Director ceases to be a member of the Bank's board of directors for any reason whatsoever. For purposes of this Agreement, if there is a dispute over the service status of the Director or the date of the Director's Termination of Service, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred.

(e) because of the occurrence of any event that results in the Director being excluded from coverage, or having coverage limited for the Director as compared to other Directors of the Bank, under a blanket bond or other fidelity or insurance policy covering directors, officers, or employees, or (f) because the Director is removed from service or permanently prohibited from participating in the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act [12 U.S.C. 1818(e)(4) or (g)(1)]. 1.14 Termination of Service means the Director ceases to be a member of the Bank's board of directors for any reason whatsoever. For purposes of this Agreement, if there is a dispute over the service status of the Director or the date of the Director's Termination of Service, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred. ARTICLE 2 LIFETIME BENEFITS 2.1 Normal Retirement Benefit. For Termination of Service on or after Normal Retirement Age, the Bank shall pay to the Director the benefit described in this Section 2.1 instead of any other benefit under this Agreement.
2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is $78,816. 2.1.2 Payment of Benefit. The Bank shall pay the annual

benefit to the Director in 12 equal monthly installments payable on the first day of each month, beginning with the month after the Director's Normal Retirement Date. The annual benefit shall be paid to the Director for 10 years. 2.2 Early Termination Benefit. After Early Termination, the Bank shall pay to the Director a benefit consisting of 120 equal monthly payments. The benefit shall be payable on the first day of each month, beginning with the month after the Normal Retirement Age. The amount of the monthly payment shall be calculated based on the Accrual Balance existing on the date of the Director's Termination of Service. For illustrative purposes only, Schedule A attached to this Agreement shows the projected annual Early Termination benefit based on the Accrual Balance at each Plan Year end. 2.3 Disability Benefit. If the Director terminates service because of Disability before the Normal Retirement Age, the Bank shall pay to the Director the benefit described in Section 2.1 instead of any other benefit under this Agreement. The benefit shall be payable on the first day of each month, beginning with the month after the Normal Retirement Age. The annual benefit shall be paid to the Director for 10 years. 2.4 Change in Control Benefit. If the Director's service with the Bank terminates within one year after a Change in Control (except for Termination for Cause), the Bank shall pay to the Director the benefit described in this Section 2.4 instead of any other benefit under this Agreement. 2.4.1 Amount of Benefit. The benefit under this Section 2.4 is the Normal Retirement Age Accrual Balance required by Section 2.1, without reduction for the time value of money or other discount. 315

2.4.2 Payment of Benefit. The Bank shall pay this benefit to the Director in a single lump sum within 3 days after the Director's Termination of Service. 2.5 Contradiction in Terms of Agreement and Schedule A. If there is a contradiction in the terms of this Agreement and Schedule A attached hereto concerning the benefits due under Section 2.2, 2.3, or 2.4 hereof, then the actual amount of benefits prescribed by this Agreement shall control. ARTICLE 3

2.4.2 Payment of Benefit. The Bank shall pay this benefit to the Director in a single lump sum within 3 days after the Director's Termination of Service. 2.5 Contradiction in Terms of Agreement and Schedule A. If there is a contradiction in the terms of this Agreement and Schedule A attached hereto concerning the benefits due under Section 2.2, 2.3, or 2.4 hereof, then the actual amount of benefits prescribed by this Agreement shall control. ARTICLE 3 DEATH BENEFITS 3.1 Death in Active Service. If the Director dies while in active service to the Bank, instead of any other benefit under this Agreement the Bank shall pay to the Director's Beneficiary the normal retirement benefit set forth in Section 2.1 of this Agreement. The Bank shall pay the annual benefit to the Director's Beneficiary in 12 equal monthly installments payable on the first day of each month, beginning with the month after the Director's death. The annual benefit shall be paid to the Director's Beneficiary for 10 years. 3.2 Death After Termination of Service. If the Director dies after having terminated active service with the Bank but before receiving any or all of the benefits to which the Director is entitled under Article 2 of this Agreement, the Bank shall pay to the Director's Beneficiary the benefits set forth in Article 2 to which the Director was entitled at the time of death. The benefits shall be payable to the Director's Beneficiary at the same time and in the same amounts they would have been paid to the Director had the Director survived, except that benefit payments shall begin in the month immediately after the Director's death if payments to the Director had not already commenced by the date of the Director's death. ARTICLE 4 BENEFICIARIES 4.1 Beneficiary Designations. The Director shall have the right to designate at any time a Beneficiary to receive any benefits payable under this Agreement upon the death of the Director. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other benefit plan of the Bank in which the Director participates. 4.2 Beneficiary Designation: Change. The Director shall designate a Beneficiary by completing and signing the Beneficiary Designation Form and delivering it to the Plan Administrator or its designated agent. The Director's Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Director or if the Director names a spouse as Beneficiary and the marriage is subsequently dissolved. The Director shall have the right to change a Beneficiary by completing, signing, and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator's rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Director and accepted by the Plan Administrator before the Director's death. 316

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted, and acknowledged in writing by the Plan Administrator or its designated agent. 4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director's spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be made to the personal representative of the Director's estate. 4.5 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative, or person having the care or custody of the minor, incapacitated person, or incapable person. The Bank may require proof of incapacity, minority, or guardianship as it may deem appropriate before distribution of

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted, and acknowledged in writing by the Plan Administrator or its designated agent. 4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director's spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be made to the personal representative of the Director's estate. 4.5 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative, or person having the care or custody of the minor, incapacitated person, or incapable person. The Bank may require proof of incapacity, minority, or guardianship as it may deem appropriate before distribution of the benefit. Distribution shall completely discharge the Bank from all liability for the benefit. ARTICLE 5 GENERAL LIMITATIONS Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any benefit under this Agreement, and this Agreement shall terminate, if the Director's Termination of Service is the result of Termination for Cause. The board of directors or a duly authorized committee of the board shall have the sole and absolute right to determine whether the bases for denial of benefits for cause exist. Benefits may be denied for cause regardless of whether the Director continued to serve as a director after the board or committee made its determination not to nominate the Director for reelection. ARTICLE 6 CLAIMS AND REVIEW PROCEDURES 6.1 Claims Procedure. The Bank shall notify any person or entity that makes a claim for benefits under this Agreement (the Claimant) in writing, within 90 days of Claimant's written application for benefits, of his or her eligibility or noneligibility for benefits under the Agreement. If the Bank determines that the Claimant is not eligible for benefits or full benefits, the notice shall set forth (1) the specific reasons for such denial, (2) a specific reference to the provisions of the Agreement on which the denial is based, (3) a description of any additional information or material necessary for the Claimant to perfect his or her claim, and a description of why it is needed, and (4) an explanation of the Agreement's claims review procedure and other appropriate information as to the steps to be taken if the Claimant wishes to have the claim reviewed. If the Bank determines that there are special circumstances requiring additional time to make a decision, the Bank shall notify the Claimant of the special circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional 90 days. 6.2 Review Procedure. If the Claimant is determined by the Bank not to be eligible for benefits, or if the Claimant believes that he or she is entitled to greater or different benefits, the Claimant shall have the opportunity to have such claim reviewed by the Bank by filing a petition for review with the Bank within 60 days after receipt of the notice issued by the Bank. Said petition shall state the specific reasons, which the Claimant believes entitle him or her to benefits or to greater or different benefits. Within 60 days after receipt by the Bank of the petition, the Bank shall afford the Claimant (and 317

counsel, if any) an opportunity to present his or her position to the Bank verbally or in writing, and the Claimant (or counsel) shall have the right to review the pertinent documents. The Bank shall notify the Claimant of its decision in writing within the 60-day period, stating specifically the basis of its decision, written in a manner to be understood by the Claimant and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the 60-day period is not sufficient, the decision may be deferred for up to another 60 days at the election of the Bank, but notice of this deferral shall be given to the Claimant. ARTICLE 7 ADMINISTRATION OF AGREEMENT

counsel, if any) an opportunity to present his or her position to the Bank verbally or in writing, and the Claimant (or counsel) shall have the right to review the pertinent documents. The Bank shall notify the Claimant of its decision in writing within the 60-day period, stating specifically the basis of its decision, written in a manner to be understood by the Claimant and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the 60-day period is not sufficient, the decision may be deferred for up to another 60 days at the election of the Bank, but notice of this deferral shall be given to the Claimant. ARTICLE 7 ADMINISTRATION OF AGREEMENT 7.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator consisting of the Bank's board of directors or such committee or person(s) as the board shall appoint. The Director may be a member of the Plan Administrator. The Plan Administrator shall also have the discretion and authority to (a) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Agreement and (b) decide or resolve any and all questions, including interpretations of this Agreement, as may arise in connection with the Agreement. 7.2 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative), and may from time to time consult with counsel, who may be counsel to the Bank. 7.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation, and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement. No Director or Beneficiary shall be deemed to have any right, vested or nonvested, regarding the continued use of any previously adopted assumptions, including but not limited to the discount rate and calculation method employed in the determination of the Accrual Balance. 7.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses, or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members. 7.5 Bank Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Termination of Service of the Director, and such other pertinent information as the Plan Administrator may reasonably require. ARTICLE 8 MISCELLANEOUS 8.1 Amendment and Termination. This Agreement may be amended solely by a written agreement signed by the Bank and by the Director. Except as provided in Article 5, this Agreement may be terminated solely by a written agreement signed by the Bank and by the Director. 318

8.2 Binding Effect. This Agreement shall bind the Director and the Bank, and their beneficiaries, survivors, executors, successors, administrators, and transferees. 8.3 No Guarantee of Service. This Agreement is not a contract for services. It does not give the Director the right to remain a Director of the Bank, nor does the Agreement interfere with the rights of the Bank's shareholders not to re-elect the Director or the right of shareholders or the Board to remove an individual as a director of the Bank. The Agreement also does not require the Director to remain a director nor interfere with the Director's right to terminate services at any time. 8.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached,

8.2 Binding Effect. This Agreement shall bind the Director and the Bank, and their beneficiaries, survivors, executors, successors, administrators, and transferees. 8.3 No Guarantee of Service. This Agreement is not a contract for services. It does not give the Director the right to remain a Director of the Bank, nor does the Agreement interfere with the rights of the Bank's shareholders not to re-elect the Director or the right of shareholders or the Board to remove an individual as a director of the Bank. The Agreement also does not require the Director to remain a director nor interfere with the Director's right to terminate services at any time. 8.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached, or encumbered in any manner. 8.5 Successors; Binding Agreement. The Bank shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Bank, by an assumption agreement in form and substance satisfactory to the Director, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform this Agreement if no such succession had occurred. Failure of the Bank to obtain such assumption agreement before effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Director to the Change in Control benefit provided in Section 2.4. 8.6 Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement. 8.7 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of North Carolina, except to the extent preempted by the laws of the United States of America. 8.8 Unfunded Arrangement. The Director and beneficiary are general unsecured creditors of the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise by the Bank to pay benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Director's life is a general asset of the Bank to which the Director and beneficiary have no preferred or secured claim. 8.9 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Director concerning the subject matter hereof. No rights are granted to the Director under this Agreement other than those specifically set forth herein. The May 1, 1986 Deferred Compensation and Income Continuation Agreement, as the same may have been amended, shall be of no further force or effect and shall be superseded in its entirety by this Agreement from and after the effective date of this Agreement. 8.10 Severability. If for any reason any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not held invalid, and each such other provision shall continue in full force and effect to the full extent consistent with law. If any provision of this Agreement is held invalid in part, such invalidity shall not affect the remainder of such provision, and the remainder of such provision, together with all other provisions of this Agreement, shall continue in full force and effect to the full extent consistent with law. 319

8.11 Headings. The headings of Sections herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. 8.12 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. If to the Bank, notice shall be given to the board of directors, Citizens South Bank, 519 South New Hope Road, Gastonia, North Carolina 28054-4040, or to such other or additional person or persons as the Bank shall have designated to the Director in writing. If to the Director, notice shall be given to the Director at the address of the Director appearing on the Bank's records, or to such other or additional person or persons as the Director shall have designated to the Bank in writing.

8.11 Headings. The headings of Sections herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. 8.12 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. If to the Bank, notice shall be given to the board of directors, Citizens South Bank, 519 South New Hope Road, Gastonia, North Carolina 28054-4040, or to such other or additional person or persons as the Bank shall have designated to the Director in writing. If to the Director, notice shall be given to the Director at the address of the Director appearing on the Bank's records, or to such other or additional person or persons as the Director shall have designated to the Bank in writing. 8.13 Payment of Legal Fees. The Bank is aware that after a Change in Control management of the Bank could cause or attempt to cause the Bank to refuse to comply with its obligations under this Agreement, or could institute or cause or attempt to cause the Bank to institute litigation seeking to have this Agreement declared unenforceable, or could take or attempt to take other action to deny Director the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement would be frustrated. It is the intention of the Bank that the Director not be required to incur the expenses associated with the enforcement of his rights under this Agreement, whether by litigation or other legal action, because the cost and expense thereof would substantially detract from the benefits intended to be granted to the Director hereunder. It is the intention of the Bank that the Director not be forced to negotiate settlement of his rights under this Agreement under threat of incurring expenses. Accordingly, if after a Change in Control occurs it appears to the Director that (a) the Bank has failed to comply with any of its obligations under this Agreement, or (b) the Bank or any other person has taken any action to declare this Agreement void or unenforceable, or instituted any litigation or other legal action designed to deny, diminish, or to recover from the Director the benefits intended to be provided to the Director hereunder, the Bank irrevocably authorizes the Director from time to time to retain counsel of his choice, at the expense of the Bank as provided in this Section 8.13, to represent the Director in connection with the initiation or defense of any litigation or other legal action, whether by or against the Bank or any director, officer, stockholder, or other person affiliated with the Bank, in any jurisdiction. Notwithstanding any existing or previous attorneyclient relationship between the Bank and any counsel chosen by the Director under this Section 8.13, the Bank irrevocably consents to the Director entering into an attorney-client relationship with that counsel, and the Bank and the Director agree that a confidential relationship shall exist between the Director and that counsel. The fees and expenses of counsel selected from time to time by the Director as provided in this section shall be paid or reimbursed to the Director by the Bank on a regular, periodic basis upon presentation by the Director of a statement or statements prepared by such counsel in accordance with such counsel's customary practices, up to a maximum aggregate amount of $25,000. The Bank's obligation to pay the Director's legal fees provided by this Section 8.13 operates separately from and in addition to any legal fee reimbursement obligation the Bank may have with the Director under any separate employment, severance, or other agreement between the Director and the Bank. 8.14 Liquidated Damages. The parties hereto, before entering into this Agreement, have been concerned with the fact that substantial damages will be suffered by the Director in the event that the Bank shall fail to perform according to Section 2.4 of this Agreement following a Change in Control. Following a Change in Control, in the event of nonperformance by the Bank for a period of 30 days from the time payment was scheduled to be made pursuant to Section 2.4 of this Agreement, the Director shall 320

immediately be entitled to liquidated damages equal to 1 1/2 times the remaining Accrual Balance due to the Director under Section 2.4 of this Agreement. This provision shall not be applicable in the event that such nonpayment is the result of prohibition of such payment by law, regulation or order of a banking regulatory agency. IN WITNESS WHEREOF, the Director and a duly authorized Bank officer have executed this Amended Deferred Compensation and Income Continuation Agreement as of the date first written above.

immediately be entitled to liquidated damages equal to 1 1/2 times the remaining Accrual Balance due to the Director under Section 2.4 of this Agreement. This provision shall not be applicable in the event that such nonpayment is the result of prohibition of such payment by law, regulation or order of a banking regulatory agency. IN WITNESS WHEREOF, the Director and a duly authorized Bank officer have executed this Amended Deferred Compensation and Income Continuation Agreement as of the date first written above. DIRECTOR CITIZENS SOUTH BANK
/s/ Ben R. Rudisill, II /s/ Kim S. Price ---------------------Title: President By:

321

BENEFICIARY DESIGNATION CITIZENS SOUTH BANK AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT I, __________________, designate the following as beneficiary of any death benefits under this Amended Deferred Compensation and Income Continuation Agreement: Primary: Contingent: Note: To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement. I understand that I may change these beneficiary designations by filing a new written designation with the Bank. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature: Date: /s/ Ben R. Rudisill, II March 15, 2004

Received by Citizens South Bank this 15th day of March, 2004.
By: /s/ Kim S. Price ---------------Title: President

322

SCHEDULE A CITIZENS SOUTH BANK AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT Ben R. Rudisill, II Normal Retirement Age: 70

BENEFICIARY DESIGNATION CITIZENS SOUTH BANK AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT I, __________________, designate the following as beneficiary of any death benefits under this Amended Deferred Compensation and Income Continuation Agreement: Primary: Contingent: Note: To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement. I understand that I may change these beneficiary designations by filing a new written designation with the Bank. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature: Date: /s/ Ben R. Rudisill, II March 15, 2004

Received by Citizens South Bank this 15th day of March, 2004.
By: /s/ Kim S. Price ---------------Title: President

322

SCHEDULE A CITIZENS SOUTH BANK AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT Ben R. Rudisill, II Normal Retirement Age: 70
EARLY TERMINATION ANNUAL BENEFIT ACCRUAL BALANCE PAYABLE AT NORMAL 8.50% (1) RETIREMENT AGE (2) -------------------------------$ 127,267 $ 18,802 $ 155,237 $ 22,934 $ 185,678 $ 27,431 $ 218,811 $ 32,326 $ 254,872 $ 37,654 $ 294,121 $ 43,452 $ 336,839 $ 49,763 $ 383,332 $ 56,632 $ 433,936 $ 64,108 $ 489,012 $ 72,245 $ 533,491(3) $ 78,816 CHANGE-INCONTROL BENEFIT PAYABLE IN A LUMP SUM --------------$ 533,491 $ 533,491 $ 533,491 $ 533,491 $ 533,491 $ 533,491 $ 533,491 $ 533,491 $ 533,491 $ 533,491 $ 533,491

PLAN YEAR ENDING DECEMBER 31, -------------2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 September 2013

AGE AT PLAN YEAR END ------------60 61 62 63 64 65 66 67 68 69 70

(1) Calculations are approximations based on prior year-end Accrual Balances. The Accrual Balance reflects payment at the beginning of each month during retirement, beginning October 1, 2013.

SCHEDULE A CITIZENS SOUTH BANK AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT Ben R. Rudisill, II Normal Retirement Age: 70
EARLY TERMINATION ANNUAL BENEFIT ACCRUAL BALANCE PAYABLE AT NORMAL 8.50% (1) RETIREMENT AGE (2) -------------------------------$ 127,267 $ 18,802 $ 155,237 $ 22,934 $ 185,678 $ 27,431 $ 218,811 $ 32,326 $ 254,872 $ 37,654 $ 294,121 $ 43,452 $ 336,839 $ 49,763 $ 383,332 $ 56,632 $ 433,936 $ 64,108 $ 489,012 $ 72,245 $ 533,491(3) $ 78,816 CHANGE-INCONTROL BENEFIT PAYABLE IN A LUMP SUM --------------$ 533,491 $ 533,491 $ 533,491 $ 533,491 $ 533,491 $ 533,491 $ 533,491 $ 533,491 $ 533,491 $ 533,491 $ 533,491

PLAN YEAR ENDING DECEMBER 31, -------------2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 September 2013

AGE AT PLAN YEAR END ------------60 61 62 63 64 65 66 67 68 69 70

(1) Calculations are approximations based on prior year-end Accrual Balances. The Accrual Balance reflects payment at the beginning of each month during retirement, beginning October 1, 2013. (2) Based on the present value of the current payment stream of the vested Accrual Balance at each year end using a standard discount rate (8.50%). The benefit amounts shown are for illustrative purposes only. Actual Early Termination benefits will be based on the Accrual Balance existing on the date of the Director's Termination of Service. (3) Projected retirement occurs on September 4, 2013, with the first normal monthly retirement benefit commencing October 1, 2013. 323

EXHIBIT 10.24 AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT WITH JAMES J. FULLER THIS AMENDED DIRECTOR RETIREMENT AGREEMENT (this Agreement) is made as of March 15, 2004, by and between Citizens South Bank, a federally chartered savings bank (the Bank), and James J. Fuller (the Director). WHEREAS, to encourage the Director to remain a member of the Bank's board of directors, the Bank is willing to provide retirement benefits to the Director. The Bank will pay the benefits from its general assets, WHEREAS, none of the conditions or events included in the definition of the term golden parachute payment that is set forth in section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is contemplated insofar as the Bank is concerned, WHEREAS, the Director entered into a Director Retirement Agreement with the Bank or its predecessor as of October 16, 2000, providing for specified retirement benefits for the Director, WHEREAS, the Director has agreed to miscellaneous changes in the terms and conditions of the October 16, 2000 Director Retirement Agreement, and

EXHIBIT 10.24 AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT WITH JAMES J. FULLER THIS AMENDED DIRECTOR RETIREMENT AGREEMENT (this Agreement) is made as of March 15, 2004, by and between Citizens South Bank, a federally chartered savings bank (the Bank), and James J. Fuller (the Director). WHEREAS, to encourage the Director to remain a member of the Bank's board of directors, the Bank is willing to provide retirement benefits to the Director. The Bank will pay the benefits from its general assets, WHEREAS, none of the conditions or events included in the definition of the term golden parachute payment that is set forth in section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is contemplated insofar as the Bank is concerned, WHEREAS, the Director entered into a Director Retirement Agreement with the Bank or its predecessor as of October 16, 2000, providing for specified retirement benefits for the Director, WHEREAS, the Director has agreed to miscellaneous changes in the terms and conditions of the October 16, 2000 Director Retirement Agreement, and WHEREAS, the Director and the Bank intend that the October 16, 2000 Director Retirement Agreement, as the same may have been amended, shall be of no further force or effect and shall be superseded in its entirety by this Agreement from and after the effective date of this Agreement. NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and acceptance of which are hereby acknowledged, the Director and the Bank hereby agree as follows. ARTICLE 1 DEFINITIONS Whenever used in this Agreement, the following words and phrases shall have the meanings specified: 1.1 Accrual Balance means the liability that should be accrued by the Bank under generally accepted accounting principles (GAAP) for the Bank's obligation to the Director under this Agreement, by applying Accounting Principles Board Opinion No. 12, as amended by Statement of Financial Accounting Standards No. 106, and the calculation method and discount rate specified hereinafter. The Accrual Balance shall be calculated assuming a level principal amount and interest as the discount rate is accrued each period. The principal accrual is determined such that when it is credited with interest each month, the Accrual Balance at Normal Retirement Age equals the present value of the normal retirement benefits. The discount rate means the rate used by the Plan Administrator for determining the Accrual Balance. The rate is based on the yield on a 20-year corporate bond rated Aa by Moody's, rounded to the nearest 1/4%. The initial discount rate is 8.50%. However, the Plan Administrator, in its sole discretion, may adjust the discount rate to maintain the rate within reasonable standards according to GAAP. 324

1.2 Beneficiary means each designated person, or the estate of the Director, entitled to benefits, if any, upon the death of the Director, determined according to Article 4. 1.3 Beneficiary Designation Form means the form established from time to time by the Plan Administrator that the Director completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries. 1.4 Change in Control means any of the following events occur:

1.2 Beneficiary means each designated person, or the estate of the Director, entitled to benefits, if any, upon the death of the Director, determined according to Article 4. 1.3 Beneficiary Designation Form means the form established from time to time by the Plan Administrator that the Director completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries. 1.4 Change in Control means any of the following events occur: (a) Merger: Citizens South Banking Corporation, a Delaware corporation of which the Bank is a wholly owned subsidiary, merges into or consolidates with another corporation, or merges another corporation into Citizens South Banking Corporation, and as a result less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of Citizens South Banking Corporation immediately before the merger or consolidation, (b) Acquisition of Significant Share Ownership: after the date of this Agreement a report on Schedule 13D, Schedule TO, or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of the combined voting power of Citizens South Banking Corporation's voting securities outstanding (but this clause (b) shall not apply to beneficial ownership of voting shares held by a subsidiary in a fiduciary capacity or beneficial ownership of voting shares held by an employee benefit plan of Citizens South Banking Corporation or any subsidiary(ies)). For purposes of this Agreement, "subsidiary means an entity in which Citizens South Banking Corporation beneficially owns 50% or more of the outstanding voting securities, whether Citizens South Banking Corporation owns the shares directly or owns the shares indirectly through an intermediate subsidiary, (c) Change in Board Composition. during any period of two consecutive years, individuals who constitute Citizens South Banking Corporation's board of directors at the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however, that for purposes of this clause (c) each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period, or (d) Sale of Assets: Citizens South Banking Corporation sells to a third party all or substantially all of its assets. For this purpose, sale of all or substantially all of Citizens South Banking Corporation's assets includes sale of the shares or assets of the Bank alone. 325

1.5 Disability means, if the Director is covered by a Bank-sponsored disability policy, total disability as defined in such policy without regard to any waiting period. If the Director is not covered by such a policy, Disability means the Director suffers a sickness, accident or injury that, in the judgment of a physician satisfactory to the Bank, prevents the Director from performing substantially all of the Director's normal duties for the Bank. As a condition to receiving any Disability benefits, the Bank may require the Director to submit to such physical or mental evaluations and tests as the Bank's board of directors deems appropriate. 1.6 Early Termination means Termination of Service before the Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control. 1.7 Early Termination Date means the month, day, and year of Early Termination. 1.8 Effective Date means March 15, 2004. 1.9 Normal Retirement Age means the Director's 70th birthday. 1.10 Normal Retirement Date means the later of the Normal Retirement Age or Termination of Service. 1.11 Plan Administrator means the plan administrator described in Article 7.

1.5 Disability means, if the Director is covered by a Bank-sponsored disability policy, total disability as defined in such policy without regard to any waiting period. If the Director is not covered by such a policy, Disability means the Director suffers a sickness, accident or injury that, in the judgment of a physician satisfactory to the Bank, prevents the Director from performing substantially all of the Director's normal duties for the Bank. As a condition to receiving any Disability benefits, the Bank may require the Director to submit to such physical or mental evaluations and tests as the Bank's board of directors deems appropriate. 1.6 Early Termination means Termination of Service before the Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control. 1.7 Early Termination Date means the month, day, and year of Early Termination. 1.8 Effective Date means March 15, 2004. 1.9 Normal Retirement Age means the Director's 70th birthday. 1.10 Normal Retirement Date means the later of the Normal Retirement Age or Termination of Service. 1.11 Plan Administrator means the plan administrator described in Article 7. 1.12 Plan Year means each twelve-month period from the Effective Date of this Agreement. 1.13 Termination for Cause means the Director is not nominated by the board or nominating committee for reelection as a director after the expiration of his current term, or the Director is removed from the board of directors, in either case: (a) because of the Director's gross negligence or gross neglect of duties, or (b) because of the Director's commission of or plea of nolo contendere to a felony, or commission of or plea of nolo contendere to a misdemeanor involving moral turpitude, or (c) because of the Director's fraud, disloyalty, dishonesty, or willful violation of any applicable law or significant policy of the Bank committed in connection with the Director's service and resulting in an adverse effect on the Bank, or a breach of the Director's fiduciary duties for personal profit. For purposes of this Agreement, applicable laws include any statute, rule, regulatory order, statement of policy, or final cease-and-desist order of any governmental agency or body having regulatory authority over the Bank or Citizens South Banking Corporation, or, (d) because of the Director's intentional wrongful damage to the business or property of the Bank or its affiliates, including without limitation the reputation of the Bank or Citizens South Banking Corporation, which in the judgement of the Bank causes material harm to the Bank or affiliates, or 326

(e) because of the occurrence of any event that results in the Director being excluded from coverage, or having coverage limited for the Director as compared to other Directors of the Bank, under a blanket bond or other fidelity or insurance policy covering directors, officers, or employees, or (f) because the Director is removed from service or permanently prohibited from participating in the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act [12 U.S.C. 1818(e)(4) or (g)(1)]. 1.14 Termination of Service means the Director ceases to be a member of the Bank's board of directors for any reason whatsoever. For purposes of this Agreement, if there is a dispute over the service status of the Director or the date of the Director's Termination of Service, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred.

(e) because of the occurrence of any event that results in the Director being excluded from coverage, or having coverage limited for the Director as compared to other Directors of the Bank, under a blanket bond or other fidelity or insurance policy covering directors, officers, or employees, or (f) because the Director is removed from service or permanently prohibited from participating in the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act [12 U.S.C. 1818(e)(4) or (g)(1)]. 1.14 Termination of Service means the Director ceases to be a member of the Bank's board of directors for any reason whatsoever. For purposes of this Agreement, if there is a dispute over the service status of the Director or the date of the Director's Termination of Service, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred. ARTICLE 2 LIFETIME BENEFITS 2.1 Normal Retirement Benefit. For Termination of Service on or after Normal Retirement Age, the Bank shall pay to the Director the benefit described in this Section 2.1 instead of any other benefit under this Agreement.
2.1.1 2.1 is $8,000. 2.1.2 Amount of Benefit. The annual benefit under this Section

Payment of Benefit. The Bank shall pay the annual

benefit to the Director in 12 equal monthly installments payable on the first day of each month, beginning with the month after the Director's Normal Retirement Date. The annual benefit shall be paid to the Director for 15 years. 2.2 Early Termination Benefit. After Early Termination, the Bank shall pay to the Director the benefit described in this Section 2.2 instead of any other benefit under this Agreement. The benefit shall consist of 180 equal monthly payments, payable on the first day of each month, beginning with the month after the Normal Retirement Age. The amount of the monthly payment shall be calculated based on the Accrual Balance existing on the date of the Director's Termination of Service. For illustrative purposes only, Schedule A attached to this Agreement shows the projected annual Early Termination benefit based on the Accrual Balance at each Plan Year end. 2.3 Disability Benefit. If the Director terminates service because of Disability before the Normal Retirement Age, the Bank shall pay to the Director the benefit described in Section 2.1 instead of any other benefit under this Agreement. The benefits shall be payable for 180 months on the first day of each month, beginning with the month after the Normal Retirement Age. 2.4 Change in Control Benefit. If the Director's service with the Bank terminates within one year after a Change in Control (except for Termination for Cause), the Bank shall pay to the Director the benefit described in this Section 2.4 instead of any other benefit under this Agreement. 2.4.1 Amount of Benefit. The benefit under this Section 2.4 is the Normal Retirement Age Accrual Balance required by Section 2.1, without reduction for the time value of money or other discount. 327

2.4.2 Payment of Benefit. The Bank shall pay this benefit to the Director in a single lump sum within 3 days after the Director's Termination of Service. 2.5 Contradiction in Terms of Agreement and Schedule A. If there is a contradiction in the terms of this Agreement and Schedule A attached hereto concerning the benefits due under Section 2.2, 2.3, or 2.4 hereof, then the actual amount of benefits prescribed by this Agreement shall control. ARTICLE 3

2.4.2 Payment of Benefit. The Bank shall pay this benefit to the Director in a single lump sum within 3 days after the Director's Termination of Service. 2.5 Contradiction in Terms of Agreement and Schedule A. If there is a contradiction in the terms of this Agreement and Schedule A attached hereto concerning the benefits due under Section 2.2, 2.3, or 2.4 hereof, then the actual amount of benefits prescribed by this Agreement shall control. ARTICLE 3 DEATH BENEFITS 3.1 Death in Active Service. If the Director dies while in active service to the Bank, instead of any other benefit under this Agreement the Bank shall pay to the Director's Beneficiary the Normal Retirement Benefit set forth in Section 2.1 of this Agreement. The Bank shall pay the annual benefit to the Director's Beneficiary in 12 equal monthly installments payable on the first day of each month, beginning with the month after the Director's death. The annual benefit shall be paid to the Director's Beneficiary for 15 years. 3.2 Death After Termination of Service. If the Director dies after having terminated active service with the Bank but before receiving any or all of the benefits to which the Director is entitled under Article 2 of this Agreement, the Bank shall pay to the Director's Beneficiary the benefits set forth in Article 2 to which the Director was entitled at the time of death. The benefits shall be payable to the Director's Beneficiary at the same time and in the same amounts they would have been paid to the Director had the Director survived, except that benefit payments shall begin in the month immediately after the Director's death if payments to the Director had not already commenced by the date of the Director's death. ARTICLE 4 BENEFICIARIES 4.1 Beneficiary Designations. The Director shall have the right to designate at any time a Beneficiary to receive any benefits payable under this Agreement upon the death of the Director. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other benefit plan of the Bank in which the Director participates. 4.2 Beneficiary Designation: Change. The Director shall designate a Beneficiary by completing and signing the Beneficiary Designation Form and delivering it to the Plan Administrator or its designated agent. The Director's Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Director or if the Director names a spouse as Beneficiary and the marriage is subsequently dissolved. The Director shall have the right to change a Beneficiary by completing, signing, and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator's rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Director and accepted by the Plan Administrator before the Director's death. 328

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted, and acknowledged in writing by the Plan Administrator or its designated agent. 4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director's spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be made to the personal representative of the Director's estate. 4.5 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative, or person having the care or custody of the minor, incapacitated person, or incapable person. The Bank may require proof of incapacity, minority, or guardianship as it may deem appropriate before distribution of

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted, and acknowledged in writing by the Plan Administrator or its designated agent. 4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director's spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be made to the personal representative of the Director's estate. 4.5 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative, or person having the care or custody of the minor, incapacitated person, or incapable person. The Bank may require proof of incapacity, minority, or guardianship as it may deem appropriate before distribution of the benefit. Distribution shall completely discharge the Bank from all liability for the benefit. ARTICLE 5 GENERAL LIMITATIONS Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any benefit under this Agreement, and this Agreement shall terminate, if the Director's Termination of Service is the result of Termination for Cause. The board of directors or a duly authorized committee of the board shall have the sole and absolute right to determine whether the bases for denial of benefits for cause exist. Benefits may be denied for cause regardless of whether the Director continued to serve as a director after the board or committee made its determination not to nominate the Director for reelection. ARTICLE 6 CLAIMS AND REVIEW PROCEDURES 6.1 Claims Procedure. The Bank shall notify any person or entity that makes a claim for benefits under this Agreement (the Claimant) in writing, within 90 days of Claimant's written application for benefits, of his or her eligibility or noneligibility for benefits under the Agreement. If the Bank determines that the Claimant is not eligible for benefits or full benefits, the notice shall set forth (1) the specific reasons for such denial, (2) a specific reference to the provisions of the Agreement on which the denial is based, (3) a description of any additional information or material necessary for the Claimant to perfect his or her claim, and a description of why it is needed, and (4) an explanation of the Agreement's claims review procedure and other appropriate information as to the steps to be taken if the Claimant wishes to have the claim reviewed. If the Bank determines that there are special circumstances requiring additional time to make a decision, the Bank shall notify the Claimant of the special circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional 90 days. 6.2 Review Procedure. If the Claimant is determined by the Bank not to be eligible for benefits, or if the Claimant believes that he or she is entitled to greater or different benefits, the Claimant shall have the opportunity to have such claim reviewed by the Bank by filing a petition for review with the Bank within 60 days after receipt of the notice issued by the Bank. Said petition shall state the specific reasons, which the Claimant believes entitle him or her to benefits or to greater or different benefits. Within 60 days after receipt by the Bank of the petition, the Bank shall afford the Claimant (and 329

counsel, if any) an opportunity to present his or her position to the Bank verbally or in writing, and the Claimant (or counsel) shall have the right to review the pertinent documents. The Bank shall notify the Claimant of its decision in writing within the 60-day period, stating specifically the basis of its decision, written in a manner to be understood by the Claimant and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the 60-day period is not sufficient, the decision may be deferred for up to another 60 days at the election of the Bank, but notice of this deferral shall be given to the Claimant. ARTICLE 7 ADMINISTRATION OF AGREEMENT

counsel, if any) an opportunity to present his or her position to the Bank verbally or in writing, and the Claimant (or counsel) shall have the right to review the pertinent documents. The Bank shall notify the Claimant of its decision in writing within the 60-day period, stating specifically the basis of its decision, written in a manner to be understood by the Claimant and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the 60-day period is not sufficient, the decision may be deferred for up to another 60 days at the election of the Bank, but notice of this deferral shall be given to the Claimant. ARTICLE 7 ADMINISTRATION OF AGREEMENT 7.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator consisting of the Bank's board of directors or such committee or person(s) as the board shall appoint. The Director may be a member of the Plan Administrator. The Plan Administrator shall also have the discretion and authority to (a) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Agreement and (b) decide or resolve any and all questions, including interpretations of this Agreement, as may arise in connection with the Agreement. 7.2 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative), and may from time to time consult with counsel, who may be counsel to the Bank. 7.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation, and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement. No Director or Beneficiary shall be deemed to have any right, vested or nonvested, regarding the continued use of any previously adopted assumptions, including but not limited to the discount rate and calculation method employed in the determination of the Accrual Balance. 7.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses, or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members. 7.5 Bank Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Termination of Service of the Director, and such other pertinent information as the Plan Administrator may reasonably require. ARTICLE 8 MISCELLANEOUS 8.1 Amendment and Termination. This Agreement may be amended solely by a written agreement signed by the Bank and by the Director. Except as provided in Article 5, this Agreement may be terminated solely by a written agreement signed by the Bank and by the Director. 330

8.2 Binding Effect. This Agreement shall bind the Director and the Bank, and their beneficiaries, survivors, executors, successors, administrators, and transferees. 8.3 No Guarantee of Service. This Agreement is not a contract for services. It does not give the Director the right to remain a Director of the Bank, nor does the Agreement interfere with the rights of the Bank's shareholders not to re-elect the Director or the right of shareholders or the Board to remove an individual as a director of the Bank. The Agreement also does not require the Director to remain a director nor interfere with the Director's right to terminate services at any time. 8.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached,

8.2 Binding Effect. This Agreement shall bind the Director and the Bank, and their beneficiaries, survivors, executors, successors, administrators, and transferees. 8.3 No Guarantee of Service. This Agreement is not a contract for services. It does not give the Director the right to remain a Director of the Bank, nor does the Agreement interfere with the rights of the Bank's shareholders not to re-elect the Director or the right of shareholders or the Board to remove an individual as a director of the Bank. The Agreement also does not require the Director to remain a director nor interfere with the Director's right to terminate services at any time. 8.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached, or encumbered in any manner. 8.5 Successors; Binding Agreement. The Bank shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Bank, by an assumption agreement in form and substance satisfactory to the Director, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform this Agreement if no such succession had occurred. Failure of the Bank to obtain such assumption agreement before effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Director to the Change in Control benefit provided in Section 2.4. 8.6 Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement. 8.7 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of North Carolina, except to the extent preempted by the laws of the United States of America. 8.8 Unfunded Arrangement. The Director and beneficiary are general unsecured creditors of the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise by the Bank to pay benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Director's life is a general asset of the Bank to which the Director and beneficiary have no preferred or secured claim. 8.9 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Director concerning the subject matter hereof. No rights are granted to the Director under this Agreement other than those specifically set forth herein. The October 16, 2000 Director Retirement Agreement, as the same may have been amended, shall be of no further force or effect and shall be superseded in its entirety by this Agreement from and after the effective date of this Agreement. 8.10 Severability. If for any reason any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not held invalid, and each such other provision shall continue in full force and effect to the full extent consistent with law. If any provision of this Agreement is held invalid in part, such invalidity shall not affect the remainder of such provision, and the remainder of such provision, together with all other provisions of this Agreement, shall continue in full force and effect to the full extent consistent with law. 331

8.11 Headings. The headings of Sections herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. 8.12 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. If to the Bank, notice shall be given to the board of directors, Citizens South Bank, 519 South New Hope Road, Gastonia, North Carolina 28054-4040, or to such other or additional person or persons as the Bank shall have designated to the Director in writing. If to the Director, notice shall be given to the Director at the address of the Director appearing on the Bank's records, or to such other or additional person or persons as the Director shall have designated to the Bank in writing.

8.11 Headings. The headings of Sections herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. 8.12 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. If to the Bank, notice shall be given to the board of directors, Citizens South Bank, 519 South New Hope Road, Gastonia, North Carolina 28054-4040, or to such other or additional person or persons as the Bank shall have designated to the Director in writing. If to the Director, notice shall be given to the Director at the address of the Director appearing on the Bank's records, or to such other or additional person or persons as the Director shall have designated to the Bank in writing. 8.13 Payment of Legal Fees. The Bank is aware that after a Change in Control management of the Bank could cause or attempt to cause the Bank to refuse to comply with its obligations under this Agreement, or could institute or cause or attempt to cause the Bank to institute litigation seeking to have this Agreement declared unenforceable, or could take or attempt to take other action to deny Director the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement would be frustrated. It is the intention of the Bank that the Director not be required to incur the expenses associated with the enforcement of his rights under this Agreement, whether by litigation or other legal action, because the cost and expense thereof would substantially detract from the benefits intended to be granted to the Director hereunder. It is the intention of the Bank that the Director not be forced to negotiate settlement of his rights under this Agreement under threat of incurring expenses. Accordingly, if after a Change in Control occurs it appears to the Director that (a) the Bank has failed to comply with any of its obligations under this Agreement, or (b) the Bank or any other person has taken any action to declare this Agreement void or unenforceable, or instituted any litigation or other legal action designed to deny, diminish, or to recover from the Director the benefits intended to be provided to the Director hereunder, the Bank irrevocably authorizes the Director from time to time to retain counsel of his choice, at the expense of the Bank as provided in this Section 8.13, to represent the Director in connection with the initiation or defense of any litigation or other legal action, whether by or against the Bank or any director, officer, stockholder, or other person affiliated with the Bank, in any jurisdiction. Notwithstanding any existing or previous attorneyclient relationship between the Bank and any counsel chosen by the Director under this Section 8.13, the Bank irrevocably consents to the Director entering into an attorney-client relationship with that counsel, and the Bank and the Director agree that a confidential relationship shall exist between the Director and that counsel. The fees and expenses of counsel selected from time to time by the Director as provided in this section shall be paid or reimbursed to the Director by the Bank on a regular, periodic basis upon presentation by the Director of a statement or statements prepared by such counsel in accordance with such counsel's customary practices, up to a maximum aggregate amount of $25,000. The Bank's obligation to pay the Director's legal fees provided by this Section 8.13 operates separately from and in addition to any legal fee reimbursement obligation the Bank may have with the Director under any separate employment, severance, or other agreement between the Director and the Bank. 8.14 Liquidated Damages. The parties hereto, before entering into this Agreement, have been concerned with the fact that substantial damages will be suffered by the Director in the event that the Bank shall fail to perform according to Section 2.4 of this Agreement following a Change in Control. Following a Change in Control, in the event of nonperformance by the Bank for a period of 30 days from the time payment was scheduled to be made pursuant to Section 2.4 of this Agreement, the Director shall 332

immediately be entitled to liquidated damages equal to 1 1/2 times the remaining Accrual Balance due to the Director under Section 2.4 of this Agreement. This provision shall not be applicable in the event that such nonpayment is the result of prohibition of such payment by law, regulation or order of a banking regulatory agency. IN WITNESS WHEREOF, the Director and a duly authorized Bank officer have executed this Amended Deferred Compensation and Income Continuation Agreement as of the date first written above.

immediately be entitled to liquidated damages equal to 1 1/2 times the remaining Accrual Balance due to the Director under Section 2.4 of this Agreement. This provision shall not be applicable in the event that such nonpayment is the result of prohibition of such payment by law, regulation or order of a banking regulatory agency. IN WITNESS WHEREOF, the Director and a duly authorized Bank officer have executed this Amended Deferred Compensation and Income Continuation Agreement as of the date first written above. DIRECTOR CITIZENS SOUTH BANK
/s/ James J. Fuller /s/ Kim S. Price ----------------Title: President By:

333

BENEFICIARY DESIGNATION CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT I, ____________________, designate the following as beneficiary of any death benefits under this Amended Director Retirement Agreement: Primary: Contingent: Note: To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement. I understand that I may change these beneficiary designations by filing a new written designation with the Bank. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature: /s/ James J. Fuller Date: March 15, 2004

Received by Citizens South Bank this 15th day of March, 2004.
/s/ Kim S. Price ---------------Title: President By:

334

SCHEDULE A CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT James J. Fuller Normal Retirement Age: 70

BENEFICIARY DESIGNATION CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT I, ____________________, designate the following as beneficiary of any death benefits under this Amended Director Retirement Agreement: Primary: Contingent: Note: To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement. I understand that I may change these beneficiary designations by filing a new written designation with the Bank. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature: /s/ James J. Fuller Date: March 15, 2004

Received by Citizens South Bank this 15th day of March, 2004.
/s/ Kim S. Price ---------------Title: President By:

334

SCHEDULE A CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT James J. Fuller Normal Retirement Age: 70
EARLY TERMINATION ANNUAL BENEFIT ACCRUAL BALANCE PAYABLE AT NORMAL 8.50%(1) RETIREMENT AGE (2) -------------------------------$ 31,048 $ 3,643 $ 33,792 $ 3,965 $ 36,779 $ 4,316 $ 40,030 $ 4,697 $ 43,569 $ 5,112 $ 47,420 $ 5,564 $ 51,611 $ 6,056 $ 56,173 $ 6,591 $ 61,138 $ 7,174 $ 66,542 $ 7,808 $ 68,179(3) $ 8,000 CHANGE-INCONTROL BENEFIT PAYABLE IN A LUMP SUM --------------$ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179

PLAN YEAR ENDING DECEMBER 31, -------------2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 April 2013

AGE AT PLAN YEAR END ------------60 61 62 63 64 65 66 67 68 69 70

(1) Calculations are approximations based on prior year-end Accrual Balances. The Accrual Balance reflects payment at the beginning of each month during retirement, beginning May 1, 2013.

SCHEDULE A CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT James J. Fuller Normal Retirement Age: 70
EARLY TERMINATION ANNUAL BENEFIT ACCRUAL BALANCE PAYABLE AT NORMAL 8.50%(1) RETIREMENT AGE (2) -------------------------------$ 31,048 $ 3,643 $ 33,792 $ 3,965 $ 36,779 $ 4,316 $ 40,030 $ 4,697 $ 43,569 $ 5,112 $ 47,420 $ 5,564 $ 51,611 $ 6,056 $ 56,173 $ 6,591 $ 61,138 $ 7,174 $ 66,542 $ 7,808 $ 68,179(3) $ 8,000 CHANGE-INCONTROL BENEFIT PAYABLE IN A LUMP SUM --------------$ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179

PLAN YEAR ENDING DECEMBER 31, -------------2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 April 2013

AGE AT PLAN YEAR END ------------60 61 62 63 64 65 66 67 68 69 70

(1) Calculations are approximations based on prior year-end Accrual Balances. The Accrual Balance reflects payment at the beginning of each month during retirement, beginning May 1, 2013. (2) Based on the present value of the current payment stream of the vested Accrual Balance at each year end using a standard discount rate (8.50%). The benefit amounts shown are for illustrative purposes only. Actual Early Termination benefits will be based on the Accrual Balance existing on the date of the Director's Termination of Service. (3) Projected retirement occurs on April 13, 2013, with the first normal monthly retirement benefit commencing May 1, 2013. 335

EXHIBIT 10.25 AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT WITH CHARLES D. MASSEY THIS AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT (this Agreement) is made as of March 15, 2004, by and between Citizens South Bank, a federally chartered savings bank (the Bank), and Charles D. Massey (the Director). WHEREAS, to encourage the Director to remain a member of the Bank's board of directors, the Bank is willing to provide retirement benefits to the Director. The Bank will pay the benefits from its general assets, WHEREAS, none of the conditions or events included in the definition of the term golden parachute payment that is set forth in section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is contemplated insofar as the Bank is concerned, WHEREAS, the Director entered into a Deferred Compensation and Income Continuation Agreement with the Bank or its predecessor as of May 1, 1986, providing for specified retirement benefits for the Director, WHEREAS, the Director has agreed to miscellaneous changes in the terms and conditions of the May 1, 1986 Deferred Compensation and Income Continuation Agreement, and

EXHIBIT 10.25 AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT WITH CHARLES D. MASSEY THIS AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT (this Agreement) is made as of March 15, 2004, by and between Citizens South Bank, a federally chartered savings bank (the Bank), and Charles D. Massey (the Director). WHEREAS, to encourage the Director to remain a member of the Bank's board of directors, the Bank is willing to provide retirement benefits to the Director. The Bank will pay the benefits from its general assets, WHEREAS, none of the conditions or events included in the definition of the term golden parachute payment that is set forth in section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is contemplated insofar as the Bank is concerned, WHEREAS, the Director entered into a Deferred Compensation and Income Continuation Agreement with the Bank or its predecessor as of May 1, 1986, providing for specified retirement benefits for the Director, WHEREAS, the Director has agreed to miscellaneous changes in the terms and conditions of the May 1, 1986 Deferred Compensation and Income Continuation Agreement, and WHEREAS, the Director and the Bank intend that the May 1, 1986 Deferred Compensation and Income Continuation Agreement, as the same may have been amended, shall be of no further force or effect and shall be superseded in its entirety by this Agreement from and after the effective date of this Agreement. NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and acceptance of which are hereby acknowledged, the Director and the Bank hereby agree as follows. ARTICLE 1 DEFINITIONS Whenever used in this Agreement, the following words and phrases shall have the meanings specified: 1.1 Accrual Balance means the liability that should be accrued by the Bank under generally accepted accounting principles (GAAP) for the Bank's obligation to the Director under this Agreement, by applying Accounting Principles Board Opinion No. 12, as amended by Statement of Financial Accounting Standards No. 106, and the calculation method and discount rate specified hereinafter. The Accrual Balance shall be calculated assuming a level principal amount and interest as the discount rate is accrued each period. The principal accrual is determined such that when it is credited with interest each month, the Accrual Balance at Normal Retirement Age equals the present value of the normal retirement benefits. The discount rate means the rate used by the Plan Administrator for determining the Accrual Balance. The rate is based on the yield on a 20-year corporate bond rated Aa by Moody's, rounded to the nearest 1/4%. The initial discount rate is 8.50%. However, the Plan Administrator, in its sole discretion, may adjust the discount rate to maintain the rate within reasonable standards according to GAAP. 336

1.2 Beneficiary means each designated person, or the estate of the Director, entitled to benefits, if any, upon the death of the Director, determined according to Article 4. 1.3 Beneficiary Designation Form means the form established from time to time by the Plan Administrator that the Director completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries. 1.4 Change in Control means any of the following events occur:

1.2 Beneficiary means each designated person, or the estate of the Director, entitled to benefits, if any, upon the death of the Director, determined according to Article 4. 1.3 Beneficiary Designation Form means the form established from time to time by the Plan Administrator that the Director completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries. 1.4 Change in Control means any of the following events occur: (a) Merger: Citizens South Banking Corporation, a Delaware corporation of which the Bank is a wholly owned subsidiary, merges into or consolidates with another corporation, or merges another corporation into Citizens South Banking Corporation, and as a result less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of Citizens South Banking Corporation immediately before the merger or consolidation, (b) Acquisition of Significant Share Ownership: after the date of this Agreement a report on Schedule 13D, Schedule TO, or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of the combined voting power of Citizens South Banking Corporation's voting securities outstanding (but this clause (b) shall not apply to beneficial ownership of voting shares held by a subsidiary in a fiduciary capacity or beneficial ownership of voting shares held by an employee benefit plan of Citizens South Banking Corporation or any subsidiary(ies)). For purposes of this Agreement, "subsidiary means an entity in which Citizens South Banking Corporation beneficially owns 50% or more of the outstanding voting securities, whether Citizens South Banking Corporation owns the shares directly or owns the shares indirectly through an intermediate subsidiary, (c) Change in Board Composition. during any period of two consecutive years, individuals who constitute Citizens South Banking Corporation's board of directors at the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however, that for purposes of this clause (c) each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period, or (d) Sale of Assets: Citizens South Banking Corporation sells to a third party all or substantially all of its assets. For this purpose, sale of all or substantially all of Citizens South Banking Corporation's assets includes sale of the shares or assets of the Bank alone. 337

1.5 Disability means, if the Director is covered by a Bank-sponsored disability policy, total disability as defined in such policy without regard to any waiting period. If the Director is not covered by such a policy, Disability means the Director suffers a sickness, accident or injury that, in the judgment of a physician satisfactory to the Bank, prevents the Director from performing substantially all of the Director's normal duties for the Bank. As a condition to receiving any Disability benefits, the Bank may require the Director to submit to such physical or mental evaluations and tests as the Bank's board of directors deems appropriate. 1.6 Early Termination means Termination of Service before the Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control. 1.7 Early Termination Date means the month, day, and year of Early Termination. 1.8 Effective Date means March 15, 2004. 1.9 Normal Retirement Age means the Director's 70th birthday. 1.10 Normal Retirement Date means the later of the Normal Retirement Age or Termination of Service. 1.11 Plan Administrator means the plan administrator described in Article 7.

1.5 Disability means, if the Director is covered by a Bank-sponsored disability policy, total disability as defined in such policy without regard to any waiting period. If the Director is not covered by such a policy, Disability means the Director suffers a sickness, accident or injury that, in the judgment of a physician satisfactory to the Bank, prevents the Director from performing substantially all of the Director's normal duties for the Bank. As a condition to receiving any Disability benefits, the Bank may require the Director to submit to such physical or mental evaluations and tests as the Bank's board of directors deems appropriate. 1.6 Early Termination means Termination of Service before the Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control. 1.7 Early Termination Date means the month, day, and year of Early Termination. 1.8 Effective Date means March 15, 2004. 1.9 Normal Retirement Age means the Director's 70th birthday. 1.10 Normal Retirement Date means the later of the Normal Retirement Age or Termination of Service. 1.11 Plan Administrator means the plan administrator described in Article 7. 1.12 Plan Year means each twelve-month period from the Effective Date of this Agreement. 1.13 Termination for Cause means the Director is not nominated by the board or nominating committee for reelection as a director after the expiration of his current term, or the Director is removed from the board of directors, in either case: (a) because of the Director's gross negligence or gross neglect of duties, or (b) because of the Director's commission of or plea of nolo contendere to a felony, or commission of or plea of nolo contendere to a misdemeanor involving moral turpitude, or (c) because of the Director's fraud, disloyalty, dishonesty, or willful violation of any applicable law or significant policy of the Bank committed in connection with the Director's service and resulting in an adverse effect on the Bank, or a breach of the Director's fiduciary duties for personal profit. For purposes of this Agreement, applicable laws include any statute, rule, regulatory order, statement of policy, or final cease-and-desist order of any governmental agency or body having regulatory authority over the Bank or Citizens South Banking Corporation, or, (d) because of the Director's intentional wrongful damage to the business or property of the Bank or its affiliates, including without limitation the reputation of the Bank or Citizens South Banking Corporation, which in the judgement of the Bank causes material harm to the Bank or affiliates, or 338

(e) because of the occurrence of any event that results in the Director being excluded from coverage, or having coverage limited for the Director as compared to other Directors of the Bank, under a blanket bond or other fidelity or insurance policy covering directors, officers, or employees, or (f) because the Director is removed from service or permanently prohibited from participating in the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act [12 U.S.C. 1818(e)(4) or (g)(1)]. 1.14 Termination of Service means the Director ceases to be a member of the Bank's board of directors for any reason whatsoever. For purposes of this Agreement, if there is a dispute over the service status of the Director or the date of the Director's Termination of Service, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred.

(e) because of the occurrence of any event that results in the Director being excluded from coverage, or having coverage limited for the Director as compared to other Directors of the Bank, under a blanket bond or other fidelity or insurance policy covering directors, officers, or employees, or (f) because the Director is removed from service or permanently prohibited from participating in the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act [12 U.S.C. 1818(e)(4) or (g)(1)]. 1.14 Termination of Service means the Director ceases to be a member of the Bank's board of directors for any reason whatsoever. For purposes of this Agreement, if there is a dispute over the service status of the Director or the date of the Director's Termination of Service, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred. ARTICLE 2 LIFETIME BENEFITS 2.1 Normal Retirement Benefit. For Termination of Service on or after Normal Retirement Age, the Bank shall pay to the Director the benefit described in this Section 2.1 instead of any other benefit under this Agreement. 2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is $40,968. 2.1.2 Payment of Benefit. The Bank shall pay the annual benefit to the Director in 12 equal monthly installments payable on the first day of each month, beginning with the month after the Director's Normal Retirement Date. The annual benefit shall be paid to the Director for 10 years. 2.2 Early Termination Benefit. After Early Termination, the Bank shall pay to the Director a benefit consisting of 120 equal monthly payments. The benefit shall be payable on the first day of each month, beginning with the month after the Normal Retirement Age. The amount of the monthly payment shall be calculated based on the Accrual Balance existing on the date of the Director's Termination of Service. For illustrative purposes only, Schedule A attached to this Agreement shows the projected annual Early Termination benefit based on the Accrual Balance at each Plan Year end. 2.3 Disability Benefit. If the Director terminates service because of Disability before the Normal Retirement Age, the Bank shall pay to the Director the benefit described in Section 2.1 instead of any other benefit under this Agreement. The benefit shall be payable on the first day of each month, beginning with the month after the Normal Retirement Age. The annual benefit shall be paid to the Director for 10 years. 2.4 Change in Control Benefit. If the Director's service with the Bank terminates within one year after a Change in Control (except for Termination for Cause), the Bank shall pay to the Director the benefit described in this Section 2.4 instead of any other benefit under this Agreement. 2.4.1 Amount of Benefit. The benefit under this Section 2.4 is the Normal Retirement Age Accrual Balance required by Section 2.1, without reduction for the time value of money or other discount. 339

2.4.2 Payment of Benefit. The Bank shall pay this benefit to the Director in a single lump sum within 3 days after the Director's Termination of Service. 2.5 Contradiction in Terms of Agreement and Schedule A. If there is a contradiction in the terms of this Agreement and Schedule A attached hereto concerning the benefits due under Section 2.2, 2.3, or 2.4 hereof, then the actual amount of benefits prescribed by this Agreement shall control. ARTICLE 3 DEATH BENEFITS

2.4.2 Payment of Benefit. The Bank shall pay this benefit to the Director in a single lump sum within 3 days after the Director's Termination of Service. 2.5 Contradiction in Terms of Agreement and Schedule A. If there is a contradiction in the terms of this Agreement and Schedule A attached hereto concerning the benefits due under Section 2.2, 2.3, or 2.4 hereof, then the actual amount of benefits prescribed by this Agreement shall control. ARTICLE 3 DEATH BENEFITS 3.1 Death in Active Service. If the Director dies while in active service to the Bank, instead of any other benefit under this Agreement the Bank shall pay to the Director's Beneficiary the normal retirement benefit set forth in Section 2.1 of this Agreement. The Bank shall pay the annual benefit to the Director's Beneficiary in 12 equal monthly installments payable on the first day of each month, beginning with the month after the Director's death. The annual benefit shall be paid to the Director's Beneficiary for 10 years. 3.2 Death After Termination of Service. If the Director dies after having terminated active service with the Bank but before receiving any or all of the benefits to which the Director is entitled under Article 2 of this Agreement, the Bank shall pay to the Director's Beneficiary the benefits set forth in Article 2 to which the Director was entitled at the time of death. The benefits shall be payable to the Director's Beneficiary at the same time and in the same amounts they would have been paid to the Director had the Director survived, except that benefit payments shall begin in the month immediately after the Director's death if payments to the Director had not already commenced by the date of the Director's death. ARTICLE 4 BENEFICIARIES 4.1 Beneficiary Designations. The Director shall have the right to designate at any time a Beneficiary to receive any benefits payable under this Agreement upon the death of the Director. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other benefit plan of the Bank in which the Director participates. 4.2 Beneficiary Designation: Change. The Director shall designate a Beneficiary by completing and signing the Beneficiary Designation Form and delivering it to the Plan Administrator or its designated agent. The Director's Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Director or if the Director names a spouse as Beneficiary and the marriage is subsequently dissolved. The Director shall have the right to change a Beneficiary by completing, signing, and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator's rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Director and accepted by the Plan Administrator before the Director's death. 340

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted, and acknowledged in writing by the Plan Administrator or its designated agent. 4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director's spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be made to the personal representative of the Director's estate. 4.5 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative, or person having the care or custody of the minor, incapacitated person, or incapable person. The Bank may require proof of incapacity, minority, or guardianship as it may deem appropriate before distribution of

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted, and acknowledged in writing by the Plan Administrator or its designated agent. 4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director's spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be made to the personal representative of the Director's estate. 4.5 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative, or person having the care or custody of the minor, incapacitated person, or incapable person. The Bank may require proof of incapacity, minority, or guardianship as it may deem appropriate before distribution of the benefit. Distribution shall completely discharge the Bank from all liability for the benefit. ARTICLE 5 GENERAL LIMITATIONS Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any benefit under this Agreement, and this Agreement shall terminate, if the Director's Termination of Service is the result of Termination for Cause. The board of directors or a duly authorized committee of the board shall have the sole and absolute right to determine whether the bases for denial of benefits for cause exist. Benefits may be denied for cause regardless of whether the Director continued to serve as a director after the board or committee made its determination not to nominate the Director for reelection. ARTICLE 6 CLAIMS AND REVIEW PROCEDURES 6.1 Claims Procedure. The Bank shall notify any person or entity that makes a claim for benefits under this Agreement (the Claimant) in writing, within 90 days of Claimant's written application for benefits, of his or her eligibility or noneligibility for benefits under the Agreement. If the Bank determines that the Claimant is not eligible for benefits or full benefits, the notice shall set forth (1) the specific reasons for such denial, (2) a specific reference to the provisions of the Agreement on which the denial is based, (3) a description of any additional information or material necessary for the Claimant to perfect his or her claim, and a description of why it is needed, and (4) an explanation of the Agreement's claims review procedure and other appropriate information as to the steps to be taken if the Claimant wishes to have the claim reviewed. If the Bank determines that there are special circumstances requiring additional time to make a decision, the Bank shall notify the Claimant of the special circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional 90 days. 6.2 Review Procedure. If the Claimant is determined by the Bank not to be eligible for benefits, or if the Claimant believes that he or she is entitled to greater or different benefits, the Claimant shall have the opportunity to have such claim reviewed by the Bank by filing a petition for review with the Bank within 60 days after receipt of the notice issued by the Bank. Said petition shall state the specific reasons, which the Claimant believes entitle him or her to benefits or to greater or different benefits. Within 60 days after receipt by the Bank of the petition, the Bank shall afford the Claimant (and 341

counsel, if any) an opportunity to present his or her position to the Bank verbally or in writing, and the Claimant (or counsel) shall have the right to review the pertinent documents. The Bank shall notify the Claimant of its decision in writing within the 60-day period, stating specifically the basis of its decision, written in a manner to be understood by the Claimant and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the 60-day period is not sufficient, the decision may be deferred for up to another 60 days at the election of the Bank, but notice of this deferral shall be given to the Claimant. ARTICLE 7 ADMINISTRATION OF AGREEMENT

counsel, if any) an opportunity to present his or her position to the Bank verbally or in writing, and the Claimant (or counsel) shall have the right to review the pertinent documents. The Bank shall notify the Claimant of its decision in writing within the 60-day period, stating specifically the basis of its decision, written in a manner to be understood by the Claimant and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the 60-day period is not sufficient, the decision may be deferred for up to another 60 days at the election of the Bank, but notice of this deferral shall be given to the Claimant. ARTICLE 7 ADMINISTRATION OF AGREEMENT 7.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator consisting of the Bank's board of directors or such committee or person(s) as the board shall appoint. The Director may be a member of the Plan Administrator. The Plan Administrator shall also have the discretion and authority to (a) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Agreement and (b) decide or resolve any and all questions, including interpretations of this Agreement, as may arise in connection with the Agreement. 7.2 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative), and may from time to time consult with counsel, who may be counsel to the Bank. 7.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation, and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement. No Director or Beneficiary shall be deemed to have any right, vested or nonvested, regarding the continued use of any previously adopted assumptions, including but not limited to the discount rate and calculation method employed in the determination of the Accrual Balance. 7.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses, or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members. 7.5 Bank Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Termination of Service of the Director, and such other pertinent information as the Plan Administrator may reasonably require. ARTICLE 8 MISCELLANEOUS 8.1 Amendment and Termination. This Agreement may be amended solely by a written agreement signed by the Bank and by the Director. Except as provided in Article 5, this Agreement may be terminated solely by a written agreement signed by the Bank and by the Director. 342

8.2 Binding Effect. This Agreement shall bind the Director and the Bank, and their beneficiaries, survivors, executors, successors, administrators, and transferees. 8.3 No Guarantee of Service. This Agreement is not a contract for services. It does not give the Director the right to remain a Director of the Bank, nor does the Agreement interfere with the rights of the Bank's shareholders not to re-elect the Director or the right of shareholders or the Board to remove an individual as a director of the Bank. The Agreement also does not require the Director to remain a director nor interfere with the Director's right to terminate services at any time. 8.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached,

8.2 Binding Effect. This Agreement shall bind the Director and the Bank, and their beneficiaries, survivors, executors, successors, administrators, and transferees. 8.3 No Guarantee of Service. This Agreement is not a contract for services. It does not give the Director the right to remain a Director of the Bank, nor does the Agreement interfere with the rights of the Bank's shareholders not to re-elect the Director or the right of shareholders or the Board to remove an individual as a director of the Bank. The Agreement also does not require the Director to remain a director nor interfere with the Director's right to terminate services at any time. 8.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached, or encumbered in any manner. 8.5 Successors; Binding Agreement. The Bank shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Bank, by an assumption agreement in form and substance satisfactory to the Director, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform this Agreement if no such succession had occurred. Failure of the Bank to obtain such assumption agreement before effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Director to the Change in Control benefit provided in Section 2.4. 8.6 Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement. 8.7 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of North Carolina, except to the extent preempted by the laws of the United States of America. 8.8 Unfunded Arrangement. The Director and beneficiary are general unsecured creditors of the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise by the Bank to pay benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Director's life is a general asset of the Bank to which the Director and beneficiary have no preferred or secured claim. 8.9 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Director concerning the subject matter hereof. No rights are granted to the Director under this Agreement other than those specifically set forth herein. The May 1, 1986 Deferred Compensation and Income Continuation Agreement, as the same may have been amended, shall be of no further force or effect and shall be superseded in its entirety by this Agreement from and after the effective date of this Agreement. 8.10 Severability. If for any reason any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not held invalid, and each such other provision shall continue in full force and effect to the full extent consistent with law. If any provision of this Agreement is held invalid in part, such invalidity shall not affect the remainder of such provision, and the remainder of such provision, together with all other provisions of this Agreement, shall continue in full force and effect to the full extent consistent with law. 343

8.11 Headings. The headings of Sections herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. 8.12 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. If to the Bank, notice shall be given to the board of directors, Citizens South Bank, 519 South New Hope Road, Gastonia, North Carolina 28054-4040, or to such other or additional person or persons as the Bank shall have designated to the Director in writing. If to the Director, notice shall be given to the Director at the address of the Director appearing on the Bank's records, or to such other or additional person or persons as the Director shall have designated to the Bank in writing.

8.11 Headings. The headings of Sections herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. 8.12 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. If to the Bank, notice shall be given to the board of directors, Citizens South Bank, 519 South New Hope Road, Gastonia, North Carolina 28054-4040, or to such other or additional person or persons as the Bank shall have designated to the Director in writing. If to the Director, notice shall be given to the Director at the address of the Director appearing on the Bank's records, or to such other or additional person or persons as the Director shall have designated to the Bank in writing. 8.13 Payment of Legal Fees. The Bank is aware that after a Change in Control management of the Bank could cause or attempt to cause the Bank to refuse to comply with its obligations under this Agreement, or could institute or cause or attempt to cause the Bank to institute litigation seeking to have this Agreement declared unenforceable, or could take or attempt to take other action to deny Director the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement would be frustrated. It is the intention of the Bank that the Director not be required to incur the expenses associated with the enforcement of his rights under this Agreement, whether by litigation or other legal action, because the cost and expense thereof would substantially detract from the benefits intended to be granted to the Director hereunder. It is the intention of the Bank that the Director not be forced to negotiate settlement of his rights under this Agreement under threat of incurring expenses. Accordingly, if after a Change in Control occurs it appears to the Director that (a) the Bank has failed to comply with any of its obligations under this Agreement, or (b) the Bank or any other person has taken any action to declare this Agreement void or unenforceable, or instituted any litigation or other legal action designed to deny, diminish, or to recover from the Director the benefits intended to be provided to the Director hereunder, the Bank irrevocably authorizes the Director from time to time to retain counsel of his choice, at the expense of the Bank as provided in this Section 8.13, to represent the Director in connection with the initiation or defense of any litigation or other legal action, whether by or against the Bank or any director, officer, stockholder, or other person affiliated with the Bank, in any jurisdiction. Notwithstanding any existing or previous attorneyclient relationship between the Bank and any counsel chosen by the Director under this Section 8.13, the Bank irrevocably consents to the Director entering into an attorney-client relationship with that counsel, and the Bank and the Director agree that a confidential relationship shall exist between the Director and that counsel. The fees and expenses of counsel selected from time to time by the Director as provided in this section shall be paid or reimbursed to the Director by the Bank on a regular, periodic basis upon presentation by the Director of a statement or statements prepared by such counsel in accordance with such counsel's customary practices, up to a maximum aggregate amount of $25,000. The Bank's obligation to pay the Director's legal fees provided by this Section 8.13 operates separately from and in addition to any legal fee reimbursement obligation the Bank may have with the Director under any separate employment, severance, or other agreement between the Director and the Bank. 8.14 Liquidated Damages. The parties hereto, before entering into this Agreement, have been concerned with the fact that substantial damages will be suffered by the Director in the event that the Bank shall fail to perform according to Section 2.4 of this Agreement following a Change in Control. Following a Change in Control, in the event of nonperformance by the Bank for a period of 30 days from the time payment was scheduled to be made pursuant to Section 2.4 of this Agreement, the Director shall immediately be entitled to liquidated damages equal to 1 1/2 times the remaining Accrual Balance due to the Director under Section 2.4 of this Agreement. This provision shall not be applicable in the event that such nonpayment is the result of prohibition of such payment by law, regulation or order of a banking regulatory agency. 344

IN WITNESS WHEREOF, the Director and a duly authorized Bank officer have executed this Amended Deferred Compensation and Income Continuation Agreement as of the date first written above. DIRECTOR CITIZENS SOUTH BANK

IN WITNESS WHEREOF, the Director and a duly authorized Bank officer have executed this Amended Deferred Compensation and Income Continuation Agreement as of the date first written above. DIRECTOR CITIZENS SOUTH BANK
/s/ Charles D. Massey /s/ Kim S. Price ---------------Title: President By:

345

BENEFICIARY DESIGNATION CITIZENS SOUTH BANK AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT I, _______________, designate the following as beneficiary of any death benefits under this Amended Deferred Compensation and Income Continuation Agreement: Primary: Contingent: Note: To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement. I understand that I may change these beneficiary designations by filing a new written designation with the Bank. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature: Date: /s/ Charles D. Massey March 15, 2004

Received by Citizens South Bank this 15th day of March, 2004.
By: Title: /s/ Kim S. Price ---------------President

346

SCHEDULE A CITIZENS SOUTH BANK AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT Charles D. Massey Normal Retirement Age: 70
EARLY TERMINATION ANNUAL BENEFIT PAYABLE AT NORMAL RETIREMENT AGE (2) -----------------$ 22,326 $ 26,733 CHANGE-IN-CONTROL BENEFIT PAYABLE IN A LUMP SUM ----------------$ 277,305 $ 277,305

PLAN YEAR ENDING DECEMBER 31, -----------2003 2004

AGE AT PLAN YEAR END ----------66 67

ACCRUAL BALANCE 8.50% (1) --------------$ 151,118 $ 180,952

BENEFICIARY DESIGNATION CITIZENS SOUTH BANK AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT I, _______________, designate the following as beneficiary of any death benefits under this Amended Deferred Compensation and Income Continuation Agreement: Primary: Contingent: Note: To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement. I understand that I may change these beneficiary designations by filing a new written designation with the Bank. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature: Date: /s/ Charles D. Massey March 15, 2004

Received by Citizens South Bank this 15th day of March, 2004.
By: Title: /s/ Kim S. Price ---------------President

346

SCHEDULE A CITIZENS SOUTH BANK AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT Charles D. Massey Normal Retirement Age: 70
EARLY TERMINATION ANNUAL BENEFIT ACCRUAL BALANCE PAYABLE AT NORMAL 8.50% (1) RETIREMENT AGE (2) -------------------------------$ 151,118 $ 22,326 $ 180,952 $ 26,733 $ 213,423 $ 31,530 $ 248,764 $ 36,751 $ 277,305(3) $ 40,968 CHANGE-IN-CONTROL BENEFIT PAYABLE IN A LUMP SUM ----------------$ 277,305 $ 277,305 $ 277,303 $ 277,305 $ 277,305

PLAN YEAR ENDING DECEMBER 31, -----------2003 2004 2005 2006 May 2007

AGE AT PLAN YEAR END ----------66 67 68 69 70

(1) Calculations are approximations based on prior year-end Accrual Balances. The Accrual Balance reflects payment at the beginning of each month during retirement, beginning June 1, 2007. (2) Based on the present value of the current payment stream of the vested Accrual Balance at each year end using a standard discount rate (8.50%). The benefit amounts shown are for illustrative purposes only. Actual Early Termination benefits will be based on the Accrual Balance existing on the date of the Director's Termination of Service.

SCHEDULE A CITIZENS SOUTH BANK AMENDED DEFERRED COMPENSATION AND INCOME CONTINUATION AGREEMENT Charles D. Massey Normal Retirement Age: 70
EARLY TERMINATION ANNUAL BENEFIT ACCRUAL BALANCE PAYABLE AT NORMAL 8.50% (1) RETIREMENT AGE (2) -------------------------------$ 151,118 $ 22,326 $ 180,952 $ 26,733 $ 213,423 $ 31,530 $ 248,764 $ 36,751 $ 277,305(3) $ 40,968 CHANGE-IN-CONTROL BENEFIT PAYABLE IN A LUMP SUM ----------------$ 277,305 $ 277,305 $ 277,303 $ 277,305 $ 277,305

PLAN YEAR ENDING DECEMBER 31, -----------2003 2004 2005 2006 May 2007

AGE AT PLAN YEAR END ----------66 67 68 69 70

(1) Calculations are approximations based on prior year-end Accrual Balances. The Accrual Balance reflects payment at the beginning of each month during retirement, beginning June 1, 2007. (2) Based on the present value of the current payment stream of the vested Accrual Balance at each year end using a standard discount rate (8.50%). The benefit amounts shown are for illustrative purposes only. Actual Early Termination benefits will be based on the Accrual Balance existing on the date of the Director's Termination of Service. (3) Projected retirement occurs on May 7, 2007, with the first normal monthly retirement benefit commencing June 1, 2007. 347

EXHIBIT 10.26 AMENDED DIRECTOR RETIREMENT AGREEMENT WITH DAVID W. HOYLE, SR. THIS AMENDED DIRECTOR RETIREMENT AGREEMENT (this Agreement) is made as of March 15, 2004, by and between Citizens South Bank, a federally chartered savings bank (the Bank), and David W. Hoyle, Sr. (the Director). WHEREAS, to encourage the Director to remain a member of the Bank's board of directors, the Bank is willing to provide retirement benefits to the Director. The Bank will pay the benefits from its general assets, WHEREAS, none of the conditions or events included in the definition of the term golden parachute payment that is set forth in section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is contemplated insofar as the Bank is concerned, WHEREAS, the Director entered into a Director Retirement Agreement with the Bank or its predecessor as of October 16, 2000, providing for specified retirement benefits for the Director, WHEREAS, the Director has agreed to miscellaneous changes in the terms and conditions of the October 16, 2000 Director Retirement Agreement, and WHEREAS, the Director and the Bank intend that the October 16, 2000 Director Retirement Agreement, as the same may have been amended, shall be of no further force or effect and shall be superseded in its entirety by this Agreement from and after the effective date of this Agreement. NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the

EXHIBIT 10.26 AMENDED DIRECTOR RETIREMENT AGREEMENT WITH DAVID W. HOYLE, SR. THIS AMENDED DIRECTOR RETIREMENT AGREEMENT (this Agreement) is made as of March 15, 2004, by and between Citizens South Bank, a federally chartered savings bank (the Bank), and David W. Hoyle, Sr. (the Director). WHEREAS, to encourage the Director to remain a member of the Bank's board of directors, the Bank is willing to provide retirement benefits to the Director. The Bank will pay the benefits from its general assets, WHEREAS, none of the conditions or events included in the definition of the term golden parachute payment that is set forth in section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is contemplated insofar as the Bank is concerned, WHEREAS, the Director entered into a Director Retirement Agreement with the Bank or its predecessor as of October 16, 2000, providing for specified retirement benefits for the Director, WHEREAS, the Director has agreed to miscellaneous changes in the terms and conditions of the October 16, 2000 Director Retirement Agreement, and WHEREAS, the Director and the Bank intend that the October 16, 2000 Director Retirement Agreement, as the same may have been amended, shall be of no further force or effect and shall be superseded in its entirety by this Agreement from and after the effective date of this Agreement. NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and acceptance of which are hereby acknowledged, the Director and the Bank hereby agree as follows. ARTICLE 1 DEFINITIONS Whenever used in this Agreement, the following words and phrases shall have the meanings specified: 1.1 Accrual Balance means the liability that should be accrued by the Bank under generally accepted accounting principles (GAAP) for the Bank's obligation to the Director under this Agreement, by applying Accounting Principles Board Opinion No. 12, as amended by Statement of Financial Accounting Standards No. 106, and the calculation method and discount rate specified hereinafter. The Accrual Balance shall be calculated assuming a level principal amount and interest as the discount rate is accrued each period. The principal accrual is determined such that when it is credited with interest each month, the Accrual Balance at Normal Retirement Age equals the present value of the normal retirement benefits. The discount rate means the rate used by the Plan Administrator for determining the Accrual Balance. The rate is based on the yield on a 20-year corporate bond rated Aa by Moody's, rounded to the nearest 1/4%. The initial discount rate is 8.50%. However, the Plan Administrator, in its sole discretion, may adjust the discount rate to maintain the rate within reasonable standards according to GAAP. 348

1.2 Beneficiary means each designated person, or the estate of the Director, entitled to benefits, if any, upon the death of the Director, determined according to Article 4. 1.3 Beneficiary Designation Form means the form established from time to time by the Plan Administrator that the Director completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries. 1.4 Change in Control means any of the following events occur: (a) Merger: Citizens South Banking Corporation, a Delaware corporation of which the Bank is a wholly owned

1.2 Beneficiary means each designated person, or the estate of the Director, entitled to benefits, if any, upon the death of the Director, determined according to Article 4. 1.3 Beneficiary Designation Form means the form established from time to time by the Plan Administrator that the Director completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries. 1.4 Change in Control means any of the following events occur: (a) Merger: Citizens South Banking Corporation, a Delaware corporation of which the Bank is a wholly owned subsidiary, merges into or consolidates with another corporation, or merges another corporation into Citizens South Banking Corporation, and as a result less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of Citizens South Banking Corporation immediately before the merger or consolidation, (b) Acquisition of Significant Share Ownership: after the date of this Agreement a report on Schedule 13D, Schedule TO, or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of the combined voting power of Citizens South Banking Corporation's voting securities outstanding (but this clause (b) shall not apply to beneficial ownership of voting shares held by a subsidiary in a fiduciary capacity or beneficial ownership of voting shares held by an employee benefit plan of Citizens South Banking Corporation or any subsidiary(ies)). For purposes of this Agreement, "subsidiary means an entity in which Citizens South Banking Corporation beneficially owns 50% or more of the outstanding voting securities, whether Citizens South Banking Corporation owns the shares directly or owns the shares indirectly through an intermediate subsidiary, (c) Change in Board Composition. during any period of two consecutive years, individuals who constitute Citizens South Banking Corporation's board of directors at the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however, that for purposes of this clause (c) each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period, or (d) Sale of Assets: Citizens South Banking Corporation sells to a third party all or substantially all of its assets. For this purpose, sale of all or substantially all of Citizens South Banking Corporation's assets includes sale of the shares or assets of the Bank alone. 349

1.5 Disability means, if the Director is covered by a Bank-sponsored disability policy, total disability as defined in such policy without regard to any waiting period. If the Director is not covered by such a policy, Disability means the Director suffers a sickness, accident or injury that, in the judgment of a physician satisfactory to the Bank, prevents the Director from performing substantially all of the Director's normal duties for the Bank. As a condition to receiving any Disability benefits, the Bank may require the Director to submit to such physical or mental evaluations and tests as the Bank's board of directors deems appropriate. 1.6 Early Termination means Termination of Service before the Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control. 1.7 Early Termination Date means the month, day, and year of Early Termination. 1.8 Effective Date means March 15, 2004. 1.9 Normal Retirement Age means the Director's 70th birthday. 1.10 Normal Retirement Date means the later of the Normal Retirement Age or Termination of Service. 1.11 Plan Administrator means the plan administrator described in Article 7.

1.5 Disability means, if the Director is covered by a Bank-sponsored disability policy, total disability as defined in such policy without regard to any waiting period. If the Director is not covered by such a policy, Disability means the Director suffers a sickness, accident or injury that, in the judgment of a physician satisfactory to the Bank, prevents the Director from performing substantially all of the Director's normal duties for the Bank. As a condition to receiving any Disability benefits, the Bank may require the Director to submit to such physical or mental evaluations and tests as the Bank's board of directors deems appropriate. 1.6 Early Termination means Termination of Service before the Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control. 1.7 Early Termination Date means the month, day, and year of Early Termination. 1.8 Effective Date means March 15, 2004. 1.9 Normal Retirement Age means the Director's 70th birthday. 1.10 Normal Retirement Date means the later of the Normal Retirement Age or Termination of Service. 1.11 Plan Administrator means the plan administrator described in Article 7. 1.12 Plan Year means each twelve-month period from the Effective Date of this Agreement. 1.13 Termination for Cause means the Director is not nominated by the board or nominating committee for reelection as a director after the expiration of his current term, or the Director is removed from the board of directors, in either case: (a) because of the Director's gross negligence or gross neglect of duties, or (b) because of the Director's commission of or plea of nolo contendere to a felony, or commission of or plea of nolo contendere to a misdemeanor involving moral turpitude, or (c) because of the Director's fraud, disloyalty, dishonesty, or willful violation of any applicable law or significant policy of the Bank committed in connection with the Director's service and resulting in an adverse effect on the Bank, or a breach of the Director's fiduciary duties for personal profit. For purposes of this Agreement, applicable laws include any statute, rule, regulatory order, statement of policy, or final cease-and-desist order of any governmental agency or body having regulatory authority over the Bank or Citizens South Banking Corporation, or, (d) because of the Director's intentional wrongful damage to the business or property of the Bank or its affiliates, including without limitation the reputation of the Bank or Citizens South Banking Corporation, which in the judgement of the Bank causes material harm to the Bank or affiliates, or 350

(e) because of the occurrence of any event that results in the Director being excluded from coverage, or having coverage limited for the Director as compared to other Directors of the Bank, under a blanket bond or other fidelity or insurance policy covering directors, officers, or employees, or (f) because the Director is removed from service or permanently prohibited from participating in the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act [12 U.S.C. 1818(e)(4) or (g)(1)]. 1.14 Termination of Service means the Director ceases to be a member of the Bank's board of directors for any reason whatsoever. For purposes of this Agreement, if there is a dispute over the service status of the Director or the date of the Director's Termination of Service, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred.

(e) because of the occurrence of any event that results in the Director being excluded from coverage, or having coverage limited for the Director as compared to other Directors of the Bank, under a blanket bond or other fidelity or insurance policy covering directors, officers, or employees, or (f) because the Director is removed from service or permanently prohibited from participating in the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act [12 U.S.C. 1818(e)(4) or (g)(1)]. 1.14 Termination of Service means the Director ceases to be a member of the Bank's board of directors for any reason whatsoever. For purposes of this Agreement, if there is a dispute over the service status of the Director or the date of the Director's Termination of Service, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred. ARTICLE 2 LIFETIME BENEFITS 2.1 Normal Retirement Benefit. For Termination of Service on or after Normal Retirement Age, the Bank shall pay to the Director the benefit described in this Section 2.1 instead of any other benefit under this Agreement.
2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is $15,600. 2.1.2 Payment of Benefit. The Bank shall pay the annual

benefit to the Director in 12 equal monthly installments payable on the first day of each month, beginning with the month after the Director's Normal Retirement Date. The annual benefit shall be paid to the Director for 15 years. 2.2 Early Termination Benefit. After Early Termination, the Bank shall pay to the Director the benefit described in this Section 2.2 instead of any other benefit under this Agreement. The benefit shall consist of 180 equal monthly payments, payable on the first day of each month, beginning with the month after the Normal Retirement Age. The amount of the monthly payment shall be calculated based on the Accrual Balance existing on the date of the Director's Termination of Service. For illustrative purposes only, Schedule A attached to this Agreement shows the projected annual Early Termination benefit based on the Accrual Balance at each Plan Year end. 2.3 Disability Benefit. If the Director terminates service because of Disability before the Normal Retirement Age, the Bank shall pay to the Director the benefit described in Section 2.1 instead of any other benefit under this Agreement. The benefits shall be payable for 180 months on the first day of each month, beginning with the month after the Normal Retirement Age. 2.4 Change in Control Benefit. If the Director's service with the Bank terminates within one year after a Change in Control (except for Termination for Cause), the Bank shall pay to the Director the benefit described in this Section 2.4 instead of any other benefit under this Agreement. 2.4.1 Amount of Benefit. The benefit under this Section 2.4 is the Normal Retirement Age Accrual Balance required by Section 2.1, without reduction for the time value of money or other discount. 351

2.4.2 Payment of Benefit. The Bank shall pay this benefit to the Director in a single lump sum within 3 days after the Director's Termination of Service. 2.5 Contradiction in Terms of Agreement and Schedule A. If there is a contradiction in the terms of this Agreement and Schedule A attached hereto concerning the benefits due under Section 2.2, 2.3, or 2.4 hereof, then the actual amount of benefits prescribed by this Agreement shall control. ARTICLE 3

2.4.2 Payment of Benefit. The Bank shall pay this benefit to the Director in a single lump sum within 3 days after the Director's Termination of Service. 2.5 Contradiction in Terms of Agreement and Schedule A. If there is a contradiction in the terms of this Agreement and Schedule A attached hereto concerning the benefits due under Section 2.2, 2.3, or 2.4 hereof, then the actual amount of benefits prescribed by this Agreement shall control. ARTICLE 3 DEATH BENEFITS 3.1 Death in Active Service. If the Director dies while in active service to the Bank, instead of any other benefit under this Agreement the Bank shall pay to the Director's Beneficiary the Normal Retirement Benefit set forth in Section 2.1 of this Agreement. The Bank shall pay the annual benefit to the Director's Beneficiary in 12 equal monthly installments payable on the first day of each month, beginning with the month after the Director's death. The annual benefit shall be paid to the Director's Beneficiary for 15 years. 3.2 Death After Termination of Service. If the Director dies after having terminated active service with the Bank but before receiving any or all of the benefits to which the Director is entitled under Article 2 of this Agreement, the Bank shall pay to the Director's Beneficiary the benefits set forth in Article 2 to which the Director was entitled at the time of death. The benefits shall be payable to the Director's Beneficiary at the same time and in the same amounts they would have been paid to the Director had the Director survived, except that benefit payments shall begin in the month immediately after the Director's death if payments to the Director had not already commenced by the date of the Director's death. ARTICLE 4 BENEFICIARIES 4.1 Beneficiary Designations. The Director shall have the right to designate at any time a Beneficiary to receive any benefits payable under this Agreement upon the death of the Director. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other benefit plan of the Bank in which the Director participates. 4.2 Beneficiary Designation: Change. The Director shall designate a Beneficiary by completing and signing the Beneficiary Designation Form and delivering it to the Plan Administrator or its designated agent. The Director's Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Director or if the Director names a spouse as Beneficiary and the marriage is subsequently dissolved. The Director shall have the right to change a Beneficiary by completing, signing, and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator's rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Director and accepted by the Plan Administrator before the Director's death. 352

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted, and acknowledged in writing by the Plan Administrator or its designated agent. 4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director's spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be made to the personal representative of the Director's estate. 4.5 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative, or person having the care or custody of the minor, incapacitated person, or incapable person. The Bank may require proof of incapacity, minority, or guardianship as it may deem appropriate before distribution of

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted, and acknowledged in writing by the Plan Administrator or its designated agent. 4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director's spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be made to the personal representative of the Director's estate. 4.5 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative, or person having the care or custody of the minor, incapacitated person, or incapable person. The Bank may require proof of incapacity, minority, or guardianship as it may deem appropriate before distribution of the benefit. Distribution shall completely discharge the Bank from all liability for the benefit. ARTICLE 5 GENERAL LIMITATIONS Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any benefit under this Agreement, and this Agreement shall terminate, if the Director's Termination of Service is the result of Termination for Cause. The board of directors or a duly authorized committee of the board shall have the sole and absolute right to determine whether the bases for denial of benefits for cause exist. Benefits may be denied for cause regardless of whether the Director continued to serve as a director after the board or committee made its determination not to nominate the Director for reelection. ARTICLE 6 CLAIMS AND REVIEW PROCEDURES 6.1 Claims Procedure. The Bank shall notify any person or entity that makes a claim for benefits under this Agreement (the Claimant) in writing, within 90 days of Claimant's written application for benefits, of his or her eligibility or noneligibility for benefits under the Agreement. If the Bank determines that the Claimant is not eligible for benefits or full benefits, the notice shall set forth (1) the specific reasons for such denial, (2) a specific reference to the provisions of the Agreement on which the denial is based, (3) a description of any additional information or material necessary for the Claimant to perfect his or her claim, and a description of why it is needed, and (4) an explanation of the Agreement's claims review procedure and other appropriate information as to the steps to be taken if the Claimant wishes to have the claim reviewed. If the Bank determines that there are special circumstances requiring additional time to make a decision, the Bank shall notify the Claimant of the special circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional 90 days. 6.2 Review Procedure. If the Claimant is determined by the Bank not to be eligible for benefits, or if the Claimant believes that he or she is entitled to greater or different benefits, the Claimant shall have the opportunity to have such claim reviewed by the Bank by filing a petition for review with the Bank within 60 days after receipt of the notice issued by the Bank. Said petition shall state the specific reasons, which the Claimant believes entitle him or her to benefits or to greater or different benefits. Within 60 days after receipt by the Bank of the petition, the Bank shall afford the Claimant (and 353

counsel, if any) an opportunity to present his or her position to the Bank verbally or in writing, and the Claimant (or counsel) shall have the right to review the pertinent documents. The Bank shall notify the Claimant of its decision in writing within the 60-day period, stating specifically the basis of its decision, written in a manner to be understood by the Claimant and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the 60-day period is not sufficient, the decision may be deferred for up to another 60 days at the election of the Bank, but notice of this deferral shall be given to the Claimant. ARTICLE 7 ADMINISTRATION OF AGREEMENT

counsel, if any) an opportunity to present his or her position to the Bank verbally or in writing, and the Claimant (or counsel) shall have the right to review the pertinent documents. The Bank shall notify the Claimant of its decision in writing within the 60-day period, stating specifically the basis of its decision, written in a manner to be understood by the Claimant and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the 60-day period is not sufficient, the decision may be deferred for up to another 60 days at the election of the Bank, but notice of this deferral shall be given to the Claimant. ARTICLE 7 ADMINISTRATION OF AGREEMENT 7.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator consisting of the Bank's board of directors or such committee or person(s) as the board shall appoint. The Director may be a member of the Plan Administrator. The Plan Administrator shall also have the discretion and authority to (a) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Agreement and (b) decide or resolve any and all questions, including interpretations of this Agreement, as may arise in connection with the Agreement. 7.2 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative), and may from time to time consult with counsel, who may be counsel to the Bank. 7.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation, and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement. No Director or Beneficiary shall be deemed to have any right, vested or nonvested, regarding the continued use of any previously adopted assumptions, including but not limited to the discount rate and calculation method employed in the determination of the Accrual Balance. 7.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses, or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members. 7.5 Bank Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Termination of Service of the Director, and such other pertinent information as the Plan Administrator may reasonably require. ARTICLE 8 MISCELLANEOUS 8.1 Amendment and Termination. This Agreement may be amended solely by a written agreement signed by the Bank and by the Director. Except as provided in Article 5, this Agreement may be terminated solely by a written agreement signed by the Bank and by the Director. 354

8.2 Binding Effect. This Agreement shall bind the Director and the Bank, and their beneficiaries, survivors, executors, successors, administrators, and transferees. 8.3 No Guarantee of Service. This Agreement is not a contract for services. It does not give the Director the right to remain a Director of the Bank, nor does the Agreement interfere with the rights of the Bank's shareholders not to re-elect the Director or the right of shareholders or the Board to remove an individual as a director of the Bank. The Agreement also does not require the Director to remain a director nor interfere with the Director's right to terminate services at any time. 8.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached,

8.2 Binding Effect. This Agreement shall bind the Director and the Bank, and their beneficiaries, survivors, executors, successors, administrators, and transferees. 8.3 No Guarantee of Service. This Agreement is not a contract for services. It does not give the Director the right to remain a Director of the Bank, nor does the Agreement interfere with the rights of the Bank's shareholders not to re-elect the Director or the right of shareholders or the Board to remove an individual as a director of the Bank. The Agreement also does not require the Director to remain a director nor interfere with the Director's right to terminate services at any time. 8.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached, or encumbered in any manner. 8.5 Successors; Binding Agreement. The Bank shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Bank, by an assumption agreement in form and substance satisfactory to the Director, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform this Agreement if no such succession had occurred. Failure of the Bank to obtain such assumption agreement before effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Director to the Change in Control benefit provided in Section 2.4. 8.6 Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement. 8.7 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of North Carolina, except to the extent preempted by the laws of the United States of America. 8.8 Unfunded Arrangement. The Director and beneficiary are general unsecured creditors of the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise by the Bank to pay benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Director's life is a general asset of the Bank to which the Director and beneficiary have no preferred or secured claim. 8.9 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Director concerning the subject matter hereof. No rights are granted to the Director under this Agreement other than those specifically set forth herein. The October 16, 2000 Director Retirement Agreement, as the same may have been amended, shall be of no further force or effect and shall be superseded in its entirety by this Agreement from and after the effective date of this Agreement. 8.10 Severability. If for any reason any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not held invalid, and each such other provision shall continue in full force and effect to the full extent consistent with law. If any provision of this Agreement is held invalid in part, such invalidity shall not affect the remainder of such provision, and the remainder of such provision, together with all other provisions of this Agreement, shall continue in full force and effect to the full extent consistent with law. 355

8.11 Headings. The headings of Sections herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. 8.12 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. If to the Bank, notice shall be given to the board of directors, Citizens South Bank, 519 South New Hope Road, Gastonia, North Carolina 28054-4040, or to such other or additional person or persons as the Bank shall have designated to the Director in writing. If to the Director, notice shall be given to the Director at the address of the Director appearing on the Bank's records, or to such other or additional person or persons as the Director shall have designated to the Bank in writing.

8.11 Headings. The headings of Sections herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. 8.12 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. If to the Bank, notice shall be given to the board of directors, Citizens South Bank, 519 South New Hope Road, Gastonia, North Carolina 28054-4040, or to such other or additional person or persons as the Bank shall have designated to the Director in writing. If to the Director, notice shall be given to the Director at the address of the Director appearing on the Bank's records, or to such other or additional person or persons as the Director shall have designated to the Bank in writing. 8.13 Payment of Legal Fees. The Bank is aware that after a Change in Control management of the Bank could cause or attempt to cause the Bank to refuse to comply with its obligations under this Agreement, or could institute or cause or attempt to cause the Bank to institute litigation seeking to have this Agreement declared unenforceable, or could take or attempt to take other action to deny Director the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement would be frustrated. It is the intention of the Bank that the Director not be required to incur the expenses associated with the enforcement of his rights under this Agreement, whether by litigation or other legal action, because the cost and expense thereof would substantially detract from the benefits intended to be granted to the Director hereunder. It is the intention of the Bank that the Director not be forced to negotiate settlement of his rights under this Agreement under threat of incurring expenses. Accordingly, if after a Change in Control occurs it appears to the Director that (a) the Bank has failed to comply with any of its obligations under this Agreement, or (b) the Bank or any other person has taken any action to declare this Agreement void or unenforceable, or instituted any litigation or other legal action designed to deny, diminish, or to recover from the Director the benefits intended to be provided to the Director hereunder, the Bank irrevocably authorizes the Director from time to time to retain counsel of his choice, at the expense of the Bank as provided in this Section 8.13, to represent the Director in connection with the initiation or defense of any litigation or other legal action, whether by or against the Bank or any director, officer, stockholder, or other person affiliated with the Bank, in any jurisdiction. Notwithstanding any existing or previous attorneyclient relationship between the Bank and any counsel chosen by the Director under this Section 8.13, the Bank irrevocably consents to the Director entering into an attorney-client relationship with that counsel, and the Bank and the Director agree that a confidential relationship shall exist between the Director and that counsel. The fees and expenses of counsel selected from time to time by the Director as provided in this section shall be paid or reimbursed to the Director by the Bank on a regular, periodic basis upon presentation by the Director of a statement or statements prepared by such counsel in accordance with such counsel's customary practices, up to a maximum aggregate amount of $25,000. The Bank's obligation to pay the Director's legal fees provided by this Section 8.13 operates separately from and in addition to any legal fee reimbursement obligation the Bank may have with the Director under any separate employment, severance, or other agreement between the Director and the Bank. 8.14 Liquidated Damages. The parties hereto, before entering into this Agreement, have been concerned with the fact that substantial damages will be suffered by the Director in the event that the Bank shall fail to perform according to Section 2.4 of this Agreement following a Change in Control. Following a Change in Control, in the event of nonperformance by the Bank for a period of 30 days from the time payment was scheduled to be made pursuant to Section 2.4 of this Agreement, the Director shall 356

immediately be entitled to liquidated damages equal to 1 1/2 times the remaining Accrual Balance due to the Director under Section 2.4 of this Agreement. This provision shall not be applicable in the event that such nonpayment is the result of prohibition of such payment by law, regulation or order of a banking regulatory agency. IN WITNESS WHEREOF, the Director and a duly authorized Bank officer have executed this Amended Deferred Compensation and Income Continuation Agreement as of the date first written above.

immediately be entitled to liquidated damages equal to 1 1/2 times the remaining Accrual Balance due to the Director under Section 2.4 of this Agreement. This provision shall not be applicable in the event that such nonpayment is the result of prohibition of such payment by law, regulation or order of a banking regulatory agency. IN WITNESS WHEREOF, the Director and a duly authorized Bank officer have executed this Amended Deferred Compensation and Income Continuation Agreement as of the date first written above. DIRECTOR CITIZENS SOUTH BANK
/s/ David W. Hoyle, Sr. /s/ Kim S. Price ---------------Title: President By:

357

BENEFICIARY DESIGNATION CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT I, _______________, designate the following as beneficiary of any death benefits under this Amended Director Retirement Agreement: Primary: Contingent: Note: To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement. I understand that I may change these beneficiary designations by filing a new written designation with the Bank. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature: Date: /s/ David W. Hoyle, Sr. March 15, 2004

Received by Citizens South Bank this 15th day of March , 2004.
By: Title: /s/ Kim S. Price ---------------President

358

SCHEDULE A CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT David W. Hoyle, Sr. Normal Retirement Age: 70

BENEFICIARY DESIGNATION CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT I, _______________, designate the following as beneficiary of any death benefits under this Amended Director Retirement Agreement: Primary: Contingent: Note: To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement. I understand that I may change these beneficiary designations by filing a new written designation with the Bank. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature: Date: /s/ David W. Hoyle, Sr. March 15, 2004

Received by Citizens South Bank this 15th day of March , 2004.
By: Title: /s/ Kim S. Price ---------------President

358

SCHEDULE A CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT David W. Hoyle, Sr. Normal Retirement Age: 70
EARLY TERMINATION ANNUAL BENEFIT ACCRUAL BALANCE PAYABLE AT NORMAL 8.50% (1) RETIREMENT AGE (2) -------------------------------$ 85,029 $ 9,977 $ 92,744 $ 10,882 $ 101,141 $ 11,868 $ 110,281 $ 12,940 $ 120,228 $ 14,107 $ 131,055 $ 15,378 $ 132,950(3) $ 15,600 CHANGE-IN-CONTROL BENEFIT PAYABLE IN A LUMP SUM ----------------$ 132,950 $ 132,950 $ 132,950 $ 132,950 $ 132,950 $ 132,950 $ 132,950

PLAN YEAR ENDING DECEMBER 31, ---------------2003 2004 2005 2006 2007 2008 February 2009

AGE AT PLAN YEAR END ----------66 67 68 69 66 67 70

(1) Calculations are approximations based on prior year-end Accrual Balances. The Accrual Balance reflects payment at the beginning of each month during retirement, beginning March 1, 2009. (2) Based on the present value of the current payment stream of the vested Accrual Balance at each year end using a standard discount rate (8.50%). The benefit amounts shown are for illustrative purposes only. Actual Early Termination benefits will be based on the Accrual Balance existing on the date of the Director's Termination

SCHEDULE A CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT David W. Hoyle, Sr. Normal Retirement Age: 70
EARLY TERMINATION ANNUAL BENEFIT ACCRUAL BALANCE PAYABLE AT NORMAL 8.50% (1) RETIREMENT AGE (2) -------------------------------$ 85,029 $ 9,977 $ 92,744 $ 10,882 $ 101,141 $ 11,868 $ 110,281 $ 12,940 $ 120,228 $ 14,107 $ 131,055 $ 15,378 $ 132,950(3) $ 15,600 CHANGE-IN-CONTROL BENEFIT PAYABLE IN A LUMP SUM ----------------$ 132,950 $ 132,950 $ 132,950 $ 132,950 $ 132,950 $ 132,950 $ 132,950

PLAN YEAR ENDING DECEMBER 31, ---------------2003 2004 2005 2006 2007 2008 February 2009

AGE AT PLAN YEAR END ----------66 67 68 69 66 67 70

(1) Calculations are approximations based on prior year-end Accrual Balances. The Accrual Balance reflects payment at the beginning of each month during retirement, beginning March 1, 2009. (2) Based on the present value of the current payment stream of the vested Accrual Balance at each year end using a standard discount rate (8.50%). The benefit amounts shown are for illustrative purposes only. Actual Early Termination benefits will be based on the Accrual Balance existing on the date of the Director's Termination of Service. (3) Projected retirement occurs on February 4, 2009, with the first normal monthly retirement benefit commencing March 1, 2009. 359

EXHIBIT 10.27 AMENDED DIRECTOR RETIREMENT AGREEMENT WITH BEN R. RUDSILL, II THIS AMENDED DIRECTOR RETIREMENT AGREEMENT (this Agreement) is made as of March 15, 2004, by and between Citizens South Bank, a federally chartered savings bank (the Bank), and Ben R. Rudisill, II (the Director). WHEREAS, to encourage the Director to remain a member of the Bank's board of directors, the Bank is willing to provide retirement benefits to the Director. The Bank will pay the benefits from its general assets, WHEREAS, none of the conditions or events included in the definition of the term golden parachute payment that is set forth in section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is contemplated insofar as the Bank is concerned, WHEREAS, the Director entered into a Director Retirement Agreement with the Bank or its predecessor as of October 16, 2000, providing for specified retirement benefits for the Director, WHEREAS, the Director has agreed to miscellaneous changes in the terms and conditions of the October 16, 2000 Director Retirement Agreement, and WHEREAS, the Director and the Bank intend that the October 16, 2000 Director Retirement Agreement, as the same may have been amended, shall be of no further force or effect and shall be superseded in its entirety by this Agreement from and after the effective date of this Agreement.

EXHIBIT 10.27 AMENDED DIRECTOR RETIREMENT AGREEMENT WITH BEN R. RUDSILL, II THIS AMENDED DIRECTOR RETIREMENT AGREEMENT (this Agreement) is made as of March 15, 2004, by and between Citizens South Bank, a federally chartered savings bank (the Bank), and Ben R. Rudisill, II (the Director). WHEREAS, to encourage the Director to remain a member of the Bank's board of directors, the Bank is willing to provide retirement benefits to the Director. The Bank will pay the benefits from its general assets, WHEREAS, none of the conditions or events included in the definition of the term golden parachute payment that is set forth in section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is contemplated insofar as the Bank is concerned, WHEREAS, the Director entered into a Director Retirement Agreement with the Bank or its predecessor as of October 16, 2000, providing for specified retirement benefits for the Director, WHEREAS, the Director has agreed to miscellaneous changes in the terms and conditions of the October 16, 2000 Director Retirement Agreement, and WHEREAS, the Director and the Bank intend that the October 16, 2000 Director Retirement Agreement, as the same may have been amended, shall be of no further force or effect and shall be superseded in its entirety by this Agreement from and after the effective date of this Agreement. NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and acceptance of which are hereby acknowledged, the Director and the Bank hereby agree as follows. ARTICLE 1 DEFINITIONS Whenever used in this Agreement, the following words and phrases shall have the meanings specified: 1.1 Accrual Balance means the liability that should be accrued by the Bank under generally accepted accounting principles (GAAP) for the Bank's obligation to the Director under this Agreement, by applying Accounting Principles Board Opinion No. 12, as amended by Statement of Financial Accounting Standards No. 106, and the calculation method and discount rate specified hereinafter. The Accrual Balance shall be calculated assuming a level principal amount and interest as the discount rate is accrued each period. The principal accrual is determined such that when it is credited with interest each month, the Accrual Balance at Normal Retirement Age equals the present value of the normal retirement benefits. The discount rate means the rate used by the Plan Administrator for determining the Accrual Balance. The rate is based on the yield on a 20-year corporate bond rated Aa by Moody's, rounded to the nearest 1/4%. The initial discount rate is 8.50%. However, the Plan Administrator, in its sole discretion, may adjust the discount rate to maintain the rate within reasonable standards according to GAAP. 360

1.2 Beneficiary means each designated person, or the estate of the Director, entitled to benefits, if any, upon the death of the Director, determined according to Article 4. 1.3 Beneficiary Designation Form means the form established from time to time by the Plan Administrator that the Director completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries. 1.4 Change in Control means any of the following events occur: (a) Merger: Citizens South Banking Corporation, a Delaware corporation of which the Bank is a wholly owned

1.2 Beneficiary means each designated person, or the estate of the Director, entitled to benefits, if any, upon the death of the Director, determined according to Article 4. 1.3 Beneficiary Designation Form means the form established from time to time by the Plan Administrator that the Director completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries. 1.4 Change in Control means any of the following events occur: (a) Merger: Citizens South Banking Corporation, a Delaware corporation of which the Bank is a wholly owned subsidiary, merges into or consolidates with another corporation, or merges another corporation into Citizens South Banking Corporation, and as a result less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of Citizens South Banking Corporation immediately before the merger or consolidation, (b) Acquisition of Significant Share Ownership: after the date of this Agreement a report on Schedule 13D, Schedule TO, or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of the combined voting power of Citizens South Banking Corporation's voting securities outstanding (but this clause (b) shall not apply to beneficial ownership of voting shares held by a subsidiary in a fiduciary capacity or beneficial ownership of voting shares held by an employee benefit plan of Citizens South Banking Corporation or any subsidiary(ies)). For purposes of this Agreement, "subsidiary means an entity in which Citizens South Banking Corporation beneficially owns 50% or more of the outstanding voting securities, whether Citizens South Banking Corporation owns the shares directly or owns the shares indirectly through an intermediate subsidiary, (c) Change in Board Composition. during any period of two consecutive years, individuals who constitute Citizens South Banking Corporation's board of directors at the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however, that for purposes of this clause (c) each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period, or (d) Sale of Assets: Citizens South Banking Corporation sells to a third party all or substantially all of its assets. For this purpose, sale of all or substantially all of Citizens South Banking Corporation's assets includes sale of the shares or assets of the Bank alone. 361

1.5 Disability means, if the Director is covered by a Bank-sponsored disability policy, total disability as defined in such policy without regard to any waiting period. If the Director is not covered by such a policy, Disability means the Director suffers a sickness, accident or injury that, in the judgment of a physician satisfactory to the Bank, prevents the Director from performing substantially all of the Director's normal duties for the Bank. As a condition to receiving any Disability benefits, the Bank may require the Director to submit to such physical or mental evaluations and tests as the Bank's board of directors deems appropriate. 1.6 Early Termination means Termination of Service before the Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control. 1.7 Early Termination Date means the month, day, and year of Early Termination. 1.8 Effective Date means March 15, 2004. 1.9 Normal Retirement Age means the Director's 70th birthday. 1.10 Normal Retirement Date means the later of the Normal Retirement Age or Termination of Service. 1.11 Plan Administrator means the plan administrator described in Article 7.

1.5 Disability means, if the Director is covered by a Bank-sponsored disability policy, total disability as defined in such policy without regard to any waiting period. If the Director is not covered by such a policy, Disability means the Director suffers a sickness, accident or injury that, in the judgment of a physician satisfactory to the Bank, prevents the Director from performing substantially all of the Director's normal duties for the Bank. As a condition to receiving any Disability benefits, the Bank may require the Director to submit to such physical or mental evaluations and tests as the Bank's board of directors deems appropriate. 1.6 Early Termination means Termination of Service before the Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control. 1.7 Early Termination Date means the month, day, and year of Early Termination. 1.8 Effective Date means March 15, 2004. 1.9 Normal Retirement Age means the Director's 70th birthday. 1.10 Normal Retirement Date means the later of the Normal Retirement Age or Termination of Service. 1.11 Plan Administrator means the plan administrator described in Article 7. 1.12 Plan Year means each twelve-month period from the Effective Date of this Agreement. 1.13 Termination for Cause means the Director is not nominated by the board or nominating committee for reelection as a director after the expiration of his current term, or the Director is removed from the board of directors, in either case: (a) because of the Director's gross negligence or gross neglect of duties, or (b) because of the Director's commission of or plea of nolo contendere to a felony, or commission of or plea of nolo contendere to a misdemeanor involving moral turpitude, or (c) because of the Director's fraud, disloyalty, dishonesty, or willful violation of any applicable law or significant policy of the Bank committed in connection with the Director's service and resulting in an adverse effect on the Bank, or a breach of the Director's fiduciary duties for personal profit. For purposes of this Agreement, applicable laws include any statute, rule, regulatory order, statement of policy, or final cease-and-desist order of any governmental agency or body having regulatory authority over the Bank or Citizens South Banking Corporation, or, (d) because of the Director's intentional wrongful damage to the business or property of the Bank or its affiliates, including without limitation the reputation of the Bank or Citizens South Banking Corporation, which in the judgement of the Bank causes material harm to the Bank or affiliates, or 362

(e) because of the occurrence of any event that results in the Director being excluded from coverage, or having coverage limited for the Director as compared to other Directors of the Bank, under a blanket bond or other fidelity or insurance policy covering directors, officers, or employees, or (f) because the Director is removed from service or permanently prohibited from participating in the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act [12 U.S.C. 1818(e)(4) or (g)(1)]. 1.14 Termination of Service means the Director ceases to be a member of the Bank's board of directors for any reason whatsoever. For purposes of this Agreement, if there is a dispute over the service status of the Director or the date of the Director's Termination of Service, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred.

(e) because of the occurrence of any event that results in the Director being excluded from coverage, or having coverage limited for the Director as compared to other Directors of the Bank, under a blanket bond or other fidelity or insurance policy covering directors, officers, or employees, or (f) because the Director is removed from service or permanently prohibited from participating in the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act [12 U.S.C. 1818(e)(4) or (g)(1)]. 1.14 Termination of Service means the Director ceases to be a member of the Bank's board of directors for any reason whatsoever. For purposes of this Agreement, if there is a dispute over the service status of the Director or the date of the Director's Termination of Service, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred. ARTICLE 2 LIFETIME BENEFITS 2.1 Normal Retirement Benefit. For Termination of Service on or after Normal Retirement Age, the Bank shall pay to the Director the benefit described in this Section 2.1 instead of any other benefit under this Agreement. 2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is $8,000. 2.1.2 Payment of Benefit. The Bank shall pay the annual benefit to the Director in 12 equal monthly installments payable on the first day of each month, beginning with the month after the Director's Normal Retirement Date. The annual benefit shall be paid to the Director for 15 years. 2.2 Early Termination Benefit. After Early Termination, the Bank shall pay to the Director the benefit described in this Section 2.2 instead of any other benefit under this Agreement. The benefit shall consist of 180 equal monthly payments, payable on the first day of each month, beginning with the month after the Normal Retirement Age. The amount of the monthly payment shall be calculated based on the Accrual Balance existing on the date of the Director's Termination of Service. For illustrative purposes only, Schedule A attached to this Agreement shows the projected annual Early Termination benefit based on the Accrual Balance at each Plan Year end. 2.3 Disability Benefit. If the Director terminates service because of Disability before the Normal Retirement Age, the Bank shall pay to the Director the benefit described in Section 2.1 instead of any other benefit under this Agreement. The benefits shall be payable for 180 months on the first day of each month, beginning with the month after the Normal Retirement Age. 2.4 Change in Control Benefit. If the Director's service with the Bank terminates within one year after a Change in Control (except for Termination for Cause), the Bank shall pay to the Director the benefit described in this Section 2.4 instead of any other benefit under this Agreement. 2.4.1 Amount of Benefit. The benefit under this Section 2.4 is the Normal Retirement Age Accrual Balance required by Section 2.1, without reduction for the time value of money or other discount. 363

2.4.2 Payment of Benefit. The Bank shall pay this benefit to the Director in a single lump sum within 3 days after the Director's Termination of Service. 2.5 Contradiction in Terms of Agreement and Schedule A. If there is a contradiction in the terms of this Agreement and Schedule A attached hereto concerning the benefits due under Section 2.2, 2.3, or 2.4 hereof, then the actual amount of benefits prescribed by this Agreement shall control. ARTICLE 3 DEATH BENEFITS

2.4.2 Payment of Benefit. The Bank shall pay this benefit to the Director in a single lump sum within 3 days after the Director's Termination of Service. 2.5 Contradiction in Terms of Agreement and Schedule A. If there is a contradiction in the terms of this Agreement and Schedule A attached hereto concerning the benefits due under Section 2.2, 2.3, or 2.4 hereof, then the actual amount of benefits prescribed by this Agreement shall control. ARTICLE 3 DEATH BENEFITS 3.1 Death in Active Service. If the Director dies while in active service to the Bank, instead of any other benefit under this Agreement the Bank shall pay to the Director's Beneficiary the Normal Retirement Benefit set forth in Section 2.1 of this Agreement. The Bank shall pay the annual benefit to the Director's Beneficiary in 12 equal monthly installments payable on the first day of each month, beginning with the month after the Director's death. The annual benefit shall be paid to the Director's Beneficiary for 15 years. 3.2 Death After Termination of Service. If the Director dies after having terminated active service with the Bank but before receiving any or all of the benefits to which the Director is entitled under Article 2 of this Agreement, the Bank shall pay to the Director's Beneficiary the benefits set forth in Article 2 to which the Director was entitled at the time of death. The benefits shall be payable to the Director's Beneficiary at the same time and in the same amounts they would have been paid to the Director had the Director survived, except that benefit payments shall begin in the month immediately after the Director's death if payments to the Director had not already commenced by the date of the Director's death. ARTICLE 4 BENEFICIARIES 4.1 Beneficiary Designations. The Director shall have the right to designate at any time a Beneficiary to receive any benefits payable under this Agreement upon the death of the Director. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other benefit plan of the Bank in which the Director participates. 4.2 Beneficiary Designation: Change. The Director shall designate a Beneficiary by completing and signing the Beneficiary Designation Form and delivering it to the Plan Administrator or its designated agent. The Director's Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Director or if the Director names a spouse as Beneficiary and the marriage is subsequently dissolved. The Director shall have the right to change a Beneficiary by completing, signing, and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator's rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Director and accepted by the Plan Administrator before the Director's death. 364

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted, and acknowledged in writing by the Plan Administrator or its designated agent. 4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director's spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be made to the personal representative of the Director's estate. 4.5 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative, or person having the care or custody of the minor, incapacitated person, or incapable person. The Bank may require proof of incapacity, minority, or guardianship as it may deem appropriate before distribution of

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted, and acknowledged in writing by the Plan Administrator or its designated agent. 4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director's spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be made to the personal representative of the Director's estate. 4.5 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative, or person having the care or custody of the minor, incapacitated person, or incapable person. The Bank may require proof of incapacity, minority, or guardianship as it may deem appropriate before distribution of the benefit. Distribution shall completely discharge the Bank from all liability for the benefit. ARTICLE 5 GENERAL LIMITATIONS Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any benefit under this Agreement, and this Agreement shall terminate, if the Director's Termination of Service is the result of Termination for Cause. The board of directors or a duly authorized committee of the board shall have the sole and absolute right to determine whether the bases for denial of benefits for cause exist. Benefits may be denied for cause regardless of whether the Director continued to serve as a director after the board or committee made its determination not to nominate the Director for reelection. ARTICLE 6 CLAIMS AND REVIEW PROCEDURES 6.1 Claims Procedure. The Bank shall notify any person or entity that makes a claim for benefits under this Agreement (the Claimant) in writing, within 90 days of Claimant's written application for benefits, of his or her eligibility or noneligibility for benefits under the Agreement. If the Bank determines that the Claimant is not eligible for benefits or full benefits, the notice shall set forth (1) the specific reasons for such denial, (2) a specific reference to the provisions of the Agreement on which the denial is based, (3) a description of any additional information or material necessary for the Claimant to perfect his or her claim, and a description of why it is needed, and (4) an explanation of the Agreement's claims review procedure and other appropriate information as to the steps to be taken if the Claimant wishes to have the claim reviewed. If the Bank determines that there are special circumstances requiring additional time to make a decision, the Bank shall notify the Claimant of the special circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional 90 days. 6.2 Review Procedure. If the Claimant is determined by the Bank not to be eligible for benefits, or if the Claimant believes that he or she is entitled to greater or different benefits, the Claimant shall have the opportunity to have such claim reviewed by the Bank by filing a petition for review with the Bank within 60 days after receipt of the notice issued by the Bank. Said petition shall state the specific reasons, which the Claimant believes entitle him or her to benefits or to greater or different benefits. Within 60 days after receipt by the Bank of the petition, the Bank shall afford the Claimant (and 365

counsel, if any) an opportunity to present his or her position to the Bank verbally or in writing, and the Claimant (or counsel) shall have the right to review the pertinent documents. The Bank shall notify the Claimant of its decision in writing within the 60-day period, stating specifically the basis of its decision, written in a manner to be understood by the Claimant and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the 60-day period is not sufficient, the decision may be deferred for up to another 60 days at the election of the Bank, but notice of this deferral shall be given to the Claimant. ARTICLE 7 ADMINISTRATION OF AGREEMENT

counsel, if any) an opportunity to present his or her position to the Bank verbally or in writing, and the Claimant (or counsel) shall have the right to review the pertinent documents. The Bank shall notify the Claimant of its decision in writing within the 60-day period, stating specifically the basis of its decision, written in a manner to be understood by the Claimant and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the 60-day period is not sufficient, the decision may be deferred for up to another 60 days at the election of the Bank, but notice of this deferral shall be given to the Claimant. ARTICLE 7 ADMINISTRATION OF AGREEMENT 7.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator consisting of the Bank's board of directors or such committee or person(s) as the board shall appoint. The Director may be a member of the Plan Administrator. The Plan Administrator shall also have the discretion and authority to (a) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Agreement and (b) decide or resolve any and all questions, including interpretations of this Agreement, as may arise in connection with the Agreement. 7.2 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative), and may from time to time consult with counsel, who may be counsel to the Bank. 7.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation, and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement. No Director or Beneficiary shall be deemed to have any right, vested or nonvested, regarding the continued use of any previously adopted assumptions, including but not limited to the discount rate and calculation method employed in the determination of the Accrual Balance. 7.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses, or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members. 7.5 Bank Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Termination of Service of the Director, and such other pertinent information as the Plan Administrator may reasonably require. ARTICLE 8 MISCELLANEOUS 8.1 Amendment and Termination. This Agreement may be amended solely by a written agreement signed by the Bank and by the Director. Except as provided in Article 5, this Agreement may be terminated solely by a written agreement signed by the Bank and by the Director. 366

8.2 Binding Effect. This Agreement shall bind the Director and the Bank, and their beneficiaries, survivors, executors, successors, administrators, and transferees. 8.3 No Guarantee of Service. This Agreement is not a contract for services. It does not give the Director the right to remain a Director of the Bank, nor does the Agreement interfere with the rights of the Bank's shareholders not to re-elect the Director or the right of shareholders or the Board to remove an individual as a director of the Bank. The Agreement also does not require the Director to remain a director nor interfere with the Director's right to terminate services at any time. 8.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached,

8.2 Binding Effect. This Agreement shall bind the Director and the Bank, and their beneficiaries, survivors, executors, successors, administrators, and transferees. 8.3 No Guarantee of Service. This Agreement is not a contract for services. It does not give the Director the right to remain a Director of the Bank, nor does the Agreement interfere with the rights of the Bank's shareholders not to re-elect the Director or the right of shareholders or the Board to remove an individual as a director of the Bank. The Agreement also does not require the Director to remain a director nor interfere with the Director's right to terminate services at any time. 8.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached, or encumbered in any manner. 8.5 Successors; Binding Agreement. The Bank shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Bank, by an assumption agreement in form and substance satisfactory to the Director, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform this Agreement if no such succession had occurred. Failure of the Bank to obtain such assumption agreement before effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Director to the Change in Control benefit provided in Section 2.4. 8.6 Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement. 8.7 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of North Carolina, except to the extent preempted by the laws of the United States of America. 8.8 Unfunded Arrangement. The Director and beneficiary are general unsecured creditors of the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise by the Bank to pay benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Director's life is a general asset of the Bank to which the Director and beneficiary have no preferred or secured claim. 8.9 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Director concerning the subject matter hereof. No rights are granted to the Director under this Agreement other than those specifically set forth herein. The October 16, 2000 Director Retirement Agreement, as the same may have been amended, shall be of no further force or effect and shall be superseded in its entirety by this Agreement from and after the effective date of this Agreement. 8.10 Severability. If for any reason any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not held invalid, and each such other provision shall continue in full force and effect to the full extent consistent with law. If any provision of this Agreement is held invalid in part, such invalidity shall not affect the remainder of such provision, and the remainder of such provision, together with all other provisions of this Agreement, shall continue in full force and effect to the full extent consistent with law. 367

8.11 Headings. The headings of Sections herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. 8.12 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. If to the Bank, notice shall be given to the board of directors, Citizens South Bank, 519 South New Hope Road, Gastonia, North Carolina 28054-4040, or to such other or additional person or persons as the Bank shall have designated to the Director in writing. If to the Director, notice shall be given to the Director at the address of the Director appearing on the Bank's records, or to such other or additional person or persons as the Director shall have designated to the Bank in writing.

8.11 Headings. The headings of Sections herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. 8.12 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. If to the Bank, notice shall be given to the board of directors, Citizens South Bank, 519 South New Hope Road, Gastonia, North Carolina 28054-4040, or to such other or additional person or persons as the Bank shall have designated to the Director in writing. If to the Director, notice shall be given to the Director at the address of the Director appearing on the Bank's records, or to such other or additional person or persons as the Director shall have designated to the Bank in writing. 8.13 Payment of Legal Fees. The Bank is aware that after a Change in Control management of the Bank could cause or attempt to cause the Bank to refuse to comply with its obligations under this Agreement, or could institute or cause or attempt to cause the Bank to institute litigation seeking to have this Agreement declared unenforceable, or could take or attempt to take other action to deny Director the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement would be frustrated. It is the intention of the Bank that the Director not be required to incur the expenses associated with the enforcement of his rights under this Agreement, whether by litigation or other legal action, because the cost and expense thereof would substantially detract from the benefits intended to be granted to the Director hereunder. It is the intention of the Bank that the Director not be forced to negotiate settlement of his rights under this Agreement under threat of incurring expenses. Accordingly, if after a Change in Control occurs it appears to the Director that (a) the Bank has failed to comply with any of its obligations under this Agreement, or (b) the Bank or any other person has taken any action to declare this Agreement void or unenforceable, or instituted any litigation or other legal action designed to deny, diminish, or to recover from the Director the benefits intended to be provided to the Director hereunder, the Bank irrevocably authorizes the Director from time to time to retain counsel of his choice, at the expense of the Bank as provided in this Section 8.13, to represent the Director in connection with the initiation or defense of any litigation or other legal action, whether by or against the Bank or any director, officer, stockholder, or other person affiliated with the Bank, in any jurisdiction. Notwithstanding any existing or previous attorneyclient relationship between the Bank and any counsel chosen by the Director under this Section 8.13, the Bank irrevocably consents to the Director entering into an attorney-client relationship with that counsel, and the Bank and the Director agree that a confidential relationship shall exist between the Director and that counsel. The fees and expenses of counsel selected from time to time by the Director as provided in this section shall be paid or reimbursed to the Director by the Bank on a regular, periodic basis upon presentation by the Director of a statement or statements prepared by such counsel in accordance with such counsel's customary practices, up to a maximum aggregate amount of $25,000. The Bank's obligation to pay the Director's legal fees provided by this Section 8.13 operates separately from and in addition to any legal fee reimbursement obligation the Bank may have with the Director under any separate employment, severance, or other agreement between the Director and the Bank. 8.14 Liquidated Damages. The parties hereto, before entering into this Agreement, have been concerned with the fact that substantial damages will be suffered by the Director in the event that the Bank shall fail to perform according to Section 2.4 of this Agreement following a Change in Control. Following a Change in Control, in the event of nonperformance by the Bank for a period of 30 days from the time payment was scheduled to be made pursuant to Section 2.4 of this Agreement, the Director shall 368

immediately be entitled to liquidated damages equal to 1 1/2 times the remaining Accrual Balance due to the Director under Section 2.4 of this Agreement. This provision shall not be applicable in the event that such nonpayment is the result of prohibition of such payment by law, regulation or order of a banking regulatory agency. IN WITNESS WHEREOF, the Director and a duly authorized Bank officer have executed this Amended Deferred Compensation and Income Continuation Agreement as of the date first written above.

immediately be entitled to liquidated damages equal to 1 1/2 times the remaining Accrual Balance due to the Director under Section 2.4 of this Agreement. This provision shall not be applicable in the event that such nonpayment is the result of prohibition of such payment by law, regulation or order of a banking regulatory agency. IN WITNESS WHEREOF, the Director and a duly authorized Bank officer have executed this Amended Deferred Compensation and Income Continuation Agreement as of the date first written above. DIRECTOR CITIZENS SOUTH BANK
/s/ Ben R. Rudisill, II /s/ Kim S. Price ---------------Title: President By:

369

BENEFICIARY DESIGNATION CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT I, _______________, designate the following as beneficiary of any death benefits under this Amended Director Retirement Agreement: Primary: Contingent: Note: To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement. I understand that I may change these beneficiary designations by filing a new written designation with the Bank. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature: Date: /s/ Ben R. Rudisill, II March 15, 2004

Received by Citizens South Bank this 15th day of March, 2004.
By: Title: /s/ Kim S. Price ---------------President

370

SCHEDULE A CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT Ben R. Rudisill, II Normal Retirement Age: 70

BENEFICIARY DESIGNATION CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT I, _______________, designate the following as beneficiary of any death benefits under this Amended Director Retirement Agreement: Primary: Contingent: Note: To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement. I understand that I may change these beneficiary designations by filing a new written designation with the Bank. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature: Date: /s/ Ben R. Rudisill, II March 15, 2004

Received by Citizens South Bank this 15th day of March, 2004.
By: Title: /s/ Kim S. Price ---------------President

370

SCHEDULE A CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT Ben R. Rudisill, II Normal Retirement Age: 70
EARLY TERMINATION ANNUAL BENEFIT ACCRUAL BALANCE PAYABLE AT NORMAL 8.50% (1) RETIREMENT AGE (2) -------------------------------$ 22,505 $ 2,641 $ 25,650 $ 3,010 $ 29,073 $ 3,411 $ 32,798 $ 3,848 $ 36,852 $ 4,324 $ 41,265 $ 4,482 $ 46,068 $ 5,406 $ 51,296 $ 6,019 $ 56,985 $ 6,687 $ 63,178 $ 7,413 $ 68,179(3) $ 8,000 CHANGE-IN-CONTROL BENEFIT PAYABLE IN A LUMP SUM ----------------$ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179

PLAN YEAR ENDING DECEMBER 31, ---------------2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 September 2013

AGE AT PLAN YEAR END ----------60 61 62 63 64 65 66 67 68 69 70

(1) Calculations are approximations based on prior year-end Accrual Balances. The Accrual Balance reflects payment at the beginning of each month during retirement, beginning October 1, 2013.

SCHEDULE A CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT Ben R. Rudisill, II Normal Retirement Age: 70
EARLY TERMINATION ANNUAL BENEFIT ACCRUAL BALANCE PAYABLE AT NORMAL 8.50% (1) RETIREMENT AGE (2) -------------------------------$ 22,505 $ 2,641 $ 25,650 $ 3,010 $ 29,073 $ 3,411 $ 32,798 $ 3,848 $ 36,852 $ 4,324 $ 41,265 $ 4,482 $ 46,068 $ 5,406 $ 51,296 $ 6,019 $ 56,985 $ 6,687 $ 63,178 $ 7,413 $ 68,179(3) $ 8,000 CHANGE-IN-CONTROL BENEFIT PAYABLE IN A LUMP SUM ----------------$ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179

PLAN YEAR ENDING DECEMBER 31, ---------------2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 September 2013

AGE AT PLAN YEAR END ----------60 61 62 63 64 65 66 67 68 69 70

(1) Calculations are approximations based on prior year-end Accrual Balances. The Accrual Balance reflects payment at the beginning of each month during retirement, beginning October 1, 2013. (2) Based on the present value of the current payment stream of the vested Accrual Balance at each year end using a standard discount rate (8.50%). The benefit amounts shown are for illustrative purposes only. Actual Early Termination benefits will be based on the Accrual Balance existing on the date of the Director's Termination of Service. (3) Projected retirement occurs on September 4, 2013, with the first normal monthly retirement benefit commencing October 1, 2013. 371

EXHIBIT 10.28 AMENDED DIRECTOR RETIREMENT AGREEMENT WITH JAMES J. FULLER THIS AMENDED DIRECTOR RETIREMENT AGREEMENT (this "Agreement") is made as of March 15, 2004, by and between Citizens South Bank, a federally chartered savings bank (the "Bank"), and James J. Fuller (the "Director"). WHEREAS, to encourage the Director to remain a member of the Bank's board of directors, the Bank is willing to provide retirement benefits to the Director. The Bank will pay the benefits from its general assets, WHEREAS, none of the conditions or events included in the definition of the term "golden parachute payment" that is set forth in section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is contemplated insofar as the Bank is concerned, WHEREAS, the Director entered into a Director Retirement Agreement with the Bank or its predecessor as of October 16, 2000, providing for specified retirement benefits for the Director, WHEREAS, the Director has agreed to miscellaneous changes in the terms and conditions of the October 16, 2000 Director Retirement Agreement, and

EXHIBIT 10.28 AMENDED DIRECTOR RETIREMENT AGREEMENT WITH JAMES J. FULLER THIS AMENDED DIRECTOR RETIREMENT AGREEMENT (this "Agreement") is made as of March 15, 2004, by and between Citizens South Bank, a federally chartered savings bank (the "Bank"), and James J. Fuller (the "Director"). WHEREAS, to encourage the Director to remain a member of the Bank's board of directors, the Bank is willing to provide retirement benefits to the Director. The Bank will pay the benefits from its general assets, WHEREAS, none of the conditions or events included in the definition of the term "golden parachute payment" that is set forth in section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is contemplated insofar as the Bank is concerned, WHEREAS, the Director entered into a Director Retirement Agreement with the Bank or its predecessor as of October 16, 2000, providing for specified retirement benefits for the Director, WHEREAS, the Director has agreed to miscellaneous changes in the terms and conditions of the October 16, 2000 Director Retirement Agreement, and WHEREAS, the Director and the Bank intend that the October 16, 2000 Director Retirement Agreement, as the same may have been amended, shall be of no further force or effect and shall be superseded in its entirety by this Agreement from and after the effective date of this Agreement. NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and acceptance of which are hereby acknowledged, the Director and the Bank hereby agree as follows. ARTICLE 1 DEFINITIONS Whenever used in this Agreement, the following words and phrases shall have the meanings specified: 1.1 "Accrual Balance" means the liability that should be accrued by the Bank under generally accepted accounting principles ("GAAP") for the Bank's obligation to the Director under this Agreement, by applying Accounting Principles Board Opinion No. 12, as amended by Statement of Financial Accounting Standards No. 106, and the calculation method and discount rate specified hereinafter. The Accrual Balance shall be calculated assuming a level principal amount and interest as the discount rate is accrued each period. The principal accrual is determined such that when it is credited with interest each month, the Accrual Balance at Normal Retirement Age equals the present value of the normal retirement benefits. The discount rate means the rate used by the Plan Administrator for determining the Accrual Balance. The rate is based on the yield on a 20-year corporate bond rated Aa by Moody's, rounded to the nearest 1/4%. The initial discount rate is 8.50%. However, the Plan Administrator, in its sole discretion, may adjust the discount rate to maintain the rate within reasonable standards according to GAAP. 372

1.2 "Beneficiary" means each designated person, or the estate of the Director, entitled to benefits, if any, upon the death of the Director, determined according to Article 4. 1.3 "Beneficiary Designation Form" means the form established from time to time by the Plan Administrator that the Director completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries. 1.4 "Change in Control" means any of the following events occur: (a) Merger: Citizens South Banking Corporation, a Delaware corporation of which the Bank is a wholly owned subsidiary, merges into or consolidates with another corporation, or merges another corporation into Citizens

1.2 "Beneficiary" means each designated person, or the estate of the Director, entitled to benefits, if any, upon the death of the Director, determined according to Article 4. 1.3 "Beneficiary Designation Form" means the form established from time to time by the Plan Administrator that the Director completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries. 1.4 "Change in Control" means any of the following events occur: (a) Merger: Citizens South Banking Corporation, a Delaware corporation of which the Bank is a wholly owned subsidiary, merges into or consolidates with another corporation, or merges another corporation into Citizens South Banking Corporation, and as a result less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of Citizens South Banking Corporation immediately before the merger or consolidation, (b) Acquisition of Significant Share Ownership: after the date of this Agreement a report on Schedule 13D, Schedule TO, or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of the combined voting power of Citizens South Banking Corporation's voting securities outstanding (but this clause (b) shall not apply to beneficial ownership of voting shares held by a subsidiary in a fiduciary capacity or beneficial ownership of voting shares held by an employee benefit plan of Citizens South Banking Corporation or any subsidiary(ies)). For purposes of this Agreement, "subsidiary" means an entity in which Citizens South Banking Corporation beneficially owns 50% or more of the outstanding voting securities, whether Citizens South Banking Corporation owns the shares directly or owns the shares indirectly through an intermediate subsidiary, (c) Change in Board Composition. during any period of two consecutive years, individuals who constitute Citizens South Banking Corporation's board of directors at the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however, that -- for purposes of this clause (c) -- each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period, or (d) Sale of Assets: Citizens South Banking Corporation sells to a third party all or substantially all of its assets. For this purpose, sale of all or substantially all of Citizens South Banking Corporation's assets includes sale of the shares or assets of the Bank alone. 373

1.5 "Disability" means, if the Director is covered by a Bank-sponsored disability policy, total disability as defined in such policy without regard to any waiting period. If the Director is not covered by such a policy, Disability means the Director suffers a sickness, accident or injury that, in the judgment of a physician satisfactory to the Bank, prevents the Director from performing substantially all of the Director's normal duties for the Bank. As a condition to receiving any Disability benefits, the Bank may require the Director to submit to such physical or mental evaluations and tests as the Bank's board of directors deems appropriate. 1.6 "Early Termination" means Termination of Service before the Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control. 1.7 "Early Termination Date" means the month, day, and year of Early Termination. 1.8 "Effective Date" means March 15, 2004. 1.9 "Normal Retirement Age" means the Director's 70th birthday. 1.10 "Normal Retirement Date" means the later of the Normal Retirement Age or Termination of Service. 1.11 "Plan Administrator" means the plan administrator described in Article 7.

1.5 "Disability" means, if the Director is covered by a Bank-sponsored disability policy, total disability as defined in such policy without regard to any waiting period. If the Director is not covered by such a policy, Disability means the Director suffers a sickness, accident or injury that, in the judgment of a physician satisfactory to the Bank, prevents the Director from performing substantially all of the Director's normal duties for the Bank. As a condition to receiving any Disability benefits, the Bank may require the Director to submit to such physical or mental evaluations and tests as the Bank's board of directors deems appropriate. 1.6 "Early Termination" means Termination of Service before the Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control. 1.7 "Early Termination Date" means the month, day, and year of Early Termination. 1.8 "Effective Date" means March 15, 2004. 1.9 "Normal Retirement Age" means the Director's 70th birthday. 1.10 "Normal Retirement Date" means the later of the Normal Retirement Age or Termination of Service. 1.11 "Plan Administrator" means the plan administrator described in Article 7. 1.12 "Plan Year" means each twelve-month period from the Effective Date of this Agreement. 1.13 "Termination for Cause" means the Director is not nominated by the board or nominating committee for reelection as a director after the expiration of his current term, or the Director is removed from the board of directors, in either case -(a) because of the Director's gross negligence or gross neglect of duties, or (b) because of the Director's commission of or plea of nolo contendere to a felony, or commission of or plea of nolo contendere to a misdemeanor involving moral turpitude, or (c) because of the Director's fraud, disloyalty, dishonesty, or willful violation of any applicable law or significant policy of the Bank committed in connection with the Director's service and resulting in an adverse effect on the Bank, or a breach of the Director's fiduciary duties for personal profit. For purposes of this Agreement, applicable laws include any statute, rule, regulatory order, statement of policy, or final cease-and-desist order of any governmental agency or body having regulatory authority over the Bank or Citizens South Banking Corporation, or, (d) because of the Director's intentional wrongful damage to the business or property of the Bank or its affiliates, including without limitation the reputation of the Bank or Citizens South Banking Corporation, which in the judgment of the Bank causes material harm to the Bank or affiliates, or 374

(e) because of the occurrence of any event that results in the Director being excluded from coverage, or having coverage limited for the Director as compared to other Directors of the Bank, under a blanket bond or other fidelity or insurance policy covering directors, officers, or employees, or (f) because the Director is removed from service or permanently prohibited from participating in the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act [12 U.S.C. 1818(e)(4) or (g)(1)]. 1.14 "Termination of Service" means the Director ceases to be a member of the Bank's board of directors for any reason whatsoever. For purposes of this Agreement, if there is a dispute over the service status of the Director or the date of the Director's Termination of Service, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred.

(e) because of the occurrence of any event that results in the Director being excluded from coverage, or having coverage limited for the Director as compared to other Directors of the Bank, under a blanket bond or other fidelity or insurance policy covering directors, officers, or employees, or (f) because the Director is removed from service or permanently prohibited from participating in the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act [12 U.S.C. 1818(e)(4) or (g)(1)]. 1.14 "Termination of Service" means the Director ceases to be a member of the Bank's board of directors for any reason whatsoever. For purposes of this Agreement, if there is a dispute over the service status of the Director or the date of the Director's Termination of Service, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred. ARTICLE 2 LIFETIME BENEFITS 2.1 Normal Retirement Benefit. For Termination of Service on or after Normal Retirement Age, the Bank shall pay to the Director the benefit described in this Section 2.1 instead of any other benefit under this Agreement. 2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is $8,000. 2.1.2 Payment of Benefit. The Bank shall pay the annual benefit to the Director in 12 equal monthly installments payable on the first day of each month, beginning with the month after the Director's Normal Retirement Date. The annual benefit shall be paid to the Director for 15 years. 2.2 Early Termination Benefit. After Early Termination, the Bank shall pay to the Director the benefit described in this Section 2.2 instead of any other benefit under this Agreement. The benefit shall consist of 180 equal monthly payments, payable on the first day of each month, beginning with the month after the Normal Retirement Age. The amount of the monthly payment shall be calculated based on the Accrual Balance existing on the date of the Director's Termination of Service. For illustrative purposes only, Schedule A attached to this Agreement shows the projected annual Early Termination benefit based on the Accrual Balance at each Plan Year end. 2.3 Disability Benefit. If the Director terminates service because of Disability before the Normal Retirement Age, the Bank shall pay to the Director the benefit described in Section 2.1 instead of any other benefit under this Agreement. The benefits shall be payable for 180 months on the first day of each month, beginning with the month after the Normal Retirement Age. 2.4 Change in Control Benefit. If the Director's service with the Bank terminates within one year after a Change in Control (except for Termination for Cause), the Bank shall pay to the Director the benefit described in this Section 2.4 instead of any other benefit under this Agreement. 2.4.1 Amount of Benefit. The benefit under this Section 2.4 is the Normal Retirement Age Accrual Balance required by Section 2.1, without reduction for the time value of money or other discount. 375

2.4.2 Payment of Benefit. The Bank shall pay this benefit to the Director in a single lump sum within 3 days after the Director's Termination of Service. 2.5 Contradiction in Terms of Agreement and Schedule A. If there is a contradiction in the terms of this Agreement and Schedule A attached hereto concerning the benefits due under Section 2.2, 2.3, or 2.4 hereof, then the actual amount of benefits prescribed by this Agreement shall control. ARTICLE 3 DEATH BENEFITS

2.4.2 Payment of Benefit. The Bank shall pay this benefit to the Director in a single lump sum within 3 days after the Director's Termination of Service. 2.5 Contradiction in Terms of Agreement and Schedule A. If there is a contradiction in the terms of this Agreement and Schedule A attached hereto concerning the benefits due under Section 2.2, 2.3, or 2.4 hereof, then the actual amount of benefits prescribed by this Agreement shall control. ARTICLE 3 DEATH BENEFITS 3.1 Death in Active Service. If the Director dies while in active service to the Bank, instead of any other benefit under this Agreement the Bank shall pay to the Director's Beneficiary the Normal Retirement Benefit set forth in Section 2.1 of this Agreement. The Bank shall pay the annual benefit to the Director's Beneficiary in 12 equal monthly installments payable on the first day of each month, beginning with the month after the Director's death. The annual benefit shall be paid to the Director's Beneficiary for 15 years. 3.2 Death After Termination of Service. If the Director dies after having terminated active service with the Bank but before receiving any or all of the benefits to which the Director is entitled under Article 2 of this Agreement, the Bank shall pay to the Director's Beneficiary the benefits set forth in Article 2 to which the Director was entitled at the time of death. The benefits shall be payable to the Director's Beneficiary at the same time and in the same amounts they would have been paid to the Director had the Director survived, except that benefit payments shall begin in the month immediately after the Director's death if payments to the Director had not already commenced by the date of the Director's death. ARTICLE 4 BENEFICIARIES 4.1 Beneficiary Designations. The Director shall have the right to designate at any time a Beneficiary to receive any benefits payable under this Agreement upon the death of the Director. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other benefit plan of the Bank in which the Director participates. 4.2 Beneficiary Designation: Change. The Director shall designate a Beneficiary by completing and signing the Beneficiary Designation Form and delivering it to the Plan Administrator or its designated agent. The Director's Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Director or if the Director names a spouse as Beneficiary and the marriage is subsequently dissolved. The Director shall have the right to change a Beneficiary by completing, signing, and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator's rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Director and accepted by the Plan Administrator before the Director's death. 4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted, and acknowledged in writing by the Plan Administrator or its designated agent. 376

4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director's spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be made to the personal representative of the Director's estate. 4.5 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative, or person having the care or custody of the minor, incapacitated person, or incapable person. The Bank may require proof of incapacity, minority, or guardianship as it may deem appropriate before distribution of

4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director's spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be made to the personal representative of the Director's estate. 4.5 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative, or person having the care or custody of the minor, incapacitated person, or incapable person. The Bank may require proof of incapacity, minority, or guardianship as it may deem appropriate before distribution of the benefit. Distribution shall completely discharge the Bank from all liability for the benefit. ARTICLE 5 GENERAL LIMITATIONS Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any benefit under this Agreement, and this Agreement shall terminate, if the Director's Termination of Service is the result of Termination for Cause. The board of directors or a duly authorized committee of the board shall have the sole and absolute right to determine whether the bases for denial of benefits for cause exist. Benefits may be denied for cause regardless of whether the Director continued to serve as a director after the board or committee made its determination not to nominate the Director for reelection. ARTICLE 6 CLAIMS AND REVIEW PROCEDURES 6.1 Claims Procedure. The Bank shall notify any person or entity that makes a claim for benefits under this Agreement (the "Claimant") in writing, within 90 days of Claimant's written application for benefits, of his or her eligibility or noneligibility for benefits under the Agreement. If the Bank determines that the Claimant is not eligible for benefits or full benefits, the notice shall set forth (1) the specific reasons for such denial, (2) a specific reference to the provisions of the Agreement on which the denial is based, (3) a description of any additional information or material necessary for the Claimant to perfect his or her claim, and a description of why it is needed, and (4) an explanation of the Agreement's claims review procedure and other appropriate information as to the steps to be taken if the Claimant wishes to have the claim reviewed. If the Bank determines that there are special circumstances requiring additional time to make a decision, the Bank shall notify the Claimant of the special circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional 90 days. 6.2 Review Procedure. If the Claimant is determined by the Bank not to be eligible for benefits, or if the Claimant believes that he or she is entitled to greater or different benefits, the Claimant shall have the opportunity to have such claim reviewed by the Bank by filing a petition for review with the Bank within 60 days after receipt of the notice issued by the Bank. Said petition shall state the specific reasons, which the Claimant believes entitle him or her to benefits or to greater or different benefits. Within 60 days after receipt by the Bank of the petition, the Bank shall afford the Claimant (and counsel, if any) an opportunity to present his or her position to the Bank verbally or in writing, and the Claimant (or counsel) shall have the right to review the pertinent documents. The Bank shall notify the Claimant of its decision in writing within the 60-day period, stating specifically the basis of its decision, written in a manner to be understood by the Claimant and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the 60-day period is not sufficient, the decision may be deferred for up to another 60 days at the election of the Bank, but notice of this deferral shall be given to the Claimant. 377

ARTICLE 7 ADMINISTRATION OF AGREEMENT 7.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator consisting of the Bank's board of directors or such committee or person(s) as the board shall appoint. The Director may be a member of the Plan Administrator. The Plan Administrator shall also have the discretion and authority to (a)

ARTICLE 7 ADMINISTRATION OF AGREEMENT 7.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator consisting of the Bank's board of directors or such committee or person(s) as the board shall appoint. The Director may be a member of the Plan Administrator. The Plan Administrator shall also have the discretion and authority to (a) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Agreement and (b) decide or resolve any and all questions, including interpretations of this Agreement, as may arise in connection with the Agreement. 7.2 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative), and may from time to time consult with counsel, who may be counsel to the Bank. 7.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation, and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement. No Director or Beneficiary shall be deemed to have any right, vested or nonvested, regarding the continued use of any previously adopted assumptions, including but not limited to the discount rate and calculation method employed in the determination of the Accrual Balance. 7.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses, or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members. 7.5 Bank Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Termination of Service of the Director, and such other pertinent information as the Plan Administrator may reasonably require. ARTICLE 8 MISCELLANEOUS 8.1 Amendment and Termination. This Agreement may be amended solely by a written agreement signed by the Bank and by the Director. Except as provided in Article 5, this Agreement may be terminated solely by a written agreement signed by the Bank and by the Director. 8.2 Binding Effect. This Agreement shall bind the Director and the Bank, and their beneficiaries, survivors, executors, successors, administrators, and transferees. 378

8.3 No Guarantee of Service. This Agreement is not a contract for services. It does not give the Director the right to remain a Director of the Bank, nor does the Agreement interfere with the rights of the Bank's shareholders not to re-elect the Director or the right of shareholders or the Board to remove an individual as a director of the Bank. The Agreement also does not require the Director to remain a director nor interfere with the Director's right to terminate services at any time. 8.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached, or encumbered in any manner. 8.5 Successors; Binding Agreement. The Bank shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Bank, by an assumption agreement in form and substance satisfactory to the Director, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform this Agreement if no such succession had occurred. Failure of the Bank to obtain such assumption agreement

8.3 No Guarantee of Service. This Agreement is not a contract for services. It does not give the Director the right to remain a Director of the Bank, nor does the Agreement interfere with the rights of the Bank's shareholders not to re-elect the Director or the right of shareholders or the Board to remove an individual as a director of the Bank. The Agreement also does not require the Director to remain a director nor interfere with the Director's right to terminate services at any time. 8.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached, or encumbered in any manner. 8.5 Successors; Binding Agreement. The Bank shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Bank, by an assumption agreement in form and substance satisfactory to the Director, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform this Agreement if no such succession had occurred. Failure of the Bank to obtain such assumption agreement before effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Director to the Change in Control benefit provided in Section 2.4. 8.6 Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement. 8.7 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of North Carolina, except to the extent preempted by the laws of the United States of America. 8.8 Unfunded Arrangement. The Director and beneficiary are general unsecured creditors of the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise by the Bank to pay benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Director's life is a general asset of the Bank to which the Director and beneficiary have no preferred or secured claim. 8.9 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Director concerning the subject matter hereof. No rights are granted to the Director under this Agreement other than those specifically set forth herein. The October 16, 2000 Director Retirement Agreement, as the same may have been amended, shall be of no further force or effect and shall be superseded in its entirety by this Agreement from and after the effective date of this Agreement. 8.10 Severability. If for any reason any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not held invalid, and each such other provision shall continue in full force and effect to the full extent consistent with law. If any provision of this Agreement is held invalid in part, such invalidity shall not affect the remainder of such provision, and the remainder of such provision, together with all other provisions of this Agreement, shall continue in full force and effect to the full extent consistent with law. 8.11 Headings. The headings of Sections herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. 379

8.12 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. If to the Bank, notice shall be given to the board of directors, Citizens South Bank, 519 South New Hope Road, Gastonia, North Carolina 28054-4040, or to such other or additional person or persons as the Bank shall have designated to the Director in writing. If to the Director, notice shall be given to the Director at the address of the Director appearing on the Bank's records, or to such other or additional person or persons as the Director shall have designated to the Bank in writing. 8.13 Payment of Legal Fees. The Bank is aware that after a Change in Control management of the Bank could cause or attempt to cause the Bank to refuse to comply with its obligations under this Agreement, or could

8.12 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. If to the Bank, notice shall be given to the board of directors, Citizens South Bank, 519 South New Hope Road, Gastonia, North Carolina 28054-4040, or to such other or additional person or persons as the Bank shall have designated to the Director in writing. If to the Director, notice shall be given to the Director at the address of the Director appearing on the Bank's records, or to such other or additional person or persons as the Director shall have designated to the Bank in writing. 8.13 Payment of Legal Fees. The Bank is aware that after a Change in Control management of the Bank could cause or attempt to cause the Bank to refuse to comply with its obligations under this Agreement, or could institute or cause or attempt to cause the Bank to institute litigation seeking to have this Agreement declared unenforceable, or could take or attempt to take other action to deny Director the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement would be frustrated. It is the intention of the Bank that the Director not be required to incur the expenses associated with the enforcement of his rights under this Agreement, whether by litigation or other legal action, because the cost and expense thereof would substantially detract from the benefits intended to be granted to the Director hereunder. It is the intention of the Bank that the Director not be forced to negotiate settlement of his rights under this Agreement under threat of incurring expenses. Accordingly, if after a Change in Control occurs it appears to the Director that (a) the Bank has failed to comply with any of its obligations under this Agreement, or (b) the Bank or any other person has taken any action to declare this Agreement void or unenforceable, or instituted any litigation or other legal action designed to deny, diminish, or to recover from the Director the benefits intended to be provided to the Director hereunder, the Bank irrevocably authorizes the Director from time to time to retain counsel of his choice, at the expense of the Bank as provided in this Section 8.13, to represent the Director in connection with the initiation or defense of any litigation or other legal action, whether by or against the Bank or any director, officer, stockholder, or other person affiliated with the Bank, in any jurisdiction. Notwithstanding any existing or previous attorneyclient relationship between the Bank and any counsel chosen by the Director under this Section 8.13, the Bank irrevocably consents to the Director entering into an attorney-client relationship with that counsel, and the Bank and the Director agree that a confidential relationship shall exist between the Director and that counsel. The fees and expenses of counsel selected from time to time by the Director as provided in this section shall be paid or reimbursed to the Director by the Bank on a regular, periodic basis upon presentation by the Director of a statement or statements prepared by such counsel in accordance with such counsel's customary practices, up to a maximum aggregate amount of $25,000. The Bank's obligation to pay the Director's legal fees provided by this Section 8.13 operates separately from and in addition to any legal fee reimbursement obligation the Bank may have with the Director under any separate employment, severance, or other agreement between the Director and the Bank. 8.14 Liquidated Damages. The parties hereto, before entering into this Agreement, have been concerned with the fact that substantial damages will be suffered by the Director in the event that the Bank shall fail to perform according to Section 2.4 of this Agreement following a Change in Control. Following a Change in Control, in the event of nonperformance by the Bank for a period of 30 days from the time payment was scheduled to be made pursuant to Section 2.4 of this Agreement, the Director shall immediately be entitled to liquidated damages equal to 1 1/2 times the remaining Accrual Balance due to the Director under Section 2.4 of this Agreement. This provision shall not be applicable in the event that such nonpayment is the result of prohibition of such payment by law, regulation or order of a banking regulatory agency. 380

IN WITNESS WHEREOF, the Director and a duly authorized Bank officer have executed this Amended Deferred Compensation and Income Continuation Agreement as of the date first written above. DIRECTOR CITIZENS SOUTH BANK
/s/ James J. Fuller ------------------James J. Fuller By: /s/ Kim S. Price ----------------------------Title: President and Chief Executive Officer

IN WITNESS WHEREOF, the Director and a duly authorized Bank officer have executed this Amended Deferred Compensation and Income Continuation Agreement as of the date first written above. DIRECTOR CITIZENS SOUTH BANK
/s/ James J. Fuller ------------------James J. Fuller By: /s/ Kim S. Price ----------------------------Title: President and Chief Executive Officer

381

BENEFICIARY DESIGNATION CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT I, James J. Fuller, designate the following as beneficiary of any death benefits under this Amended Director Retirement Agreement: Primary: Contingent: Note: To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement. I understand that I may change these beneficiary designations by filing a new written designation with the Bank. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature: /s/ James J. Fuller ------------------James J. Fuller May 17, 2004

Date:

Received by Citizens South Bank this 17th day of May, 2004.
By: Title: /s/ Paul L. Teem, Jr. -------------------------------------Executive Vice President and Secretary

382

SCHEDULE A CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT James J. Fuller Normal Retirement Age: 70
EARLY TERMINATION ANNUAL BENEFIT PAYABLE AT NORMAL RETIREMENT AGE (2) CHANGE-IN-CONTROL BENEFIT PAYABLE IN A LUMP SUM

PLAN YEAR ENDING DECEMBER 31,

AGE AT PLAN YEAR END

ACCRUAL BALANCE @ 8.50% (1)

BENEFICIARY DESIGNATION CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT I, James J. Fuller, designate the following as beneficiary of any death benefits under this Amended Director Retirement Agreement: Primary: Contingent: Note: To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement. I understand that I may change these beneficiary designations by filing a new written designation with the Bank. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature: /s/ James J. Fuller ------------------James J. Fuller May 17, 2004

Date:

Received by Citizens South Bank this 17th day of May, 2004.
By: Title: /s/ Paul L. Teem, Jr. -------------------------------------Executive Vice President and Secretary

382

SCHEDULE A CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT James J. Fuller Normal Retirement Age: 70
EARLY TERMINATION ANNUAL BENEFIT ACCRUAL BALANCE @ PAYABLE AT NORMAL 8.50% (1) RETIREMENT AGE (2) ---------------------------------$ 31,048 $ 3,643 $ 33,792 $ 3,965 $ 36,779 $ 4,316 $ 40,030 $ 4,697 $ 43,569 $ 5,112 $ 47,420 $ 5,564 $ 51,611 $ 6,056 $ 56,173 $ 6,591 $ 61,138 $ 7,174 $ 66,542 $ 7,808 $ 68,179(3) $ 8,000 CHANGE-IN-CONTROL BENEFIT PAYABLE IN A LUMP SUM -----------------$ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179

PLAN YEAR ENDING DECEMBER 31, -----------2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 April 2013

AGE AT PLAN YEAR END -----------60 61 62 63 64 65 66 67 68 69 70

(1) Calculations are approximations based on prior year-end Accrual Balances. The Accrual Balance reflects payment at the beginning of each month during retirement, beginning May 1, 2013.

SCHEDULE A CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT James J. Fuller Normal Retirement Age: 70
EARLY TERMINATION ANNUAL BENEFIT ACCRUAL BALANCE @ PAYABLE AT NORMAL 8.50% (1) RETIREMENT AGE (2) ---------------------------------$ 31,048 $ 3,643 $ 33,792 $ 3,965 $ 36,779 $ 4,316 $ 40,030 $ 4,697 $ 43,569 $ 5,112 $ 47,420 $ 5,564 $ 51,611 $ 6,056 $ 56,173 $ 6,591 $ 61,138 $ 7,174 $ 66,542 $ 7,808 $ 68,179(3) $ 8,000 CHANGE-IN-CONTROL BENEFIT PAYABLE IN A LUMP SUM -----------------$ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179

PLAN YEAR ENDING DECEMBER 31, -----------2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 April 2013

AGE AT PLAN YEAR END -----------60 61 62 63 64 65 66 67 68 69 70

(1) Calculations are approximations based on prior year-end Accrual Balances. The Accrual Balance reflects payment at the beginning of each month during retirement, beginning May 1, 2013. (2) Based on the present value of the current payment stream of the vested Accrual Balance at each year end using a standard discount rate (8.50%). The benefit amounts shown are for illustrative purposes only. Actual Early Termination benefits will be based on the Accrual Balance existing on the date of the Director's Termination of Service. (3) Projected retirement occurs on April 13, 2013, with the first normal monthly retirement benefit commencing May 1, 2013. 383

EXHIBIT 10.29 THIS AMENDED DIRECTOR RETIREMENT AGREEMENT (this "Agreement") is made as of March 15, 2004, by and between Citizens South Bank, a federally chartered savings bank (the "Bank"), and Charles D. Massey (the "Director"). WHEREAS, to encourage the Director to remain a member of the Bank's board of directors, the Bank is willing to provide retirement benefits to the Director. The Bank will pay the benefits from its general assets, WHEREAS, none of the conditions or events included in the definition of the term "golden parachute payment" that is set forth in section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is contemplated insofar as the Bank is concerned, WHEREAS, the Director entered into a Director Retirement Agreement with the Bank or its predecessor as of October 16, 2000, providing for specified retirement benefits for the Director, WHEREAS, the Director has agreed to miscellaneous changes in the terms and conditions of the October 16, 2000 Director Retirement Agreement, and WHEREAS, the Director and the Bank intend that the October 16, 2000 Director Retirement Agreement, as the same may have been amended, shall be of no further force or effect and shall be superseded in its entirety by this

EXHIBIT 10.29 THIS AMENDED DIRECTOR RETIREMENT AGREEMENT (this "Agreement") is made as of March 15, 2004, by and between Citizens South Bank, a federally chartered savings bank (the "Bank"), and Charles D. Massey (the "Director"). WHEREAS, to encourage the Director to remain a member of the Bank's board of directors, the Bank is willing to provide retirement benefits to the Director. The Bank will pay the benefits from its general assets, WHEREAS, none of the conditions or events included in the definition of the term "golden parachute payment" that is set forth in section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is contemplated insofar as the Bank is concerned, WHEREAS, the Director entered into a Director Retirement Agreement with the Bank or its predecessor as of October 16, 2000, providing for specified retirement benefits for the Director, WHEREAS, the Director has agreed to miscellaneous changes in the terms and conditions of the October 16, 2000 Director Retirement Agreement, and WHEREAS, the Director and the Bank intend that the October 16, 2000 Director Retirement Agreement, as the same may have been amended, shall be of no further force or effect and shall be superseded in its entirety by this Agreement from and after the effective date of this Agreement. NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and acceptance of which are hereby acknowledged, the Director and the Bank hereby agree as follows. ARTICLE 1 DEFINITIONS Whenever used in this Agreement, the following words and phrases shall have the meanings specified: 1.1 "Accrual Balance" means the liability that should be accrued by the Bank under generally accepted accounting principles ("GAAP") for the Bank's obligation to the Director under this Agreement, by applying Accounting Principles Board Opinion No. 12, as amended by Statement of Financial Accounting Standards No. 106, and the calculation method and discount rate specified hereinafter. The Accrual Balance shall be calculated assuming a level principal amount and interest as the discount rate is accrued each period. The principal accrual is determined such that when it is credited with interest each month, the Accrual Balance at Normal Retirement Age equals the present value of the normal retirement benefits. The discount rate means the rate used by the Plan Administrator for determining the Accrual Balance. The rate is based on the yield on a 20-year corporate bond rated Aa by Moody's, rounded to the nearest 1/4%. The initial discount rate is 8.50%. However, the Plan Administrator, in its sole discretion, may adjust the discount rate to maintain the rate within reasonable standards according to GAAP. 384

1.2 "Beneficiary" means each designated person, or the estate of the Director, entitled to benefits, if any, upon the death of the Director, determined according to Article 4. 1.3 "Beneficiary Designation Form" means the form established from time to time by the Plan Administrator that the Director completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries. 1.4 "Change in Control" means any of the following events occur: (a) Merger: Citizens South Banking Corporation, a Delaware corporation of which the Bank is a wholly owned subsidiary, merges into or consolidates with another corporation, or merges another corporation into Citizens South Banking Corporation, and as a result less than a majority of the combined voting power of the resulting

1.2 "Beneficiary" means each designated person, or the estate of the Director, entitled to benefits, if any, upon the death of the Director, determined according to Article 4. 1.3 "Beneficiary Designation Form" means the form established from time to time by the Plan Administrator that the Director completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries. 1.4 "Change in Control" means any of the following events occur: (a) Merger: Citizens South Banking Corporation, a Delaware corporation of which the Bank is a wholly owned subsidiary, merges into or consolidates with another corporation, or merges another corporation into Citizens South Banking Corporation, and as a result less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of Citizens South Banking Corporation immediately before the merger or consolidation, (b) Acquisition of Significant Share Ownership: after the date of this Agreement a report on Schedule 13D, Schedule TO, or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of the combined voting power of Citizens South Banking Corporation's voting securities outstanding (but this clause (b) shall not apply to beneficial ownership of voting shares held by a subsidiary in a fiduciary capacity or beneficial ownership of voting shares held by an employee benefit plan of Citizens South Banking Corporation or any subsidiary(ies)). For purposes of this Agreement, "subsidiary" means an entity in which Citizens South Banking Corporation beneficially owns 50% or more of the outstanding voting securities, whether Citizens South Banking Corporation owns the shares directly or owns the shares indirectly through an intermediate subsidiary, (c) Change in Board Composition. during any period of two consecutive years, individuals who constitute Citizens South Banking Corporation's board of directors at the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however, that -- for purposes of this clause (c) -- each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period, or (d) Sale of Assets: Citizens South Banking Corporation sells to a third party all or substantially all of its assets. For this purpose, sale of all or substantially all of Citizens South Banking Corporation's assets includes sale of the shares or assets of the Bank alone. 1.5 "Disability" means, if the Director is covered by a Bank-sponsored disability policy, total disability as defined in such policy without regard to any waiting period. If the Director is not covered by such a policy, Disability means the Director suffers a sickness, accident or injury that, in the judgment of a physician satisfactory to the Bank, prevents the Director from performing substantially all of the Director's normal duties for the Bank. As a condition to receiving any Disability benefits, the Bank may require the Director to submit to such physical or mental evaluations and tests as the Bank's board of directors deems appropriate. 385

1.6 "Early Termination" means Termination of Service before the Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control. 1.7 "Early Termination Date" means the month, day, and year of Early Termination. 1.8 "Effective Date" means March 15, 2004. 1.9 "Normal Retirement Age" means the Director's 70th birthday. 1.10 "Normal Retirement Date" means the later of the Normal Retirement Age or Termination of Service. 1.11 "Plan Administrator" means the plan administrator described in Article 7.

1.6 "Early Termination" means Termination of Service before the Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control. 1.7 "Early Termination Date" means the month, day, and year of Early Termination. 1.8 "Effective Date" means March 15, 2004. 1.9 "Normal Retirement Age" means the Director's 70th birthday. 1.10 "Normal Retirement Date" means the later of the Normal Retirement Age or Termination of Service. 1.11 "Plan Administrator" means the plan administrator described in Article 7. 1.12 "Plan Year" means each twelve-month period from the Effective Date of this Agreement. 1.13 "Termination for Cause" means the Director is not nominated by the board or nominating committee for reelection as a director after the expiration of his current term, or the Director is removed from the board of directors, in either case -(a) because of the Director's gross negligence or gross neglect of duties, or (b) because of the Director's commission of or plea of nolo contendere to a felony, or commission of or plea of nolo contendere to a misdemeanor involving moral turpitude, or (c) because of the Director's fraud, disloyalty, dishonesty, or willful violation of any applicable law or significant policy of the Bank committed in connection with the Director's service and resulting in an adverse effect on the Bank, or a breach of the Director's fiduciary duties for personal profit. For purposes of this Agreement, applicable laws include any statute, rule, regulatory order, statement of policy, or final cease-and-desist order of any governmental agency or body having regulatory authority over the Bank or Citizens South Banking Corporation, or, (d) because of the Director's intentional wrongful damage to the business or property of the Bank or its affiliates, including without limitation the reputation of the Bank or Citizens South Banking Corporation, which in the judgment of the Bank causes material harm to the Bank or affiliates, or (e) because of the occurrence of any event that results in the Director being excluded from coverage, or having coverage limited for the Director as compared to other Directors of the Bank, under a blanket bond or other fidelity or insurance policy covering directors, officers, or employees, or 386

(f) because the Director is removed from service or permanently prohibited from participating in the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act [12 U.S.C. 1818(e)(4) or (g)(1)]. 1.14 "Termination of Service" means the Director ceases to be a member of the Bank's board of directors for any reason whatsoever. For purposes of this Agreement, if there is a dispute over the service status of the Director or the date of the Director's Termination of Service, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred. ARTICLE 2 LIFETIME BENEFITS 2.1 Normal Retirement Benefit. For Termination of Service on or after Normal Retirement Age, the Bank shall pay to the Director the benefit described in this Section 2.1 instead of any other benefit under this Agreement. 2.1.1 Amount of Benefit. The annual benefit under this

(f) because the Director is removed from service or permanently prohibited from participating in the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act [12 U.S.C. 1818(e)(4) or (g)(1)]. 1.14 "Termination of Service" means the Director ceases to be a member of the Bank's board of directors for any reason whatsoever. For purposes of this Agreement, if there is a dispute over the service status of the Director or the date of the Director's Termination of Service, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred. ARTICLE 2 LIFETIME BENEFITS 2.1 Normal Retirement Benefit. For Termination of Service on or after Normal Retirement Age, the Bank shall pay to the Director the benefit described in this Section 2.1 instead of any other benefit under this Agreement. 2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is $8,000. 2.1.2 Payment of Benefit. The Bank shall pay the annual benefit to the Director in 12 equal monthly installments payable on the first day of each month, beginning with the month after the Director's Normal Retirement Date. The annual benefit shall be paid to the Director for 15 years. 2.2 Early Termination Benefit. After Early Termination, the Bank shall pay to the Director the benefit described in this Section 2.2 instead of any other benefit under this Agreement. The benefit shall consist of 180 equal monthly payments, payable on the first day of each month, beginning with the month after the Normal Retirement Age. The amount of the monthly payment shall be calculated based on the Accrual Balance existing on the date of the Director's Termination of Service. For illustrative purposes only, Schedule A attached to this Agreement shows the projected annual Early Termination benefit based on the Accrual Balance at each Plan Year end. 2.3 Disability Benefit. If the Director terminates service because of Disability before the Normal Retirement Age, the Bank shall pay to the Director the benefit described in Section 2.1 instead of any other benefit under this Agreement. The benefits shall be payable for 180 months on the first day of each month, beginning with the month after the Normal Retirement Age. 2.4 Change in Control Benefit. If the Director's service with the Bank terminates within one year after a Change in Control (except for Termination for Cause), the Bank shall pay to the Director the benefit described in this Section 2.4 instead of any other benefit under this Agreement. 2.4.1 Amount of Benefit. The benefit under this Section 2.4 is the Normal Retirement Age Accrual Balance required by Section 2.1, without reduction for the time value of money or other discount. 2.4.2 Payment of Benefit. The Bank shall pay this benefit to the Director in a single lump sum within 3 days after the Director's Termination of Service. 387

2.5 Contradiction in Terms of Agreement and Schedule A. If there is a contradiction in the terms of this Agreement and Schedule A attached hereto concerning the benefits due under Section 2.2, 2.3, or 2.4 hereof, then the actual amount of benefits prescribed by this Agreement shall control. ARTICLE 3 DEATH BENEFITS 3.1 Death in Active Service. If the Director dies while in active service to the Bank, instead of any other benefit under this Agreement the Bank shall pay to the Director's Beneficiary the Normal Retirement Benefit set forth in Section 2.1 of this Agreement. The Bank shall pay the annual benefit to the Director's Beneficiary in 12 equal monthly installments payable on the first day of each month, beginning with the month after the Director's death.

2.5 Contradiction in Terms of Agreement and Schedule A. If there is a contradiction in the terms of this Agreement and Schedule A attached hereto concerning the benefits due under Section 2.2, 2.3, or 2.4 hereof, then the actual amount of benefits prescribed by this Agreement shall control. ARTICLE 3 DEATH BENEFITS 3.1 Death in Active Service. If the Director dies while in active service to the Bank, instead of any other benefit under this Agreement the Bank shall pay to the Director's Beneficiary the Normal Retirement Benefit set forth in Section 2.1 of this Agreement. The Bank shall pay the annual benefit to the Director's Beneficiary in 12 equal monthly installments payable on the first day of each month, beginning with the month after the Director's death. The annual benefit shall be paid to the Director's Beneficiary for 15 years. 3.2 Death After Termination of Service. If the Director dies after having terminated active service with the Bank but before receiving any or all of the benefits to which the Director is entitled under Article 2 of this Agreement, the Bank shall pay to the Director's Beneficiary the benefits set forth in Article 2 to which the Director was entitled at the time of death. The benefits shall be payable to the Director's Beneficiary at the same time and in the same amounts they would have been paid to the Director had the Director survived, except that benefit payments shall begin in the month immediately after the Director's death if payments to the Director had not already commenced by the date of the Director's death. ARTICLE 4 BENEFICIARIES 4.1 Beneficiary Designations. The Director shall have the right to designate at any time a Beneficiary to receive any benefits payable under this Agreement upon the death of the Director. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other benefit plan of the Bank in which the Director participates. 4.2 Beneficiary Designation: Change. The Director shall designate a Beneficiary by completing and signing the Beneficiary Designation Form and delivering it to the Plan Administrator or its designated agent. The Director's Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Director or if the Director names a spouse as Beneficiary and the marriage is subsequently dissolved. The Director shall have the right to change a Beneficiary by completing, signing, and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator's rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Director and accepted by the Plan Administrator before the Director's death. 4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted, and acknowledged in writing by the Plan Administrator or its designated agent. 388

4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director's spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be made to the personal representative of the Director's estate. 4.5 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative, or person having the care or custody of the minor, incapacitated person, or incapable person. The Bank may require proof of incapacity, minority, or guardianship as it may deem appropriate before distribution of the benefit. Distribution shall completely discharge the Bank from all liability for the benefit. ARTICLE 5

4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director's spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be made to the personal representative of the Director's estate. 4.5 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative, or person having the care or custody of the minor, incapacitated person, or incapable person. The Bank may require proof of incapacity, minority, or guardianship as it may deem appropriate before distribution of the benefit. Distribution shall completely discharge the Bank from all liability for the benefit. ARTICLE 5 GENERAL LIMITATIONS Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any benefit under this Agreement, and this Agreement shall terminate, if the Director's Termination of Service is the result of Termination for Cause. The board of directors or a duly authorized committee of the board shall have the sole and absolute right to determine whether the bases for denial of benefits for cause exist. Benefits may be denied for cause regardless of whether the Director continued to serve as a director after the board or committee made its determination not to nominate the Director for reelection. ARTICLE 6 CLAIMS AND REVIEW PROCEDURES 6.1 Claims Procedure. The Bank shall notify any person or entity that makes a claim for benefits under this Agreement (the "Claimant") in writing, within 90 days of Claimant's written application for benefits, of his or her eligibility or noneligibility for benefits under the Agreement. If the Bank determines that the Claimant is not eligible for benefits or full benefits, the notice shall set forth (1) the specific reasons for such denial, (2) a specific reference to the provisions of the Agreement on which the denial is based, (3) a description of any additional information or material necessary for the Claimant to perfect his or her claim, and a description of why it is needed, and (4) an explanation of the Agreement's claims review procedure and other appropriate information as to the steps to be taken if the Claimant wishes to have the claim reviewed. If the Bank determines that there are special circumstances requiring additional time to make a decision, the Bank shall notify the Claimant of the special circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional 90 days. 6.2 Review Procedure. If the Claimant is determined by the Bank not to be eligible for benefits, or if the Claimant believes that he or she is entitled to greater or different benefits, the Claimant shall have the opportunity to have such claim reviewed by the Bank by filing a petition for review with the Bank within 60 days after receipt of the notice issued by the Bank. Said petition shall state the specific reasons, which the Claimant believes entitle him or her to benefits or to greater or different benefits. Within 60 days after receipt by the Bank of the petition, the Bank shall afford the Claimant (and counsel, if any) an opportunity to present his or her position to the Bank verbally or in writing, and the Claimant (or counsel) shall have the right to review the pertinent documents. The Bank shall notify the Claimant of its decision in writing within the 60-day period, stating specifically the basis of its decision, written in a manner to be understood by the Claimant and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the 60-day period is not sufficient, the decision may be deferred for up to another 60 days at the election of the Bank, but notice of this deferral shall be given to the Claimant. 389

ARTICLE 7 ADMINISTRATION OF AGREEMENT 7.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator consisting of the Bank's board of directors or such committee or person(s) as the board shall appoint. The Director may be a member of the Plan Administrator. The Plan Administrator shall also have the discretion and authority to (a)

ARTICLE 7 ADMINISTRATION OF AGREEMENT 7.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator consisting of the Bank's board of directors or such committee or person(s) as the board shall appoint. The Director may be a member of the Plan Administrator. The Plan Administrator shall also have the discretion and authority to (a) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Agreement and (b) decide or resolve any and all questions, including interpretations of this Agreement, as may arise in connection with the Agreement. 7.2 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative), and may from time to time consult with counsel, who may be counsel to the Bank. 7.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation, and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement. No Director or Beneficiary shall be deemed to have any right, vested or nonvested, regarding the continued use of any previously adopted assumptions, including but not limited to the discount rate and calculation method employed in the determination of the Accrual Balance. 7.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses, or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members. 7.5 Bank Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Termination of Service of the Director, and such other pertinent information as the Plan Administrator may reasonably require. ARTICLE 8 MISCELLANEOUS 8.1 Amendment and Termination. This Agreement may be amended solely by a written agreement signed by the Bank and by the Director. Except as provided in Article 5, this Agreement may be terminated solely by a written agreement signed by the Bank and by the Director. 8.2 Binding Effect. This Agreement shall bind the Director and the Bank, and their beneficiaries, survivors, executors, successors, administrators, and transferees. 390

8.3 No Guarantee of Service. This Agreement is not a contract for services. It does not give the Director the right to remain a Director of the Bank, nor does the Agreement interfere with the rights of the Bank's shareholders not to re-elect the Director or the right of shareholders or the Board to remove an individual as a director of the Bank. The Agreement also does not require the Director to remain a director nor interfere with the Director's right to terminate services at any time. 8.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached, or encumbered in any manner. 8.5 Successors; Binding Agreement. The Bank shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Bank, by an assumption agreement in form and substance satisfactory to the Director, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform this Agreement if no such succession had occurred. Failure of the Bank to obtain such assumption agreement

8.3 No Guarantee of Service. This Agreement is not a contract for services. It does not give the Director the right to remain a Director of the Bank, nor does the Agreement interfere with the rights of the Bank's shareholders not to re-elect the Director or the right of shareholders or the Board to remove an individual as a director of the Bank. The Agreement also does not require the Director to remain a director nor interfere with the Director's right to terminate services at any time. 8.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached, or encumbered in any manner. 8.5 Successors; Binding Agreement. The Bank shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Bank, by an assumption agreement in form and substance satisfactory to the Director, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform this Agreement if no such succession had occurred. Failure of the Bank to obtain such assumption agreement before effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Director to the Change in Control benefit provided in Section 2.4. 8.6 Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement. 8.7 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of North Carolina, except to the extent preempted by the laws of the United States of America. 8.8 Unfunded Arrangement. The Director and beneficiary are general unsecured creditors of the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise by the Bank to pay benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Director's life is a general asset of the Bank to which the Director and beneficiary have no preferred or secured claim. 8.9 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Director concerning the subject matter hereof. No rights are granted to the Director under this Agreement other than those specifically set forth herein. The October 16, 2000 Director Retirement Agreement, as the same may have been amended, shall be of no further force or effect and shall be superseded in its entirety by this Agreement from and after the effective date of this Agreement. 8.10 Severability. If for any reason any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not held invalid, and each such other provision shall continue in full force and effect to the full extent consistent with law. If any provision of this Agreement is held invalid in part, such invalidity shall not affect the remainder of such provision, and the remainder of such provision, together with all other provisions of this Agreement, shall continue in full force and effect to the full extent consistent with law. 8.11 Headings. The headings of Sections herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. 391

8.12 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. If to the Bank, notice shall be given to the board of directors, Citizens South Bank, 519 South New Hope Road, Gastonia, North Carolina 28054-4040, or to such other or additional person or persons as the Bank shall have designated to the Director in writing. If to the Director, notice shall be given to the Director at the address of the Director appearing on the Bank's records, or to such other or additional person or persons as the Director shall have designated to the Bank in writing. 8.13 Payment of Legal Fees. The Bank is aware that after a Change in Control management of the Bank could cause or attempt to cause the Bank to refuse to comply with its obligations under this Agreement, or could

8.12 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. If to the Bank, notice shall be given to the board of directors, Citizens South Bank, 519 South New Hope Road, Gastonia, North Carolina 28054-4040, or to such other or additional person or persons as the Bank shall have designated to the Director in writing. If to the Director, notice shall be given to the Director at the address of the Director appearing on the Bank's records, or to such other or additional person or persons as the Director shall have designated to the Bank in writing. 8.13 Payment of Legal Fees. The Bank is aware that after a Change in Control management of the Bank could cause or attempt to cause the Bank to refuse to comply with its obligations under this Agreement, or could institute or cause or attempt to cause the Bank to institute litigation seeking to have this Agreement declared unenforceable, or could take or attempt to take other action to deny Director the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement would be frustrated. It is the intention of the Bank that the Director not be required to incur the expenses associated with the enforcement of his rights under this Agreement, whether by litigation or other legal action, because the cost and expense thereof would substantially detract from the benefits intended to be granted to the Director hereunder. It is the intention of the Bank that the Director not be forced to negotiate settlement of his rights under this Agreement under threat of incurring expenses. Accordingly, if after a Change in Control occurs it appears to the Director that (a) the Bank has failed to comply with any of its obligations under this Agreement, or (b) the Bank or any other person has taken any action to declare this Agreement void or unenforceable, or instituted any litigation or other legal action designed to deny, diminish, or to recover from the Director the benefits intended to be provided to the Director hereunder, the Bank irrevocably authorizes the Director from time to time to retain counsel of his choice, at the expense of the Bank as provided in this Section 8.13, to represent the Director in connection with the initiation or defense of any litigation or other legal action, whether by or against the Bank or any director, officer, stockholder, or other person affiliated with the Bank, in any jurisdiction. Notwithstanding any existing or previous attorneyclient relationship between the Bank and any counsel chosen by the Director under this Section 8.13, the Bank irrevocably consents to the Director entering into an attorney-client relationship with that counsel, and the Bank and the Director agree that a confidential relationship shall exist between the Director and that counsel. The fees and expenses of counsel selected from time to time by the Director as provided in this section shall be paid or reimbursed to the Director by the Bank on a regular, periodic basis upon presentation by the Director of a statement or statements prepared by such counsel in accordance with such counsel's customary practices, up to a maximum aggregate amount of $25,000. The Bank's obligation to pay the Director's legal fees provided by this Section 8.13 operates separately from and in addition to any legal fee reimbursement obligation the Bank may have with the Director under any separate employment, severance, or other agreement between the Director and the Bank. 8.14 Liquidated Damages. The parties hereto, before entering into this Agreement, have been concerned with the fact that substantial damages will be suffered by the Director in the event that the Bank shall fail to perform according to Section 2.4 of this Agreement following a Change in Control. Following a Change in Control, in the event of nonperformance by the Bank for a period of 30 days from the time payment was scheduled to be made pursuant to Section 2.4 of this Agreement, the Director shall immediately be entitled to liquidated damages equal to 1 1/2 times the remaining Accrual Balance due to the Director under Section 2.4 of this Agreement. This provision shall not be applicable in the event that such nonpayment is the result of prohibition of such payment by law, regulation or order of a banking regulatory agency. 392

IN WITNESS WHEREOF, the Director and a duly authorized Bank officer have executed this Amended Deferred Compensation and Income Continuation Agreement as of the date first written above. DIRECTOR CITIZENS SOUTH BANK
/s/ Charles D. Massey --------------------Charles D. Massey By: /s/ Kim S. Price ----------------------------Title: President and Chief Executive Officer

IN WITNESS WHEREOF, the Director and a duly authorized Bank officer have executed this Amended Deferred Compensation and Income Continuation Agreement as of the date first written above. DIRECTOR CITIZENS SOUTH BANK
/s/ Charles D. Massey --------------------Charles D. Massey By: /s/ Kim S. Price ----------------------------Title: President and Chief Executive Officer

393

BENEFICIARY DESIGNATION CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT I, Charles D. Massey, designate the following as beneficiary of any death benefits under this Amended Director Retirement Agreement: Primary: Contingent: Note: To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement. I understand that I may change these beneficiary designations by filing a new written designation with the Bank. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature: Date: /s/ Charles D. Massey May 17, 2004

Received by Citizens South Bank this 17th day of May, 2004.
By: Title: /s/ Paul L. Teem, Jr. -------------------------------------Executive Vice President and Secretary

394

SCHEDULE A CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT Charles D. Massey Normal Retirement Age: 70
EARLY TERMINATION ANNUAL BENEFIT PAYABLE AT NORMAL RETIREMENT AGE (2) -----------------$ 5,904 CHANGE-IN-CONTROL BENEFIT PAYABLE IN A LUMP SUM -----------------$ 68,179

PLAN YEAR ENDING DECEMBER 31, -----------2003

AGE AT PLAN YEAR END -----------66

ACCRUAL BALANCE @ 8.50% (1) ----------------$ 50,314

BENEFICIARY DESIGNATION CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT I, Charles D. Massey, designate the following as beneficiary of any death benefits under this Amended Director Retirement Agreement: Primary: Contingent: Note: To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement. I understand that I may change these beneficiary designations by filing a new written designation with the Bank. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature: Date: /s/ Charles D. Massey May 17, 2004

Received by Citizens South Bank this 17th day of May, 2004.
By: Title: /s/ Paul L. Teem, Jr. -------------------------------------Executive Vice President and Secretary

394

SCHEDULE A CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT Charles D. Massey Normal Retirement Age: 70
EARLY TERMINATION ANNUAL BENEFIT ACCRUAL BALANCE @ PAYABLE AT NORMAL 8.50% (1) RETIREMENT AGE (2) ---------------------------------$ 50,314 $ 5,904 $ 55,019 $ 6,456 $ 60,140 $ 7,057 $ 65,714 $ 7,711 $ 68,179(3) $ 8,000 CHANGE-IN-CONTROL BENEFIT PAYABLE IN A LUMP SUM -----------------$ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179

PLAN YEAR ENDING DECEMBER 31, -----------2003 2004 2005 2006 May 2007

AGE AT PLAN YEAR END -----------66 67 68 69 70

(1) Calculations are approximations based on prior year-end Accrual Balances. The Accrual Balance reflects payment at the beginning of each month during retirement, beginning June 1, 2007. (2) Based on the present value of the current payment stream of the vested Accrual Balance at each year end using a standard discount rate (8.50%). The benefit amounts shown are for illustrative purposes only. Actual Early Termination benefits will be based on the Accrual Balance existing on the date of the Director's Termination of Service.

SCHEDULE A CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT Charles D. Massey Normal Retirement Age: 70
EARLY TERMINATION ANNUAL BENEFIT ACCRUAL BALANCE @ PAYABLE AT NORMAL 8.50% (1) RETIREMENT AGE (2) ---------------------------------$ 50,314 $ 5,904 $ 55,019 $ 6,456 $ 60,140 $ 7,057 $ 65,714 $ 7,711 $ 68,179(3) $ 8,000 CHANGE-IN-CONTROL BENEFIT PAYABLE IN A LUMP SUM -----------------$ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179

PLAN YEAR ENDING DECEMBER 31, -----------2003 2004 2005 2006 May 2007

AGE AT PLAN YEAR END -----------66 67 68 69 70

(1) Calculations are approximations based on prior year-end Accrual Balances. The Accrual Balance reflects payment at the beginning of each month during retirement, beginning June 1, 2007. (2) Based on the present value of the current payment stream of the vested Accrual Balance at each year end using a standard discount rate (8.50%). The benefit amounts shown are for illustrative purposes only. Actual Early Termination benefits will be based on the Accrual Balance existing on the date of the Director's Termination of Service. (3) Projected retirement occurs on May 7, 2007, with the first normal monthly retirement benefit commencing June 1, 2007. 395

EXHIBIT 10.30 AMENDED DIRECTOR RETIREMENT AGREEMENT WITH EUGENE R. MATTHEWS, II THIS AMENDED DIRECTOR RETIREMENT AGREEMENT (this Agreement) is made as of March 15, 2004, by and between Citizens South Bank, a federally chartered savings bank (the Bank), and Eugene R. Matthews, II (the Director). WHEREAS, to encourage the Director to remain a member of the Bank's board of directors, the Bank is willing to provide retirement benefits to the Director. The Bank will pay the benefits from its general assets, WHEREAS, none of the conditions or events included in the definition of the term golden parachute payment that is set forth in section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is contemplated insofar as the Bank is concerned, WHEREAS, the Director entered into a Director Retirement Agreement with the Bank or its predecessor as of October 16, 2000, providing for specified retirement benefits for the Director, WHEREAS, the Director has agreed to miscellaneous changes in the terms and conditions of the October 16, 2000 Director Retirement Agreement, and WHEREAS, the Director and the Bank intend that the October 16, 2000 Director Retirement Agreement, as the same may have been amended, shall be of no further force or effect and shall be superseded in its entirety by this Agreement from and after the effective date of this Agreement. NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the

EXHIBIT 10.30 AMENDED DIRECTOR RETIREMENT AGREEMENT WITH EUGENE R. MATTHEWS, II THIS AMENDED DIRECTOR RETIREMENT AGREEMENT (this Agreement) is made as of March 15, 2004, by and between Citizens South Bank, a federally chartered savings bank (the Bank), and Eugene R. Matthews, II (the Director). WHEREAS, to encourage the Director to remain a member of the Bank's board of directors, the Bank is willing to provide retirement benefits to the Director. The Bank will pay the benefits from its general assets, WHEREAS, none of the conditions or events included in the definition of the term golden parachute payment that is set forth in section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is contemplated insofar as the Bank is concerned, WHEREAS, the Director entered into a Director Retirement Agreement with the Bank or its predecessor as of October 16, 2000, providing for specified retirement benefits for the Director, WHEREAS, the Director has agreed to miscellaneous changes in the terms and conditions of the October 16, 2000 Director Retirement Agreement, and WHEREAS, the Director and the Bank intend that the October 16, 2000 Director Retirement Agreement, as the same may have been amended, shall be of no further force or effect and shall be superseded in its entirety by this Agreement from and after the effective date of this Agreement. NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and acceptance of which are hereby acknowledged, the Director and the Bank hereby agree as follows. ARTICLE 1 DEFINITIONS Whenever used in this Agreement, the following words and phrases shall have the meanings specified: 1.1 Accrual Balance means the liability that should be accrued by the Bank under generally accepted accounting principles (GAAP) for the Bank's obligation to the Director under this Agreement, by applying Accounting Principles Board Opinion No. 12, as amended by Statement of Financial Accounting Standards No. 106, and the calculation method and discount rate specified hereinafter. The Accrual Balance shall be calculated assuming a level principal amount and interest as the discount rate is accrued each period. The principal accrual is determined such that when it is credited with interest each month, the Accrual Balance at Normal Retirement Age equals the present value of the normal retirement benefits. The discount rate means the rate used by the Plan Administrator for determining the Accrual Balance. The rate is based on the yield on a 20-year corporate bond rated Aa by Moody's, rounded to the nearest 1/4%. The initial discount rate is 8.50%. However, the Plan Administrator, in its sole discretion, may adjust the discount rate to maintain the rate within reasonable standards according to GAAP. 396

1.2 Beneficiary means each designated person, or the estate of the Director, entitled to benefits, if any, upon the death of the Director, determined according to Article 4. 1.3 Beneficiary Designation Form means the form established from time to time by the Plan Administrator that the Director completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries. 1.4 Change in Control means any of the following events occur: (a) Merger: Citizens South Banking Corporation, a Delaware corporation of which the Bank is a wholly owned

1.2 Beneficiary means each designated person, or the estate of the Director, entitled to benefits, if any, upon the death of the Director, determined according to Article 4. 1.3 Beneficiary Designation Form means the form established from time to time by the Plan Administrator that the Director completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries. 1.4 Change in Control means any of the following events occur: (a) Merger: Citizens South Banking Corporation, a Delaware corporation of which the Bank is a wholly owned subsidiary, merges into or consolidates with another corporation, or merges another corporation into Citizens South Banking Corporation, and as a result less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of Citizens South Banking Corporation immediately before the merger or consolidation, (b) Acquisition of Significant Share Ownership: after the date of this Agreement a report on Schedule 13D, Schedule TO, or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of the combined voting power of Citizens South Banking Corporation's voting securities outstanding (but this clause (b) shall not apply to beneficial ownership of voting shares held by a subsidiary in a fiduciary capacity or beneficial ownership of voting shares held by an employee benefit plan of Citizens South Banking Corporation or any subsidiary(ies)). For purposes of this Agreement, "subsidiary means an entity in which Citizens South Banking Corporation beneficially owns 50% or more of the outstanding voting securities, whether Citizens South Banking Corporation owns the shares directly or owns the shares indirectly through an intermediate subsidiary, (c) Change in Board Composition. during any period of two consecutive years, individuals who constitute Citizens South Banking Corporation's board of directors at the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however, that for purposes of this clause (c) each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period, or (d) Sale of Assets: Citizens South Banking Corporation sells to a third party all or substantially all of its assets. For this purpose, sale of all or substantially all of Citizens South Banking Corporation's assets includes sale of the shares or assets of the Bank alone. 397

1.5 Disability means, if the Director is covered by a Bank-sponsored disability policy, total disability as defined in such policy without regard to any waiting period. If the Director is not covered by such a policy, Disability means the Director suffers a sickness, accident or injury that, in the judgment of a physician satisfactory to the Bank, prevents the Director from performing substantially all of the Director's normal duties for the Bank. As a condition to receiving any Disability benefits, the Bank may require the Director to submit to such physical or mental evaluations and tests as the Bank's board of directors deems appropriate. 1.6 Early Termination means Termination of Service before the Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control. 1.7 Early Termination Date means the month, day, and year of Early Termination. 1.8 Effective Date means March 15, 2004. 1.9 Normal Retirement Age means the Director's 70th birthday. 1.10 Normal Retirement Date means the later of the Normal Retirement Age or Termination of Service. 1.11 Plan Administrator means the plan administrator described in Article 7.

1.5 Disability means, if the Director is covered by a Bank-sponsored disability policy, total disability as defined in such policy without regard to any waiting period. If the Director is not covered by such a policy, Disability means the Director suffers a sickness, accident or injury that, in the judgment of a physician satisfactory to the Bank, prevents the Director from performing substantially all of the Director's normal duties for the Bank. As a condition to receiving any Disability benefits, the Bank may require the Director to submit to such physical or mental evaluations and tests as the Bank's board of directors deems appropriate. 1.6 Early Termination means Termination of Service before the Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control. 1.7 Early Termination Date means the month, day, and year of Early Termination. 1.8 Effective Date means March 15, 2004. 1.9 Normal Retirement Age means the Director's 70th birthday. 1.10 Normal Retirement Date means the later of the Normal Retirement Age or Termination of Service. 1.11 Plan Administrator means the plan administrator described in Article 7. 1.12 Plan Year means each twelve-month period from the Effective Date of this Agreement. 1.13 Termination for Cause means the Director is not nominated by the board or nominating committee for reelection as a director after the expiration of his current term, or the Director is removed from the board of directors, in either case: (a) because of the Director's gross negligence or gross neglect of duties, or (b) because of the Director's commission of or plea of nolo contendere to a felony, or commission of or plea of nolo contendere to a misdemeanor involving moral turpitude, or (c) because of the Director's fraud, disloyalty, dishonesty, or willful violation of any applicable law or significant policy of the Bank committed in connection with the Director's service and resulting in an adverse effect on the Bank, or a breach of the Director's fiduciary duties for personal profit. For purposes of this Agreement, applicable laws include any statute, rule, regulatory order, statement of policy, or final cease-and-desist order of any governmental agency or body having regulatory authority over the Bank or Citizens South Banking Corporation, or, (d) because of the Director's intentional wrongful damage to the business or property of the Bank or its affiliates, including without limitation the reputation of the Bank or Citizens South Banking Corporation, which in the judgement of the Bank causes material harm to the Bank or affiliates, or 398

(e) because of the occurrence of any event that results in the Director being excluded from coverage, or having coverage limited for the Director as compared to other Directors of the Bank, under a blanket bond or other fidelity or insurance policy covering directors, officers, or employees, or (f) because the Director is removed from service or permanently prohibited from participating in the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act [12 U.S.C. 1818(e)(4) or (g)(1)]. 1.14 Termination of Service means the Director ceases to be a member of the Bank's board of directors for any reason whatsoever. For purposes of this Agreement, if there is a dispute over the service status of the Director or the date of the Director's Termination of Service, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred.

(e) because of the occurrence of any event that results in the Director being excluded from coverage, or having coverage limited for the Director as compared to other Directors of the Bank, under a blanket bond or other fidelity or insurance policy covering directors, officers, or employees, or (f) because the Director is removed from service or permanently prohibited from participating in the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act [12 U.S.C. 1818(e)(4) or (g)(1)]. 1.14 Termination of Service means the Director ceases to be a member of the Bank's board of directors for any reason whatsoever. For purposes of this Agreement, if there is a dispute over the service status of the Director or the date of the Director's Termination of Service, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred. ARTICLE 2 LIFETIME BENEFITS 2.1 Normal Retirement Benefit. For Termination of Service on or after Normal Retirement Age, the Bank shall pay to the Director the benefit described in this Section 2.1 instead of any other benefit under this Agreement. 2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is $8,000. 2.1.2 Payment of Benefit. The Bank shall pay the annual benefit to the Director in 12 equal monthly installments payable on the first day of each month, beginning with the month after the Director's Normal Retirement Date. The annual benefit shall be paid to the Director for 15 years. 2.2 Early Termination Benefit. After Early Termination, the Bank shall pay to the Director the benefit described in this Section 2.2 instead of any other benefit under this Agreement. The benefit shall consist of 180 equal monthly payments, payable on the first day of each month, beginning with the month after the Normal Retirement Age. The amount of the monthly payment shall be calculated based on the Accrual Balance existing on the date of the Director's Termination of Service. For illustrative purposes only, Schedule A attached to this Agreement shows the projected annual Early Termination benefit based on the Accrual Balance at each Plan Year end. 2.3 Disability Benefit. If the Director terminates service because of Disability before the Normal Retirement Age, the Bank shall pay to the Director the benefit described in Section 2.1 instead of any other benefit under this Agreement. The benefits shall be payable for 180 months on the first day of each month, beginning with the month after the Normal Retirement Age. 2.4 Change in Control Benefit. If the Director's service with the Bank terminates within one year after a Change in Control (except for Termination for Cause), the Bank shall pay to the Director the benefit described in this Section 2.4 instead of any other benefit under this Agreement. 2.4.1 Amount of Benefit. The benefit under this Section 2.4 is the Normal Retirement Age Accrual Balance required by Section 2.1, without reduction for the time value of money or other discount. 399

2.4.2 Payment of Benefit. The Bank shall pay this benefit to the Director in a single lump sum within 3 days after the Director's Termination of Service. 2.5 Contradiction in Terms of Agreement and Schedule A. If there is a contradiction in the terms of this Agreement and Schedule A attached hereto concerning the benefits due under Section 2.2, 2.3, or 2.4 hereof, then the actual amount of benefits prescribed by this Agreement shall control. ARTICLE 3 DEATH BENEFITS

2.4.2 Payment of Benefit. The Bank shall pay this benefit to the Director in a single lump sum within 3 days after the Director's Termination of Service. 2.5 Contradiction in Terms of Agreement and Schedule A. If there is a contradiction in the terms of this Agreement and Schedule A attached hereto concerning the benefits due under Section 2.2, 2.3, or 2.4 hereof, then the actual amount of benefits prescribed by this Agreement shall control. ARTICLE 3 DEATH BENEFITS 3.1 Death in Active Service. If the Director dies while in active service to the Bank, instead of any other benefit under this Agreement the Bank shall pay to the Director's Beneficiary the Normal Retirement Benefit set forth in Section 2.1 of this Agreement. The Bank shall pay the annual benefit to the Director's Beneficiary in 12 equal monthly installments payable on the first day of each month, beginning with the month after the Director's death. The annual benefit shall be paid to the Director's Beneficiary for 15 years. 3.2 Death After Termination of Service. If the Director dies after having terminated active service with the Bank but before receiving any or all of the benefits to which the Director is entitled under Article 2 of this Agreement, the Bank shall pay to the Director's Beneficiary the benefits set forth in Article 2 to which the Director was entitled at the time of death. The benefits shall be payable to the Director's Beneficiary at the same time and in the same amounts they would have been paid to the Director had the Director survived, except that benefit payments shall begin in the month immediately after the Director's death if payments to the Director had not already commenced by the date of the Director's death. ARTICLE 4 BENEFICIARIES 4.1 Beneficiary Designations. The Director shall have the right to designate at any time a Beneficiary to receive any benefits payable under this Agreement upon the death of the Director. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other benefit plan of the Bank in which the Director participates. 4.2 Beneficiary Designation: Change. The Director shall designate a Beneficiary by completing and signing the Beneficiary Designation Form and delivering it to the Plan Administrator or its designated agent. The Director's Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Director or if the Director names a spouse as Beneficiary and the marriage is subsequently dissolved. The Director shall have the right to change a Beneficiary by completing, signing, and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator's rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Director and accepted by the Plan Administrator before the Director's death. 400

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted, and acknowledged in writing by the Plan Administrator or its designated agent. 4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director's spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be made to the personal representative of the Director's estate. 4.5 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative, or person having the care or custody of the minor, incapacitated person, or incapable person. The Bank may require proof of incapacity, minority, or guardianship as it may deem appropriate before distribution of

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted, and acknowledged in writing by the Plan Administrator or its designated agent. 4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director's spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be made to the personal representative of the Director's estate. 4.5 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative, or person having the care or custody of the minor, incapacitated person, or incapable person. The Bank may require proof of incapacity, minority, or guardianship as it may deem appropriate before distribution of the benefit. Distribution shall completely discharge the Bank from all liability for the benefit. ARTICLE 5 GENERAL LIMITATIONS Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any benefit under this Agreement, and this Agreement shall terminate, if the Director's Termination of Service is the result of Termination for Cause. The board of directors or a duly authorized committee of the board shall have the sole and absolute right to determine whether the bases for denial of benefits for cause exist. Benefits may be denied for cause regardless of whether the Director continued to serve as a director after the board or committee made its determination not to nominate the Director for reelection. ARTICLE 6 CLAIMS AND REVIEW PROCEDURES 6.1 Claims Procedure. The Bank shall notify any person or entity that makes a claim for benefits under this Agreement (the Claimant) in writing, within 90 days of Claimant's written application for benefits, of his or her eligibility or noneligibility for benefits under the Agreement. If the Bank determines that the Claimant is not eligible for benefits or full benefits, the notice shall set forth (1) the specific reasons for such denial, (2) a specific reference to the provisions of the Agreement on which the denial is based, (3) a description of any additional information or material necessary for the Claimant to perfect his or her claim, and a description of why it is needed, and (4) an explanation of the Agreement's claims review procedure and other appropriate information as to the steps to be taken if the Claimant wishes to have the claim reviewed. If the Bank determines that there are special circumstances requiring additional time to make a decision, the Bank shall notify the Claimant of the special circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional 90 days. 6.2 Review Procedure. If the Claimant is determined by the Bank not to be eligible for benefits, or if the Claimant believes that he or she is entitled to greater or different benefits, the Claimant shall have the opportunity to have such claim reviewed by the Bank by filing a petition for review with the Bank within 60 days after receipt of the notice issued by the Bank. Said petition shall state the specific reasons, which the Claimant believes entitle him or her to benefits or to greater or different benefits. Within 60 days after receipt by the Bank of the petition, the Bank shall afford the Claimant (and 401

counsel, if any) an opportunity to present his or her position to the Bank verbally or in writing, and the Claimant (or counsel) shall have the right to review the pertinent documents. The Bank shall notify the Claimant of its decision in writing within the 60-day period, stating specifically the basis of its decision, written in a manner to be understood by the Claimant and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the 60-day period is not sufficient, the decision may be deferred for up to another 60 days at the election of the Bank, but notice of this deferral shall be given to the Claimant. ARTICLE 7 ADMINISTRATION OF AGREEMENT

counsel, if any) an opportunity to present his or her position to the Bank verbally or in writing, and the Claimant (or counsel) shall have the right to review the pertinent documents. The Bank shall notify the Claimant of its decision in writing within the 60-day period, stating specifically the basis of its decision, written in a manner to be understood by the Claimant and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the 60-day period is not sufficient, the decision may be deferred for up to another 60 days at the election of the Bank, but notice of this deferral shall be given to the Claimant. ARTICLE 7 ADMINISTRATION OF AGREEMENT 7.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator consisting of the Bank's board of directors or such committee or person(s) as the board shall appoint. The Director may be a member of the Plan Administrator. The Plan Administrator shall also have the discretion and authority to (a) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Agreement and (b) decide or resolve any and all questions, including interpretations of this Agreement, as may arise in connection with the Agreement. 7.2 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative), and may from time to time consult with counsel, who may be counsel to the Bank. 7.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation, and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement. No Director or Beneficiary shall be deemed to have any right, vested or nonvested, regarding the continued use of any previously adopted assumptions, including but not limited to the discount rate and calculation method employed in the determination of the Accrual Balance. 7.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses, or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members. 7.5 Bank Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Termination of Service of the Director, and such other pertinent information as the Plan Administrator may reasonably require. ARTICLE 8 MISCELLANEOUS 8.1 Amendment and Termination. This Agreement may be amended solely by a written agreement signed by the Bank and by the Director. Except as provided in Article 5, this Agreement may be terminated solely by a written agreement signed by the Bank and by the Director. 402

8.2 Binding Effect. This Agreement shall bind the Director and the Bank, and their beneficiaries, survivors, executors, successors, administrators, and transferees. 8.3 No Guarantee of Service. This Agreement is not a contract for services. It does not give the Director the right to remain a Director of the Bank, nor does the Agreement interfere with the rights of the Bank's shareholders not to re-elect the Director or the right of shareholders or the Board to remove an individual as a director of the Bank. The Agreement also does not require the Director to remain a director nor interfere with the Director's right to terminate services at any time. 8.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached,

8.2 Binding Effect. This Agreement shall bind the Director and the Bank, and their beneficiaries, survivors, executors, successors, administrators, and transferees. 8.3 No Guarantee of Service. This Agreement is not a contract for services. It does not give the Director the right to remain a Director of the Bank, nor does the Agreement interfere with the rights of the Bank's shareholders not to re-elect the Director or the right of shareholders or the Board to remove an individual as a director of the Bank. The Agreement also does not require the Director to remain a director nor interfere with the Director's right to terminate services at any time. 8.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached, or encumbered in any manner. 8.5 Successors; Binding Agreement. The Bank shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Bank, by an assumption agreement in form and substance satisfactory to the Director, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform this Agreement if no such succession had occurred. Failure of the Bank to obtain such assumption agreement before effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Director to the Change in Control benefit provided in Section 2.4. 8.6 Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement. 8.7 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of North Carolina, except to the extent preempted by the laws of the United States of America. 8.8 Unfunded Arrangement. The Director and beneficiary are general unsecured creditors of the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise by the Bank to pay benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Director's life is a general asset of the Bank to which the Director and beneficiary have no preferred or secured claim. 8.9 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Director concerning the subject matter hereof. No rights are granted to the Director under this Agreement other than those specifically set forth herein. The October 16, 2000 Director Retirement Agreement, as the same may have been amended, shall be of no further force or effect and shall be superseded in its entirety by this Agreement from and after the effective date of this Agreement. 8.10 Severability. If for any reason any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not held invalid, and each such other provision shall continue in full force and effect to the full extent consistent with law. If any provision of this Agreement is held invalid in part, such invalidity shall not affect the remainder of such provision, and the remainder of such provision, together with all other provisions of this Agreement, shall continue in full force and effect to the full extent consistent with law. 403

8.11 Headings. The headings of Sections herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. 8.12 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. If to the Bank, notice shall be given to the board of directors, Citizens South Bank, 519 South New Hope Road, Gastonia, North Carolina 28054-4040, or to such other or additional person or persons as the Bank shall have designated to the Director in writing. If to the Director, notice shall be given to the Director at the address of the Director appearing on the Bank's records, or to such other or additional person or persons as the Director shall have designated to the Bank in writing.

8.11 Headings. The headings of Sections herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. 8.12 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. If to the Bank, notice shall be given to the board of directors, Citizens South Bank, 519 South New Hope Road, Gastonia, North Carolina 28054-4040, or to such other or additional person or persons as the Bank shall have designated to the Director in writing. If to the Director, notice shall be given to the Director at the address of the Director appearing on the Bank's records, or to such other or additional person or persons as the Director shall have designated to the Bank in writing. 8.13 Payment of Legal Fees. The Bank is aware that after a Change in Control management of the Bank could cause or attempt to cause the Bank to refuse to comply with its obligations under this Agreement, or could institute or cause or attempt to cause the Bank to institute litigation seeking to have this Agreement declared unenforceable, or could take or attempt to take other action to deny Director the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement would be frustrated. It is the intention of the Bank that the Director not be required to incur the expenses associated with the enforcement of his rights under this Agreement, whether by litigation or other legal action, because the cost and expense thereof would substantially detract from the benefits intended to be granted to the Director hereunder. It is the intention of the Bank that the Director not be forced to negotiate settlement of his rights under this Agreement under threat of incurring expenses. Accordingly, if after a Change in Control occurs it appears to the Director that (a) the Bank has failed to comply with any of its obligations under this Agreement, or (b) the Bank or any other person has taken any action to declare this Agreement void or unenforceable, or instituted any litigation or other legal action designed to deny, diminish, or to recover from the Director the benefits intended to be provided to the Director hereunder, the Bank irrevocably authorizes the Director from time to time to retain counsel of his choice, at the expense of the Bank as provided in this Section 8.13, to represent the Director in connection with the initiation or defense of any litigation or other legal action, whether by or against the Bank or any director, officer, stockholder, or other person affiliated with the Bank, in any jurisdiction. Notwithstanding any existing or previous attorneyclient relationship between the Bank and any counsel chosen by the Director under this Section 8.13, the Bank irrevocably consents to the Director entering into an attorney-client relationship with that counsel, and the Bank and the Director agree that a confidential relationship shall exist between the Director and that counsel. The fees and expenses of counsel selected from time to time by the Director as provided in this section shall be paid or reimbursed to the Director by the Bank on a regular, periodic basis upon presentation by the Director of a statement or statements prepared by such counsel in accordance with such counsel's customary practices, up to a maximum aggregate amount of $25,000. The Bank's obligation to pay the Director's legal fees provided by this Section 8.13 operates separately from and in addition to any legal fee reimbursement obligation the Bank may have with the Director under any separate employment, severance, or other agreement between the Director and the Bank. 8.14 Liquidated Damages. The parties hereto, before entering into this Agreement, have been concerned with the fact that substantial damages will be suffered by the Director in the event that the Bank shall fail to perform according to Section 2.4 of this Agreement following a Change in Control. Following a Change in Control, in the event of nonperformance by the Bank for a period of 30 days from the time payment was scheduled to be made pursuant to Section 2.4 of this Agreement, the Director shall immediately be entitled to liquidated damages equal to 1 1/2 times the remaining Accrual Balance due to the Director under Section 2.4 of this Agreement. This provision shall not be applicable in the event that such nonpayment is the result of prohibition of such payment by law, regulation or order of a banking regulatory agency. 404

IN WITNESS WHEREOF, the Director and a duly authorized Bank officer have executed this Amended Deferred Compensation and Income Continuation Agreement as of the date first written above. DIRECTOR CITIZENS SOUTH BANK

IN WITNESS WHEREOF, the Director and a duly authorized Bank officer have executed this Amended Deferred Compensation and Income Continuation Agreement as of the date first written above. DIRECTOR CITIZENS SOUTH BANK
/s/ Eugene R. Matthews, II By: /s/ Kim S. Price ----------------Title: President and CEO

405

BENEFICIARY DESIGNATION CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT I, _______________, designate the following as beneficiary of any death benefits under this Amended Director Retirement Agreement: Primary: Contingent: Note: To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement. I understand that I may change these beneficiary designations by filing a new written designation with the Bank. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature: Date: /s/ Eugene R. Matthews, II May 17, 2004

Received by Citizens South Bank this 17th day of May, 2004.
By: Title: /s/ Paul L. Teem, Jr. -------------------------------------Executive Vice President and Secretary

406

SCHEDULE A CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT Eugene R. Matthews, II Normal Retirement Age: 70
EARLY TERMINATION ANNUAL BENEFIT PAYABLE AT NORMAL RETIREMENT AGE (2) -----------------$ 605 $ 717 CHANGE-IN-CONTROL BENEFIT PAYABLE IN A LUMP SUM ----------------$ 68,179 $ 68,179

PLAN YEAR ENDING DECEMBER 31, -----------2003 2004

AGE AT PLAN YEAR END ----------47 48

ACCRUAL BALANCE 8.50% (1) --------------$ 5,159 $ 6,108

BENEFICIARY DESIGNATION CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT I, _______________, designate the following as beneficiary of any death benefits under this Amended Director Retirement Agreement: Primary: Contingent: Note: To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement. I understand that I may change these beneficiary designations by filing a new written designation with the Bank. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature: Date: /s/ Eugene R. Matthews, II May 17, 2004

Received by Citizens South Bank this 17th day of May, 2004.
By: Title: /s/ Paul L. Teem, Jr. -------------------------------------Executive Vice President and Secretary

406

SCHEDULE A CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT Eugene R. Matthews, II Normal Retirement Age: 70
EARLY TERMINATION ANNUAL BENEFIT PAYABLE AT NORMAL RETIREMENT AGE (2) -----------------$ 605 $ 717 $ 838 $ 970 $ 1,113 $ 1,270 $ 1,440 $ 1,625 $ 1,827 $ 2,046 $ 2,285 $ 2,544 $ 2,827 $ 3,135 $ 3,470 $ 3,834 $ 4,231 $ 4,663 CHANGE-IN-CONTROL BENEFIT PAYABLE IN A LUMP SUM ----------------$ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179

PLAN YEAR ENDING DECEMBER 31, -----------2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

AGE AT PLAN YEAR END ----------47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64

ACCRUAL BALANCE 8.50% (1) --------------$ 5,159 $ 6,108 $ 7,141 $ 8,266 $ 9,490 $ 10,822 $ 12,271 $ 13,849 $ 15,567 $ 17,436 $ 19,470 $ 21,684 $ 24,094 $ 26,717 $ 29,572 $ 32,679 $ 36,061 $ 39,741

SCHEDULE A CITIZENS SOUTH BANK AMENDED DIRECTOR RETIREMENT AGREEMENT Eugene R. Matthews, II Normal Retirement Age: 70
EARLY TERMINATION ANNUAL BENEFIT ACCRUAL BALANCE PAYABLE AT NORMAL 8.50% (1) RETIREMENT AGE (2) -------------------------------$ 5,159 $ 605 $ 6,108 $ 717 $ 7,141 $ 838 $ 8,266 $ 970 $ 9,490 $ 1,113 $ 10,822 $ 1,270 $ 12,271 $ 1,440 $ 13,849 $ 1,625 $ 15,567 $ 1,827 $ 17,436 $ 2,046 $ 19,470 $ 2,285 $ 21,684 $ 2,544 $ 24,094 $ 2,827 $ 26,717 $ 3,135 $ 29,572 $ 3,470 $ 32,679 $ 3,834 $ 36,061 $ 4,231 $ 39,741 $ 4,663 $ 43,747 $ 5,133 $ 48,107 $ 5,645 $ 52,853 $ 6,202 $ 58,018 $ 6,808 $ 63,639 $ 7,467 $ 68,179(3) $ 8,000 CHANGE-IN-CONTROL BENEFIT PAYABLE IN A LUMP SUM ----------------$ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179 $ 68,179

PLAN YEAR ENDING DECEMBER 31, -----------2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 October 2026

AGE AT PLAN YEAR END ----------47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70

(1) Calculations are approximations based on prior year-end Accrual Balances. The Accrual Balance reflects payment at the beginning of each month during retirement, beginning November 1, 2026. (2) Based on the present value of the current payment stream of the vested Accrual Balance at each year end using a standard discount rate (8.50%). The benefit amounts shown are for illustrative purposes only. Actual Early Termination benefits will be based on the Accrual Balance existing on the date of the Director's Termination of Service. (3) Projected retirement occurs on October 24, 2026, with the first normal monthly retirement benefit commencing November 1, 2026. 407

EXHIBIT 23 CONSENT OF CHERRY, BEKAERT & Holland, L.L.P. The Board of Directors Citizens South Banking Corporation We consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-103218, 333-77657, 333-111228) of Citizens South Banking Corporation of our report dated March 3, 2005, relating to the consolidated statements of condition and related consolidated statements of operations, comprehensive income, changes in stockholders' equity and cash flows as of December 31, 2004 and 2003, and for the years ended December 31, 2004, 2003, and 2002 which is included in the December 31, 2004 Annual Report on

EXHIBIT 23 CONSENT OF CHERRY, BEKAERT & Holland, L.L.P. The Board of Directors Citizens South Banking Corporation We consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-103218, 333-77657, 333-111228) of Citizens South Banking Corporation of our report dated March 3, 2005, relating to the consolidated statements of condition and related consolidated statements of operations, comprehensive income, changes in stockholders' equity and cash flows as of December 31, 2004 and 2003, and for the years ended December 31, 2004, 2003, and 2002 which is included in the December 31, 2004 Annual Report on Form 10-K of Citizens South Banking Corporation.
/s/ Cherry, Bekaert & Holland, L.L.P. Gastonia, North Carolina March 9, 2005

408

EXHIBIT 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Kim S. Price, President and Chief Executive Officer, certify that: 1. I have reviewed this Annual Report on Form 10-K of Citizens South Banking Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under or supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

EXHIBIT 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Kim S. Price, President and Chief Executive Officer, certify that: 1. I have reviewed this Annual Report on Form 10-K of Citizens South Banking Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under or supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: March 10, 2005 /s/ Kim S. Price ------------------------------------Kim Price President and Chief Executive Officer

409

EXHIBIT 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Gary F. Hoskins, Chief Financial Officer, certify that: 1. I have reviewed this Annual Report on Form 10-K of Citizens South Banking Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under or supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: March 10, 2005 /s/ Gary F. Hoskins ----------------------Gary F. Hoskins Chief Financial Officer

410

EXHIBIT 32.1 STATEMENT OF CHIEF EXECUTIVE OFFICER FURNISHED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned, Kim S. Price, is the President and Chief Executive Officer of Citizens South Banking Corporation (the "Company"). This statement is being furnished in connection with the filing by the Company of the Company's Annual Report on Form 10-K for the year ended December 31, 2004 (the "Report"). By execution of this statement, I certify that: A) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) and B) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report. This statement is authorized to be attached as an exhibit to the Report so that this statement will accompany the Report at such time as the Report is filed with the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934, as amended.
March 10, 2005 Dated /s/ Kim S. Price ------------------------------------Kim S. Price President and Chief Executive Officer

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EXHIBIT 32.2 STATEMENT OF CHIEF FINANCIAL OFFICER FURNISHED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned, Gary F. Hoskins, is the Chief Financial Officer of Citizens South Banking Corporation (the "Company"). This statement is being furnished in connection with the filing by the Company of the Company's Annual Report on Form 10-K for the year ended December 31, 2004 (the "Report"). By execution of this statement, I certify that: A) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) and B) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report. This statement is authorized to be attached as an exhibit to the Report so that this statement will accompany the Report at such time as the Report is filed with the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934, as amended.
March 10, 2005 /s/ Gary F. Hoskins

EXHIBIT 32.1 STATEMENT OF CHIEF EXECUTIVE OFFICER FURNISHED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned, Kim S. Price, is the President and Chief Executive Officer of Citizens South Banking Corporation (the "Company"). This statement is being furnished in connection with the filing by the Company of the Company's Annual Report on Form 10-K for the year ended December 31, 2004 (the "Report"). By execution of this statement, I certify that: A) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) and B) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report. This statement is authorized to be attached as an exhibit to the Report so that this statement will accompany the Report at such time as the Report is filed with the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934, as amended.
March 10, 2005 Dated /s/ Kim S. Price ------------------------------------Kim S. Price President and Chief Executive Officer

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EXHIBIT 32.2 STATEMENT OF CHIEF FINANCIAL OFFICER FURNISHED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned, Gary F. Hoskins, is the Chief Financial Officer of Citizens South Banking Corporation (the "Company"). This statement is being furnished in connection with the filing by the Company of the Company's Annual Report on Form 10-K for the year ended December 31, 2004 (the "Report"). By execution of this statement, I certify that: A) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) and B) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report. This statement is authorized to be attached as an exhibit to the Report so that this statement will accompany the Report at such time as the Report is filed with the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934, as amended.
March 10, 2005 Dated /s/ Gary F. Hoskins --------------------------

EXHIBIT 32.2 STATEMENT OF CHIEF FINANCIAL OFFICER FURNISHED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned, Gary F. Hoskins, is the Chief Financial Officer of Citizens South Banking Corporation (the "Company"). This statement is being furnished in connection with the filing by the Company of the Company's Annual Report on Form 10-K for the year ended December 31, 2004 (the "Report"). By execution of this statement, I certify that: A) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) and B) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report. This statement is authorized to be attached as an exhibit to the Report so that this statement will accompany the Report at such time as the Report is filed with the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934, as amended.
March 10, 2005 Dated /s/ Gary F. Hoskins -------------------------Gary F. Hoskins Chief Financial Officer

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