Ocean Shore Holding 10-Q 2005 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2005

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            

Commission file number: 0-51000

OCEAN SHORE HOLDING CO.

(Exact name of registrant as specified in its charter)

United States	22-3584037
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1001 Asbury Avenue, Ocean City, New Jersey	08226
(Address of principal executive offices)	(Zip Code)

(609) 399-0012

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the Issuer’s classes of common stock as of the latest practicable date:

At August 5, 2005, the registrant had 8,762,742 shares of $0.01 par value common stock outstanding.

OCEAN SHORE HOLDING CO.

FORM 10-Q

INDEX

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Statements of Financial Condition at June 30, 2005 and December 31, 2004	1
	Unaudited Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2005 and 2004	2
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2005 and 2004	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2005 and 2004	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults upon Senior Securities	24
Item 4.	Submission of Matters to a Vote of Security Holders	24
Item 5.	Other Information	24
Item 6.	Exhibits	25
SIGNATURES		26

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	June 30, 2005			December 31, 2004
ASSETS
Cash and amounts due from depository institutions	$	14,892,374		$	7,895,819
Federal funds sold		21,500,000			39,500,000
Cash and cash equivalents		36,392,374			47,395,819
Investment securities held to maturity (estimated fair value— 2005, $9,622,997; 2004, $8,398,135)		9,617,169			8,387,127
Investment securities available for sale (amortized cost— 2005, $52,147,962; 2004, $54,067,590)		52,308,601			54,233,783
Mortgage-backed securities held to maturity (estimated fair value— 2005, $5,957,605; 2004, $2,161,900)		5,921,419			2,156,901
Mortgage-backed securities available for sale (amortized cost— 2005, $44,870,610; 2004, $51,732,377)		44,957,084			52,024,635
Loans receivable—net		373,618,668			340,585,224
Accrued interest receivable:
Loans		1,332,526			1,182,138
Mortgage-backed securities		207,022			219,992
Investment securities		615,317			627,103
Federal Home Loan Bank stock—at cost		3,391,100			3,101,600
Office properties and equipment—net		8,458,004			8,075,696
Prepaid expenses and other assets		2,915,789			2,734,054
Cash surrender value of life insurance		7,213,413			6,992,313
Deferred tax asset		719,964			727,727
TOTAL ASSETS	$	547,668,450		$	528,444,112
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Non-interest bearing deposits	$	49,444,707		$	35,318,241
Interest bearing deposits		381,257,413			380,009,838
Advances from Federal Home Loan Bank		10,000,000			10,000,000
Junior subordinated debenture		15,464,000			15,464,000
Securities sold under agreements to repurchase		24,490,000			22,840,000
Advances from borrowers for taxes and insurance		2,263,234			1,995,772
Accrued interest payable		821,782			821,013
Other liabilities		2,631,960			2,200,012
Total liabilities		486,373,096			468,648,876
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Preferred stock, $.01 par value, 5,000,000 shares authorized, none issued		—			—
Common stock, $.01 par value, 25,000,000 shares authorized, 8,762,742 shares issued		87,627			87,627
Additional paid in capital		38,395,538			38,387,523
Retained earnings - partially restricted		26,089,531			24,557,370
Deferred compensation plans trust		(346,698	)		(321,260	)
Unallocated ESOP shares		(3,091,490	)		(3,205,990	)
Accumulated other comprehensive income		160,846			289,966
Total stockholders’ equity		61,295,354			59,795,236
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	547,668,450		$	528,444,112

See notes to unaudited condensed consolidated financial statements.

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OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended June 30,				Six Months Ended June 30,
	2005		2004		2005		2004
INTEREST AND DIVIDEND INCOME:
Taxable interest and fees on loans	$	5,044,414	$	4,321,378	$	9,796,415	$	8,634,375
Taxable interest on mortgage-backed securities		582,076		587,788		1,154,341		1,258,474
Non-taxable interest on municipal securities		102,563		76,448		203,014		161,930
Taxable interest and dividends on investments securities		682,421		558,729		1,348,635		1,100,503
Total interest and dividend income		6,411,474		5,544,343		12,502,405		11,155,282
INTEREST EXPENSE:
Deposits		1,912,486		1,503,202		3,692,804		3,008,857
Advances from Federal Home Loan Bank, securities sold under agreements to repurchase and other borrowed money		713,529		744,335		1,405,086		1,492,312
Total interest expense		2,626,015		2,247,537		5,097,890		4,501,169
NET INTEREST INCOME		3,785,459		3,296,806		7,404,515		6,654,113
PROVISION FOR LOAN LOSSES		75,000		90,000		150,000		180,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		3,710,459		3,206,806		7,254,515		6,474,113
OTHER INCOME:
Service charges		383,719		381,822		735,102		744,065
Cash surrender value of life insurance		63,000		80,232		136,000		149,964
Other		124,882		117,207		268,678		224,389
Total other income		571,601		579,261		1,139,780		1,118,418
OTHER EXPENSES:
Salaries and employee benefits		1,718,686		1,550,463		3,458,308		3,148,698
Occupancy and equipment		582,282		538,260		1,165,403		1,079,725
Federal insurance premiums		14,500		14,827		29,510		30,183
Advertising		107,361		93,951		200,979		174,538
Professional services		203,945		115,703		362,617		215,867
Other operating expenses		339,708		320,087		661,089		636,809
Total other expenses		2,966,482		2,633,291		5,877,906		5,285,820
INCOME BEFORE INCOME TAXES		1,315,578		1,152,776		2,516,389		2,306,711
INCOME TAX EXPENSE		525,714		423,712		984,228		887,585
NET INCOME	$	789,864	$	729,064	$	1,532,161	$	1,419,126
Basic and diluted earnings per share:	$	0.09		N/A	$	0.18		N/A

See notes to unaudited condensed consolidated financial statements.

2

OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2005

	Common Stock		Additional Paid-In Capital		Retained Earnings - Partially Restricted		Unallocated ESOP Shares			Deferred Compensation Plans Trust			Accumulated Other Comprehensive Income (Loss)			Total Equity
BALANCE—January 1, 2005	$	87,627	$	38,387,523	$	24,557,370	$	(3,205,990	)	$	(321,260	)	$	289,966		$	59,795,236
Comprehensive income:
Net income						1,532,161											1,532,161
Net change in unrealized loss on securities available for sale, net of taxes of $55,012														(129,120	)		(129,120	)
Comprehensive income																	1,403,041
Excess of fair market value above cost of ESOP shares				8,015													8,015
ESOP shares committed to be released								114,500									114,500
Purchase of shares by deferred compensation plans trust											(25,438	)					(25,438	)
BALANCE—June 30, 2005	$	87,627	$	38,395,538	$	26,089,531	$	(3,091,490	)	$	(346,698	)	$	160,846		$	61,295,354
See notes to unaudited condensed consolidated financial statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2004
	Common Stock		Additional Paid-In Capital		Retained Earnings - Partially Restricted		Unallocated ESOP Shares			Deferred Compensation Plans Trust			Accumulated Other Comprehensive Income (Loss)			Total Equity
BALANCE—January 1, 2004		—		—	$	23,250,893		—			—		$	723,813		$	23,974,706
Comprehensive income:
Net income						1,419,126											1,419,126
Net change in unrealized loss on securities available for sale, net of taxes of $(506,661)														(791,179	)		(791,179	)
Comprehensive income																	627,947
BALANCE—June 30, 2004		—		—	$	24,670,019		—			—		$	(67,366	)	$	24,602,653

See notes to unaudited condensed consolidated financial statements.

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OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended June 30,
	2005			2004
OPERATING ACTIVITIES:
Net income	$	1,532,161		$	1,419,126
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		676,918			733,132
Provision for loan losses		150,000			180,000
Deferred income taxes		89,983			375,707
Loss on sale of office properties and equipment		—			1,754
Income on cash surrender value of life insurance		(136,000	)		(149,964	)
ESOP shares committed to be released		114,500			—
Excess of fair market value above cost of ESOP shares		8,015			—
Changes in assets and liabilities which provided (used) cash:
Accrued interest receivable		(125,632	)		(1,923	)
Prepaid expenses and other assets		(181,735	)		184,240
Accrued interest payable		769			559
Other liabilities		431,948			(1,114,076	)
Net cash provided by operating activities		2,560,927			1,628,555
INVESTING ACTIVITIES:
Principal collected on:
Mortgage-backed securities held to maturity		224,582			173,063
Mortgage-backed securities available for sale		6,792,461			10,873,756
Loans originated, net of repayments		(33,285,126	)		(12,790,074	)
Purchases of:
Loans receivable		—			(464,000	)
Mortgage-backed securities held to maturity		(3,993,750	)		(1,070,442	)
Mortgage-backed securities available for sale		—			(2,532,188	)
Investment securities held to maturity		(1,900,000	)		(1,910,010	)
Investment securities available for sale		(3,998,125	)		(21,125,136	)
Federal Home Loan Bank Stock		(289,500	)		(286,300	)
Office properties and equipment		(742,153	)		(864,435	)
Proceeds from maturities of:
Investment securities held to maturity		665,000			—
Investment securities available for sale		5,781,274			25,658,716
Purchase of life insurance contracts		(85,100	)		(293,900	)
Net cash used in investing activities		(30,830,437	)		(4,630,950	)
FINANCING ACTIVITIES:
Increase in deposits		15,374,040			20,335,991
Increase (decrease) in securities sold under agreements to repurchase		1,650,000			(480,000	)
Repayment of other borrowings		—			(365,595	)
Purchase of shares by deferred compensation plans trust		(25,438	)		—
Increase in advances from borrowers for taxes and insurance		267,463			317,339
Net cash provided by financing activities		17,266,065			19,807,735
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(11,003,445	)		16,805,340
CASH AND CASH EQUIVALENTS—Beginning of period		47,395,819			28,758,859
CASH AND CASH EQUIVALENTS—End of period	$	36,392,374		$	45,564,199
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION—Cash paid during the period for:
Interest	$	5,097,120		$	4,500,610
Income taxes	$	485,013		$	1,447,400

See notes to unaudited condensed consolidated financial statements.

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OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Basis of Financial Statement Presentation - The unaudited condensed consolidated financial statements include the accounts of Ocean Shore Holding Co. (the “Company”) and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements were prepared in accordance with instructions to Form 10-Q and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations, changes in stockholders’ equity and cash flows in conformity with accounting principles generally accepted in the United States of America. However, all normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the consolidated financial statements have been included. These financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes thereto included in the Company’s Annual Report on Form 10-K for the period ended December 31, 2004. The results for the three and six months ended June 30, 2005 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2005 or any other period.

Use of Estimates in the Preparation of Financial Statements - The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. The significant estimates include the allowance for loan losses and deferred tax asset. Actual results could differ from those estimates.

Investment and Mortgage-Backed Securities - The Company accounts for debt and equity securities as follows:

a. Held to Maturity - Debt securities that management has the positive intent and ability to hold until maturity are classified as held to maturity and are carried at their remaining unpaid principal balance, net of unamortized premiums or unaccreted discounts. Premiums are amortized and discounts are accreted using a method which produces results which approximate the interest method over the estimated remaining term of the underlying security.

b. Available for Sale - Debt and equity securities that will be held for indefinite periods of time, including securities that may be sold in response to changes in market interest or prepayment rates, needs for liquidity and changes in the availability of and the yield of alternative investments are classified as available for sale. These securities are carried at estimated fair value, which is based on market value. Market value is determined using published quotes as of the close of business. Unrealized gains and losses are excluded from earnings and are reported net of tax in other comprehensive income. Upon the sale of securities, any unamortized premium or unaccreted discount is considered in the determination of gain or loss from the sale. Realized gains and losses on the sale of securities are recognized utilizing the specific identification method. There were no sales of available for sale securities for the three or six months ended June 30, 2005 or 2004.

For all securities that are in an unrealized loss position for an extended period of time and for all securities whose fair value is significantly below amortized cost, the Company performs an evaluation of the specific events attributable to the market decline of the security. The Company considers the length of time and extent to which the security’s market value has been below cost, as well as the general market conditions, industry characteristics and the fundamental operating results of the issuer to determine if the decline is other than temporary. The Company also considers as part of the evaluation its intent and ability to hold the security until its market value has recovered to a level at least equal to the amortized cost. When the Company determines that a security’s unrealized loss is other than temporary, a realized

5

loss is recognized in the period in which the decline in value is determined to be other than temporary. The write-downs are measured based on public market prices of the security at the time the Company determines the decline in value was other than temporary.

In March 2004, the Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force (“EITF”) reached a consensus regarding EITF 03-1, “The Meaning of Other-than-Temporary Impairment and its Application to Certain Investments.” The consensus provides guidance for evaluating whether an investment is other-than-temporarily impaired and was effective for other-than-temporary impairment evaluations made in reporting periods beginning after June 15, 2004. However, the guidance related to the recognition of impaired losses has been delayed by FASB Staff Position (“FSP”) EITF Issue 03-1-1. The delay of the effective date for this guidance will be superseded concurrent with the final issuance of proposed FSP EITF Issue 03-1-a. The proposed FSP would provide implementation guidance with respect to debt securities that are impaired solely due to interest rates and/or sector spreads and analyzed for other-than-temporary impairment. On June 29, 2005, the FASB decided to keep the accounting for certain debt securities as is and not to make the changes suggested in the proposed FSP. The FASB’s proposed FSP would have established new rules for determining when permanent write-downs should be made through earnings for certain available for sale securities under EITF 03-1. The FASB will issue a final FSP, but it will codify existing accounting guidance rather than change the accounting. Under existing accounting rules, such securities are currently marked to market, but the market changes are reflected in the other comprehensive income (loss) component of stockholders’ equity rather than earnings. The revised FSP will apply to evaluations made after September 15, 2005. The disclosure provisions of EITF 03-1 continue to be effective for the Company’s consolidated financial statements and have been included in its consolidated financial statements for the year ended December 31, 2004. The Company does not anticipate the changes in accounting guidance to have a material impact on its financial position.

In December 2004, the FASB revised Statement of Financial Accounting Standards (“SFAS”) No. 123, “Share-Based Payment,” to require the recognition of expenses related to share-based payment transactions, including employee stock option grants, based on the fair value of the equity instruments issued. The Company is required to adopt SFAS No. 123(R) in the first quarter of 2006. Effective with the first quarter of 2006, the Company will recognize an expense over the required service period for any stock options granted, modified, cancelled or repurchased after that date and for the portion of grants for which the requisite service has not yet been rendered, based on the grant-date fair value of those awards. The Company is currently evaluating the impact that the adoption of SFAS No. 123(R) will have to its consolidated financial statements. The Company has not granted any share-based payments to date, but anticipates such grants will be made under the option plan approved by stockholders on July 13, 2005.

In July 2005, the FASB issued an exposure draft on a proposed interpretation of SFAS No. 109, “Accounting for Income Taxes.” This exposure draft is designed to end the diverse accounting methods used for accounting for uncertain tax positions. The proposed model is a benefit recognition model and stipulates that a benefit from a tax position should only be recorded when it is probable. The benefit should be recorded at management’s best estimate. The proposed interpretation would be effective as of the end of the first annual period after December 15, 2005. Any changes to net assets as a result of applying the proposed interpretation would be recorded as a cumulative effect of a change in accounting principle. Management is in the process of assessing the impact this interpretation will have on its financial statements.

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2. INVESTMENT SECURITIES

Investment securities are summarized as follows:

	June 30, 2005
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
Held to Maturity
Debt securities -
Municipal securities	$	9,617,169	$	6,278	$	450	$	9,622,997
Available for Sale
Debt securities -
U.S. Government and Federal Agencies	$	24,016,792	$	11,230	$	260,616	$	23,767,406
Municipal securities		4,948,802		109,394		—		5,058,196
Corporate		15,153,598		347,518		36,212		15,464,904
Equity securities		8,028,770		182,812		193,487		8,018,095
Total available for sale securities	$	52,147,962	$	650,954	$	490,315	$	52,308,601
	December 31, 2004
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
Held to Maturity
Debt securities -
Municipal securities	$	8,387,127	$	13,575	$	2,567	$	8,398,135
Available for Sale
Debt securities -
U.S. Government and Federal Agencies	$	20,516,995	$	16,955	$	174,214	$	20,359,736
Municipal securities		4,947,840		122,004		—		5,069,844
Corporate		20,573,986		294,900		163,346		20,705,540
Equity securities		8,028,769		206,230		136,336		8,098,663
Total available for sale securities	$	54,067,590	$	640,089	$	473,896	$	54,233,783

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The following table provides the gross unrealized losses and fair value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position at June 30, 2005 and December 31, 2004:

	June 30, 2005
	Less Than 12 Months				12 Months or Longer				Total
	Estimated Fair Value		Gross Unrealized Loss		Estimated Fair Value		Gross Unrealized Loss		Estimated Fair Value		Gross Unrealized Loss
Debt securities -
Municipal securities	$	—	$	—	$	459,869	$	450	$	459,869	$	450
U.S. Government and Federal Agencies		11,716,893		85,457		11,067,530		175,159		22,784,423		260,616
Corporate		3,558,566		16,885		2,703,083		19,327		6,261,649		36,212
Equity securities		—		—		7,832,687		193,487		7,832,687		193,487
Total	$	15,275,459	$	102,342	$	22,063,169	$	388,423	$	37,338,628	$	490,765
	December 31, 2004
	Less Than 12 Months				12 Months or Longer				Total
	Estimated Fair Value		Gross Unrealized Loss		Estimated Fair Value		Gross Unrealized Loss		Estimated Fair Value		Gross Unrealized Loss
Debt securities -
Municipal securities	$	1,127,709	$	2,567	$	—	$	—	$	1,127,709	$	2,567
U.S. Government and Federal Agencies		19,063,571		174,214		—		—		19,063,571		174,214
Corporate		9,133,328		126,344		2,102,622		37,002		11,235,950		163,346
Equity securities		—		—		7,889,837		136,336		7,889,837		136,336
Total	$	29,324,608	$	303,125	$	9,992,459	$	173,338	$	39,317,067	$	476,463

Management believes that the estimated fair value of the securities is dependent upon the movement in market interest rates and that the unrealized losses are temporary. The determination of whether a decline in market value is other than temporary is necessarily a matter of subjective judgment. The timing and amount of any realized losses reported in the Company’s financial statements could vary if conclusions other than those made by management were to determine whether an other than temporary impairment exists.

At June 30, 2005, fourteen debt and equity securities had aggregate depreciation of 1.73% from the Company’s amortized cost basis for 12 months or longer. The unrealized loss relates principally to the changes in market interest rates. As management has the ability and intent to hold these debt securities until maturity, or for the foreseeable future, no decline is deemed to be other than temporary. Unrealized losses on marketable equity securities that are in excess of cost, and that have been sustained for 12 months, are generally recognized by management as being other than temporary and charged to earnings, unless evidence exists to support a realizable value equal to or greater than the Company’s carrying value of the investment. Although these equity securities have unrealized losses sustained for more than 12 months, no credit issues have been identified that cause management to believe that declines in market value are other than temporary.

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The amortized cost and estimated fair value of debt securities available for sale at June 30, 2005 by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2005
	Held to Maturity Securities				Available for Sale Securities
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due within 1 year	$	9,617,169	$	9,622,997	$	7,685,543	$	7,649,438
Due after 1 year through 5 years		—		—		20,657,357		20,406,004
Due after 5 years through 10 years		—		—		2,971,754		2,986,734
Due after 10 years		—		—		12,804,538		13,248,330
Total	$	9,617,169	$	9,622,997	$	44,119,192	$	44,290,506

3. MORTGAGE-BACKED SECURITIES

Mortgage-backed securities are summarized as follows:

	June 30, 2005
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
Held to Maturity
GNMA pass-through certificates	$	203,845	$	8,967	$	—	$	212,812
FHLMC pass-through certificates		4,463		411		—		4,874
FNMA pass-through certificates		5,713,111		42,483		15,675		5,739,919
Total	$	5,921,419	$	51,861	$	15,675	$	5,957,605
Available for Sale
FHLMC pass-through certificates	$	13,876,408	$	90,293	$	113,660	$	13,853,041
GNMA pass-through certificates		5,741,783		130,716		12,471		5,860,028
FNMA pass-through certificates		25,210,935		127,063		135,297		25,202,701
Small Business Administration certificates		41,484		—		170		41,314
Total	$	44,870,610	$	348,072	$	261,598	$	44,957,084
	December 31, 2004
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
Held to Maturity
GNMA pass-through certificates	$	242,569	$	11,567	$	—	$	254,136
FHLMC pass-through certificates		4,926		571		—		5,497
FNMA pass-through certificates		1,909,406		7,586		14,725		1,902,267
Total	$	2,156,901	$	19,724	$	14,725	$	2,161,900
Available for Sale
FHLMC pass-through certificates	$	15,281,497	$	95,144	$	94,633	$	15,282,008
GNMA pass-through certificates		7,448,140		193,516		8,023		7,633,633
FNMA pass-through certificates		28,924,246		226,983		120,560		29,030,669
Small Business Administration certificates		78,494		—		169		78,325
Total	$	51,732,377	$	15,643	$	223,385	$	52,024,635

9

The following table provides the gross unrealized losses and fair value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position at June 30, 2005 and December 31, 2004:

	June 30, 2005
	Less Than 12 Months				12 Months or Longer				Total
	Estimated Fair Value		Gross Unrealized Loss		Estimated Fair Value		Gross Unrealized Loss		Estimated Fair Value		Gross Unrealized Loss
FNMA pass-through certificates-held-to-maturity	$	625,738	$	4,202	$	938,954	$	11,474	$	1,564,692	$	15,676
SBA pass-through certificates		41,314		170		—		—		41,314		170
FHLMC pass-through certificates		1,186,838		13,866		5,972,575		99,793		7,159,413		113,659
GNMA pass-through certificates		1,384,301		12,471		—		—		1,384,301		12,471
FNMA pass-through certificates		9,895,735		35,165		8,327,057		100,132		18,222,792		135,297
Total	$	13,133,926	$	65,874	$	15,238,586	$	211,399	$	28,372,512	$	277,273
	December 31, 2004
	Less Than 12 Months				12 Months or Longer				Total
	Estimated Fair Value		Gross Unrealized Loss		Estimated Fair Value		Gross Unrealized Loss		Estimated Fair Value		Gross Unrealized Loss
FNMA pass-through certificates-held-to-maturity	$	1,678,170	$	14,725	$	—	$	—	$	1,678,170	$	14,725
SBA pass-through certificates		78,325		169		—		—		78,325		169
FHLMC pass-through certificates		5,061,891		55,189		2,897,612		39,444		7,959,503		94,633
GNMA pass-through certificates		1,976,340		8,023		—		—		1,976,340		8,023
FNMA pass-through certificates		13,285,743		101,173		2,072,330		19,387		15,358,073		120,560
Total	$	22,080,469	$	179,279	$	4,969,942	$	58,831	$	27,050,411	$	238,110

Management believes that the estimated fair value of the securities is dependent upon the movement in market interest rates and that the unrealized losses are temporary. The determination of whether a decline in market value is other than temporary is necessarily a matter of subjective judgment. The timing and amount of any realized losses reported in the Company’s financial statements could vary if conclusions other than those made by management were to determine whether an other than temporary impairment exists.

At June 30, 2005, ten mortgage-backed securities had aggregate depreciation of 1.37% from the Company’s amortized cost basis for 12 months or longer. The unrealized losses relate principally to the changes in market interest rates. As management has the ability and intent to hold these debt securities until maturity, or for the foreseeable future, no declines are deemed to be other than temporary.

10

4. LOANS RECEIVABLE

Loans receivable consist of the following:

	June 30, 2005			December 31, 2004
Real estate - mortgage:
One-to four-family residential	$	271,771,042		$	247,610,013
Commercial and multi-family		27,059,682			26,482,515
Total real estate-mortgage		298,830,724			274,092,528
Real estate - construction:
Residential		8,364,450			5,034,900
Commercial		8,382,105			7,719,097
Total real estate - construction		16,746,555			12,753,997
Commercial		12,329,806			14,110,846
Consumer
Home equity		45,022,652			39,264,550
Other consumer loans		1,403,044			1,244,022
Total consumer loans		46,425,695			40,508,572
Total loans		374,332,780			341,465,943
Net deferred loan cost		899,906			585,576
Allowance for loan losses		(1,614,018	)		(1,466,295	)
Net total loans	$	373,618,668		$	340,585,224

Changes in the allowance for loan losses are as follows:

	Six Months Ended June 30,
	2005			2004
Balance at January 1	$	1,466,295		$	1,116,156
Provision for loan loss		150,000			180,000
Charge-offs		(4,466	)		(7,947	)
Recoveries		2,189			3,792
Balance at June 30	$	1,614,018		$	1,292,001

11

5. DEPOSITS

Deposits consist of the following major classifications:

	June 30, 2005				December 31, 2004
	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
NOW and other demand deposit accounts	$	217,019,935	1.19	%	$	204,817,923	1.08	%
Passbook savings and club accounts		93,252,120	1.17	%		94,915,239	1.14	%
Subtotal		310,272,055				299,733,162
Certificates with original maturities:
Within one year		36,950,477	2.47	%		34,989,278	1.84	%
One to three years		41,128,993	2.96	%		39,920,944	2.73	%
Three years and beyond		42,350,595	4.78	%		40,684,695	4.80	%
Total certificates		120,430,065				115,594,917
Total	$	430,702,120			$	415,328,079

The aggregate amount of certificate accounts in denominations of $100,000 or more at June 30, 2005 and December 31, 2004 amounted to $36,863,250 and $32,603,182, respectively.

Municipal demand deposit accounts in denominations of $100,000 or more at June 30, 2005 and December 31, 2004 amounted to $55,709,465 and $61,146,314, respectively.

6. EARNINGS PER SHARE

Basic net income per share is based upon the weighted average number of common shares outstanding, while diluted net income per share is based upon the weighted average number of common shares outstanding and common share equivalents that would arise from the exercise of dilutive securities.

The difference between the common shares issued and the common shares outstanding, for the purposes of calculating basic earnings per share, is a result of the unallocated ESOP shares.

The calculated basic and diluted earnings per share (“EPS”) are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2005		2004		2005		2004
Numerator	$	789,864	$	729,064	$	1,532,160	$	1,419,126
Denominators:
Basic shares outstanding		8,450,731		N/A		8,447,868		N/A
Effect of diluted securities		None		N/A		None		N/A
Earnings per share:
Basic and diluted	$	0.09		N/A	$	0.18		N/A

12

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT

This Quarterly Report may contain forward-looking statements within the meaning of the federal securities laws. These statements are not historical facts, but rather are statements based on Ocean Shore Holding’s current expectations regarding its business strategies and their intended results and its future performance. Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions.

Management’s ability to predict results or the effect of future plans or strategies is inherently uncertain. These factors include, but are not limited to, general economic conditions, changes in the interest rate environment, legislative or regulatory changes that may adversely affect our business, changes in accounting policies and practices, changes in competition and demand for financial services, adverse changes in the securities markets and changes in the quality or composition of the Company’s loan or investment portfolios. Additional factors that may affect our results are discussed in our Annual Report on Form 10-K for the year ended December 31, 2004 under “Item 1. Business – Risk Factors.” These factors should be considered in evaluating the forward-looking statements and undue reliance should not be placed on such statements. Ocean Shore Holding assumes no obligation to update any forward-looking statements.

GENERAL

Ocean Shore Holding Co. (“Ocean Shore Holding” or the “Company”) is a federally chartered savings and loan holding company established in 1998 to be the holding company for Ocean City Home Bank (the “Bank”). Ocean Shore Holding’s business activity is the ownership of the outstanding capital stock of Ocean City Home Bank. Accordingly, the information set forth in this report, including the consolidated financial statements and related financial data, relates primarily to the Bank.

The Bank is a federally chartered savings bank. We operate as a community-oriented financial institution offering a wide range of financial services to consumers and businesses in our market area. We attract deposits from the general public, small businesses and municipalities and use those funds to originate real estate loans, small commercial loans and consumer loans, which we hold primarily for investment.

On December 21, 2004, the Company completed its initial public offering, issuing a total of 8,762,742 shares of the Company’s common stock, of which 4,761,000 shares, or 54.3%, were issued to OC Financial MHC, 343,499 shares, or 3.9%, were issued to the Bank’s Employee Stock Ownership Plan, 166,492 shares, or 1.9%, were issued to the Ocean City Home Charitable Foundation, and 3,491,751 shares, or 39.8%, were issued to eligible depositors. Net proceeds of the offering were $36.8 million.

COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2005 AND DECEMBER 31, 2004

Total assets of the Company increased by $19.2 million to $547.7 million at June 30, 2005, from $528.4 million at December 31, 2004. Total loans receivable increased $33.0 million offset by decreases of $11.0 million of cash and cash equivalents and $3.3 million of mortgage backed securities.

Investments

Investments decreased $695,000 to $61.9 million at June 30, 2005 from $62.6 million at December 31, 2004. Purchases of $5.9 million of agency notes and municipals were offset by maturities totaling $6.7 million. Mortgage-backed securities decreased by $3.3 million to $50.9 million as purchases of $4.0 million were offset by payments received and fluctuations in market value of investments totaling $7.3 million.

13

Loans

Loans receivable increased $33.0 million to $373.6 million at June 30, 2005 from $340.6 million at December 31, 2004. Loan originations totaled $76.2 million for the six months ended June 30, 2005 including mortgage loan originations of $49.4 million, consumer loan originations of $16.2 million and $10.6 million in commercial loan originations. Originations were offset by $43.2 million in normal loan payments and payoffs.

The following table summarizes changes in the loan portfolio in the six months ended June 30, 2005.

	June 30, 2005			December 31, 2004			$ change			% change
	(Dollars in thousands)
Real estate - mortgage:
One-to four-family residential	$	271,771		$	247,610		$	24,161		9.8	%
Commercial and multi-family		27,060			26,483			577		2.2
Other		—			—			—
Total real estate-mortgage		298,831			274,093			24,738		9.0
Real estate - construction:
Residential		8,364			5,035			3,329		66.1
Commercial		8,382			7,719			663		8.6
Total real estate - construction		16,746			12,754			3,992		31.3
Commercial		12,330			14,111			(1,781	)	-12.6
Consumer
Home equity		45,023			39,264			5,759		14.7
Other consumer loans		1,403			1,244			159		12.8
Total consumer loans		46,426			40,508			5,918		14.6
Total loans		374,333			341,466			32,867		9.6
Net deferred loan cost		900			585			315		53.7
Allowance for loan losses		(1,614	)		(1,466	)		(148	)	10.1
Net total loans	$	373,619		$	340,585		$	33,034		9.7

Non-Performing Assets

Non-performing assets totaled $68,000 at June 30, 2005. Net charge-offs were $2,000 in the six months ended June 30, 2005, compared to $4,000 in the same period last year. The allowance for loan losses was 0.43% of total loans at June 30, 2005 compared to 0.41% of total loans at June 30, 2004.

	Six Months Ended June 30,
	2005			2004
	(In thousands)
Allowance for Loan Losses:
Allowance at beginning of period	$	1,466		$	1,116
Provision for loan losses		150			180
Recoveries		2			4
Charge-offs		4			8
Net charge-offs		2			4
Allowance at end of period	$	1,614		$	1,292
Allowance for loan losses as a percent of total loans		0.43	%		0.41	%
Allowance for loan losses as a percent of nonperforming loans		N/M			N/M

14

	June 30, 2005			December 31, 2004
	(In thousands)
Nonperforming Assets
Nonaccrual loans:
Mortgage loans	$	60		$	—
Commercial business loans		—			—
Consumer loans		8			4
Total		68			4
Real estate owned		—			—
Other nonperforming assets		—			—
Total nonperforming assets	$	68		$	4
Nonperforming loans as a percent of total loans		0.02	%		N/M
Nonperforming assets as a percent of total assets		0.01	%		N/M

Deposits

Deposits increased by $15.4 million, or 3.7% to $430.7 million at June 30, 2005 from $415.3 million at December 31, 2004. An increase in commercial checking of $13.0 million and consumer checking of $4.6 million was offset by a decrease in municipal checking of $5.4 million. An increase in certificates of deposit of $4.8 million was offset by a decrease in savings accounts of $1.6 million.

The following table summarizes changes in deposits in the six months ended June 30, 2005.

	June 30, 2005		December 31, 2004		$ Change			% Change
	(Dollars in thousands)
NOW and other demand deposit accounts	$	217,020	$	204,818	$	12,202		6.0	%
Passbook savings and club accounts		93,252		94,915		(1,663	)	(1.8	)
Subtotal		310,272		299,733		10,539		3.5
Certificates with original maturities:
Within one year		36,950		34,989		1,961		5.6
One to three years		41,129		39,921		1,208		3.0
Three years and beyond		42,351		40,685		1,666		4.1
Total certificates		120,430		115,595		4,835		4.2
Total	$	430,702	$	415,328	$	15,374		3.7

Borrowings

Federal Home Loan Bank advances were unchanged at June 30, 2005 from December 31, 2004. Other borrowings increased $1.7 million from $22.8 million at December 31, 2004 to $24.5 million June 30, 2005. The additional borrowings of $4.0 million were used for the purchase of MBS securities offset by repayments and pay downs of $2.3 million.

Stockholders’ Equity

Stockholders’ equity increased by $1.5 million to $61.3 million at June 30, 2005 from $59.8 million at December 31, 2005 as a result from current period earnings of $1.5 million.

15

COMPARISON OF OPERATING RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004

Net income was $790,000 for the three months ended June 30, 2005 as compared to $729,000 for the three months ended June 30, 2004. The $61,000, or 8.3% increase in 2005 from 2004, was due to an increase in net interest income of $488,000 and decrease in provision for loan losses of $15,000 offset by a decrease in other income of $7,000, an increase in other expenses of $333,000 and an increase in income tax expense of $102,000. The decrease of return on average equity resulted from the proceeds of the December 2004 stock offering being added to stockholders’ equity.

Net income was $1,532,000 for the six months ended June 30, 2005 as compared to $1,419,000 for the six months ended June 30, 2004. The $113,000, or 8.0% increase in 2005 from 2004, was due to an increase in net interest income of $750,000, a decrease in provision for loan losses of $30,000 and an increase in other income of $21,000 offset by an increase in other expenses of $592,000 and an increase in income tax expense of $96,000. The decrease of return on average equity resulted from the proceeds of the December 2004 stock offering being added to stockholders’ equity.

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
	(Dollars in thousands, except per share data)
Net income	$	790		$	729		$	1,532		$	1,419
Basic and diluted earnings per share	$	0.09			N/A		$	0.18			N/A
Return on average assets (annualized)		0.58	%		0.59	%		0.57	%		0.58	%
Return on average equity (annualized)		5.23	%		11.42	%		5.08	%		11.36	%

Net Interest Income

The following table summarizes changes in interest income and interest expense for the three-month periods ended June 30, 2005 and 2004.

	Three Months Ended June 30,				$ Change			% Change
	2005		2004
	(Dollars in thousands)
INTEREST INCOME:
Loans	$	5,044	$	4,321	$	723		16.7
Investment securities		1,212		1,159		53		4.6
Other interest-earning assets		155		64		91		142.2
Total interest income		6,411		5,544		867		15.6
INTEREST EXPENSE:
Deposits		1,912		1,503		409		27.2
Borrowings		714		744		(30	)	(4.0	)
Total interest expense		2,626		2,247		379		16.8
Net interest income	$	3,785	$	3,297	$	488		14.8

Interest income increased by $867,000 in the second quarter of 2005 compared to the second quarter of 2004, reflecting an increase in loan income of $723,000 and an increase in investment income of $144,000. The increase in loan income resulted from an increase in the average balance of loans of $50.0 million and an increase in yield of 3 basis points. The increase in investment income resulted from an increase in yield of 23 basis points offset by a decrease in the average balance of $1.5 million. Other interest earning assets income increase resulted from an increase in the average yield in fed funds sold of 190 basis points offset by a lower average balance of $3.7 million.

16

Interest expense increased by $378,000, reflecting an increase in municipal deposit expense of $243,000, an increase in time deposit expense of $143,000, an increase in all other deposits of $23,000 and a decrease in interest expense on borrowings of $31,000. Municipal deposit expense increased as a result of rising interest rates, while time deposit expense increased as a result of deposit growth and an increase in the average rate paid. Other deposit expense increased as a result of deposit growth. Borrowing expense decreased as a result of lower average balance of borrowings. In December 2004, proceeds were used from the recently completed stock offering to reduce securities sold under agreements to repurchase and other borrowings.

The interest rate spread and net interest margin were 2.75% and 3.05% respectively, for the three months ended June 30, 2005 compared to 2.83% and 2.92% for the same period in 2004. The yield on interest earning assets increased as the yield on loans increased slightly and short-term investments were reinvested in higher yielding investments due to generally higher market interest rates in the short term end of the yield curve. The continued rise in short-term interest rates increased the cost of interest expense on deposits and borrowings.

The following table summarizes changes in interest income and interest expense for the six-month periods ended June 30, 2005 and 2004.

	Six Months Ended June 30,				$ Change			% Change
	2005		2004
	(Dollars in thousands)
INTEREST INCOME:
Loans	$	9,796	$	8,634	$	1,162		13.5
Investment securities		2,380		2,408		(28	)	(1.2	)
Other interest-earning assets		326		113		213		188.5
Total interest income		12,502		11,155		1,347		12.1
INTEREST EXPENSE:
Deposits		3,693		3,009		684		22.7
Borrowings		1,405		1,492		(87	)	(5.8	)
Total interest expense		5,098		4,501		597		13.3
Net interest income	$	7,404	$	6,654	$	750		11.3

Interest income increased by $1.3 million in the six months ended June 30, 2005 compared to the same period in 2004, reflecting increases in loan income and other interest-earning assets income offset by a decrease in investment income. The increase in loan income resulted from an increase in the average balance of loans of $44.2 million offset by a decline in the average yield of 5 basis points. Investment income increased $76,000, income in Fed funds sold increased $213,000 and income in mortgage-backed securities decreased by $104,000.

Interest expense increased by $597,000, reflecting an increase in municipal deposit expense of $435,000, an increase in time deposit expense of $204,000, and an increase in other checking and savings deposit expense of $45,000 and a decrease in interest expense on borrowings of $87,000. Municipal deposit expense increased as a result of rising interest rates, while time deposit expense increased as a result of deposit growth and an increase in the average rate paid. Other checking and savings deposit expense increased as a result of higher deposit balances. Borrowing expense decreased as a result of lower average balance of borrowings. In December 2004, proceeds were used from the recently completed stock offering to reduce securities sold under agreements to repurchase and other borrowings.

The interest rate spread and net interest margin of the Company were 2.73% and 3.02% respectively, for the six months ended June 30, 2005 compared to 2.89% and 2.98% for the same period in 2004. The yield on interest earning assets increased as short-term investments were reinvested in higher yielding investments due to generally higher market interest rates in the short-term end of the yield curve offset by a 5 basis point lower yield on loans. The continued rise in short-term interest rates increased the cost of interest expense on deposits and borrowings.

17

The following table presents information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented. The balances of yields and costs are annualized for presentation purposes. For purposes of this table, average balances have been calculated using the average daily balances and nonaccrual loans are included in average balances only. Loan fees are included in interest income on loans and are insignificant. Interest income on loans and investment securities has not been calculated on a tax equivalent basis because the impact would be insignificant.

Average Balance Tables

	Three Months Ended June 30, 2005							Three Months Ended June 30, 2004
	Average Balance			Interest and Dividends		Yield/ Cost		Average Balance			Interest and Dividends		Yield/ Cost
	(Dollars in thousands)
Assets:
Interest-earning assets:
Loans	$	359,845		$	5,044	5.61	%	$	309,876		$	4,321	5.58	%
Investment securities		114,750			1,212	4.22	%		116,253			1,159	3.99	%
Other interest-earning assets		21,208			155	2.93	%		24,904			64	1.03	%
Total interest-earning assets		495,803			6,411	5.17	%		451,033			5,544	4.92	%
Noninterest-earning assets		46,166							42,530
Total assets	$	541,969						$	493,563
Liabilities and equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	170,947			644	1.51	%	$	161,130			383	0.95	%
Savings accounts		93,556			273	1.17	%		94,621			267	1.13	%
Certificates of deposit		118,765			995	3.35	%		113,120			853	3.02	%
Total interest-bearing deposits		383,268			1,912	2.00	%		368,871			1,503	1.63	%
FHLB advances		10,000			78	3.10	%		10,000			78	3.10	%
Securities sold under agreements to repurchase		24,892			301	4.83	%		33,742			304	3.61	%
Subordinated debt		15,464			335	8.67	%		15,464			335	8.67	%
Other borrowings		0			0	0.00	%		1,728			27	6.26	%
Total borrowings		50,356			714	5.67	%		60,934			744	4.89	%
Total interest-bearing liabilities		433,624			2,626	2.42	%		429,805			2,247	2.09	%
Noninterest-bearing liabilities		47,941							38,233
Total liabilities		481,565							468,038
Retained earnings		60,404							25,525
Total liabilities and retained earnings	$	541,969						$	493,563
Net interest income				$	3,785						$	3,297
Interest rate spread						2.75	%						2.83	%
Net interest margin						3.05	%						2.92	%
Average interest-earning assets to average interest-bearing liabilities		114.34	%						104.94	%

18

Average Balance Tables

	Six Months Ended June 30, 2005							Six Months Ended June 30, 2004
	Average Balance			Interest and Dividends		Yield/ Cost		Average Balance			Interest and Dividends		Yield/ Cost
	(Dollars in thousands)
Assets:
Interest-earning assets:
Loans	$	351,047		$	9,796	5.58	%	$	306,827		$	8,634	5.63	%
Investment securities		114,826			2,380	4.15	%		117,932			2,408	4.08	%
Other interest-earning assets		24,584			326	2.65	%		22,424			113	1.01	%
Total interest-earning assets		490,456			12,502	5.10	%		447,183			11,155	4.99	%
Noninterest-earning assets		44,848							40,959
Total assets	$	535,304						$	488,142
Liabilities and equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	170,361			1,235	1.45	%	$	161,242			771	0.96	%
Savings accounts		94,224			542	1.15	%		93,151			526	1.13	%
Certificates of deposit		117,120			1,916	3.27	%		112,945			1,712	3.03	%
Total interest-bearing deposits		381,705			3,693	1.93	%		367,338			3,009	1.64	%
FHLB advances		10,000			154	3.08	%		10,000			155	3.09	%
Securities sold under agreements to repurchase		23,924			580	4.85	%		33,870			610	3.60	%
Subordinated debt		15,464			670	8.67	%		15,464			670	8.67	%
Other borrowings		0			0	0.00	%		1,820			57	6.25	%
Total borrowings		49,388			1,404	5.69	%		61,154			1,492	4.88	%
Total interest-bearing liabilities		431,093			5,097	2.36	%		428,492			4,501	2.10	%
Noninterest-bearing liabilities		43,847							34,665
Total liabilities		474,940							463,157
Retained earnings		60,364							24,985
Total liabilities and retained earnings	$	535,304						$	488,142
Net interest income				$	7,405						$	6,654
Interest rate spread						2.73	%						2.89	%
Net interest margin						3.02	%						2.98	%
Average interest-earning assets to average interest-bearing liabilities		113.77	%						104.36	%

Provision for Loan Losses

We review the level of the allowance for loan losses on a monthly basis and establish the provision for loan losses based on the volume and types of lending, delinquency levels, loss experience, the amount of classified loans, economic conditions and other factors related to the collectibility of the loan portfolio. The provision for loan losses was $75,000 and $150,000 for the three and six months ended June 30, 2005 respectively, compared to $90,000 and $180,000 for the three and six months ended June 30, 2004. Net charge-offs (recoveries) were $(1,000) and $2,000 for the three and six months ended June 30, 2005, respectively, compared to $(3,000) and $4,000 for the three and six months ended June 30, 2004. The change in the level of provision for loan loses was due to growth in the loan portfolio, however based on the factors used in the determination of the level of allowance the Company deemed it reasonable to reduce the quarterly provision.

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Other Income

The following table summarizes other income for three months ended June 30, 2005 and 2004 and the changes between the periods.

	Three Months Ended June 30,				% Change
	2005		2004
	(Dollars in thousands)
OTHER INCOME:
Service charges	$	384	$	382	0.5	%
Cash surrender value of life insurance		63		80	(21.5	)
Other		125		117	6.5
Total other income	$	572	$	579	(1.3	)

Other income decreased $8,000, or (1.3%), to $572,000 for the three-month period ended June 30, 2005 from the same period in 2004. An increase in service charges and fees was offset by a decrease in the income on the surrender value of bank-owned life insurance.

The following table summarizes other income for six months ended June 30, 2005 and 2004 and the changes between the periods.

	Six Months Ended June 30,				% Change
	2005		2004
	(Dollars in thousands)
OTHER INCOME:
Service charges	$	735	$	744	(1.2	)%
Cash surrender value of life insurance		136		150	(9.3	)
Other		269		224	19.7
Total other income	$	1,140	$	1,118	1.9

Other income increased $21,000, or 1.9%, to $1.14 million for the six-month period ended June 30, 2005 from the same period in 2004. The increase occurred in service charges, fees and loan servicing fees offset by a decrease in the income on the surrender value of bank-owned life insurance.

Other Expense

The following table summarizes other expense for three months ended June 30, 2005 and 2004 and the changes between the periods.

	Three Months Ended June 30,				% Change
	2005		2004
	(Dollars in thousands)
OTHER EXPENSE:
Salaries and employee benefits	$	1,719	$	1,550	10.9	%
Occupancy and equipment		582		538	8.2
Federal insurance premiums		14		15	(2.2	)
Advertising		107		94	14.3
Professional services		204		114	78.9
Other operating expense		340		320	6.2
Total other expense	$	2,966	$	2,633	12.7

Other expenses increased $333,000 to $3.0 million for the three-month period ended June 30, 2005 from the same period in 2004. Salaries and benefits increased due to regular salary increases. Occupancy and equipment increased due primarily to increases in data processing expenses related to improvements to network security. Other operating expenses increased as accounting and legal services increased due to additional compliance requirements associated with being a public company.

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The following table summarizes other expense for six months ended June 30, 2005 and 2004 and the changes between the periods.

	Six Months Ended June 30,				% Change
	2005		2004
	(Dollars in thousands)
OTHER EXPENSE:
Salaries and employee benefits	$	3,458	$	3,149	9.9	%
Occupancy and equipment		1,165		1,080	7.9
Federal insurance premiums		30		30	0.0
Advertising		201		175	15.1
Professional services		363		216	68.0
Other operating expense		661		637	3.8
Total other expense	$	5,878	$	5,287	11.2

Other expenses increased $592,000 to $5.9 million for the six-month period ended June 30, 2005 from the same period in 2004. Salaries and benefits increased due to regular salary increases. Occupancy and equipment increased due primarily to increases in data processing expenses related to improvements to network security. Other operating expenses increased as accounting and legal services increased due to additional compliance requirements associated with being a public company.

Income Taxes

Income taxes increased $102,000 to $526,000 for an effective tax rate of 40.0% for the three months ended June 30, 2005 compared to $424,000 for an effective tax rate of 36.8% from the same period in 2004. The increase was a result of higher net income. The increase in the tax provision resulted from higher levels of pretax income of $1.3 million for the three months ended June 30, 2005 as compared to pretax income of $1.1 million for the comparable 2004 period. Additionally, increased statutory tax rates contributed to increased effective tax rate.

Income taxes increased $97,000 to $984,000 for an effective tax rate of 39.1% for the six months ended June 30, 2005 compared to $888,000 for an effective tax rate of 38.5% from the same period in 2004. The increase in the tax provision resulted from higher levels of pretax income of $2.5 million for the six months ended June 30, 2005 as compared to pretax income of $2.3 million for the comparable 2004 period. Additionally, increased statutory tax rates contributed to increased effective tax rate.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan repayments, maturities and sales of investment securities and borrowings from the Federal Home Loan Bank of New York. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

We regularly adjust our investments in liquid assets based upon our assessment of (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities and (4) the objectives of our asset/liability management policy.

Our most liquid assets are cash and cash equivalents and interest-bearing deposits. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At June 30, 2005, cash and cash equivalents totaled $36.4 million. Securities classified as available-for-sale whose market value exceeds our cost, which provide additional sources of liquidity, totaled $33.6 million at June 30, 2005. In addition, at June 30, 2005, we had the ability to borrow a total of approximately $180.6 million from the Federal Home Loan Bank of New York, which included available overnight lines of credit of $47.2 million. On that date, we had no overnight advances outstanding.

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At June 30, 2005, we had $56.1 million in loan commitments outstanding, which included $29.8 million in undisbursed loans, $20.5 million in unused home equity lines of credit and $5.6 million in commercial lines of credit. Certificates of deposit due within one year of June 30, 2005 totaled $55.8 million, or 46.3% of certificates of deposit. We believe, however, based on past experience that a significant portion of our certificates of deposit will remain with us. We also have the ability to attract and retain deposits by adjusting the interest rates offered.

At June 30, 2005, the Bank exceeded all of its regulatory capital requirements with tangible capital of $55.0 million, or 10.5% of total adjusted assets, which is above the required level of $7.9 million or 1.5%; core capital of $55 million, or 10.5% of total adjusted assets which is above the required level of $21 million or 4%; and risk-based capital of $56.6 million, or 19.9% of risk-weighted assets, which is above the required level of $22.7 million or 8%. The Bank is considered a “well-capitalized” institution under the Office of Thrift Supervision’s prompt corrective action regulations.

MARKET RISK MANAGEMENT

Net Interest Income Simulation Analysis

We analyze our interest rate sensitivity position to manage the risk associated with interest rate movements through the use of interest income simulation. The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest sensitive.” An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within that time period.

Simulation analysis is only an estimate of our interest rate risk exposure at a particular point in time. We continually review the potential effect changes in interest rates could have on the repayment of rate sensitive assets and funding requirements of rate sensitive liabilities.

The following table reflects changes in estimated net interest income only for Ocean Shore Holding.

	At June 30, 2005 Percentage Change in Estimated Net Interest Income Over
	12 Months		24 Months
200 basis point increase in rates	(0.21	)%	2.80	%
100 basis point decrease in rates	0.45	%	(3.93	)%

The 200 and 100 basis point change in rates in the above table is assumed to occur evenly over the following twelve months. Based on the scenario above, net interest income would be adversely affected (within our internal guidelines) in the twelve-month period if rates rose by 200 basis points, but would be positively affected in the twenty-four month period. The reason for the increase in the twenty-four month period is that maturing short-term securities could be reinvested at the higher prevailing rates assumed by the analysis. In addition, if rates declined by 100 basis points net interest income would be adversely affected (within our internal guidelines) in both the twelve- and 24-month periods.

Net Portfolio Value Analysis

In addition to a net interest income simulation analysis, an interest rate sensitivity analysis prepared by the Office of Thrift Supervision is used to review our level of interest rate risk. This analysis measures interest rate risk by computing changes in the net portfolio value of cash flows from assets, liabilities and off-balance sheet items in the event of a range of assumed changes in market interest rates. Net portfolio value represents the market value of portfolio equity and is equal to the market value of assets minus the market value of liabilities, with adjustments made for off-balance sheet items. This analysis assesses the risk of

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loss in market risk sensitive instruments in the event of a sudden and sustained 100 to 300 basis point increase or 100 basis point decreases in market interest rates with no effect given to any steps that we might take to counter the effect of that interest rate movement. Because of the low level of market interest rates, this analysis is not performed for decreases of more than 100 basis points. We measure interest rate risk by modeling the changes in net portfolio value over a variety of interest rate scenarios. The following table, which is based on information that we provide to the Office of Thrift Supervision, presents the change in our net portfolio value at June 30, 2005 that would occur in the event of an immediate change in interest rates based on Office of Thrift Supervision assumptions, with no effect given to any steps that we might take to counteract that change.

	Net Portfolio Value (Dollars in Thousands)							Net Portfolio Value as % of Portfolio Value of Assets
Basis Point (“bp”) Change in Rates	$ Amount		$ Change			% Change		NPV Ratio		Change
300 bp	$	67,027	$	(24,303	)	(27	)%	12.29	%	(344	)bp
200		77,369		(13,961	)	(15	)%	13.84	%	(189	)
100		89,322		(2,008	)	(2	)%	15.55	%	(18	)
0		91,330		—		—		15.73	%	—
(100)		87,902		(3,428	)	(4	)%	15.12	%	(61	)
(200)		81,493		(9,834	)	(11	)%	14.08	%	(165	)
(300)		74,757		(16,573	)	(18	)%	12.97	%	(276	)

The Office of Thrift Supervision uses certain assumptions in assessing the interest rate risk of savings associations. These assumptions relate to interest rates, loan prepayment rates, deposit decay rates, and the market values of certain assets under differing interest rate scenarios, among others. As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable-rate mortgage loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, expected rates of prepayments on loans and early withdrawals from certificates could deviate significantly from those assumed in calculating the table.

OFF-BALANCE SHEET ARRANGEMENTS

In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles, are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments and lines of credit.

For the three and six months ended June 30, 2005, we engaged in no off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The information required by this item is included in Item 2 of this report under “Market Risk Management.”

Item 4. Controls and Procedures

The Company’s management, including the Company’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the

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“Exchange Act”). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial offers, as appropriate to allow timely decisions regarding required disclosure. In addition, based on that evaluation, no change in the Company’s internal control over financial reporting occurred during the quarter ended June 30, 2005 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

Periodically, there have been various claims and lawsuits against us, such as claims to enforce liens, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business. We are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Ocean Shore Holding did not repurchase any of its securities in the quarter ended June 30, 2005.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

The Annual Meeting of Stockholders of the Company was held on May 18, 2005. The results of the vote on the matters presented at the meeting are as follows:

1. The following individuals were elected as directors, each for a three-year term:

	Votes for	Votes Withheld
Sylva A. Bertini	8,578,893	47,046
John L. Van Duyne	8,564,113	61,826
Christopher J. Ford	8,551,718	74,221

2. The appointment of Deloitte & Touche LLP as auditors for the Company for the fiscal year ending December 31, 2005 was ratified by stockholders by the following vote:

For 8,398,597;             Against 48,129

Broker non-votes totaled none.

Item 5. Other Information

None.

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Item 6. Exhibits

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

32.0 Section 1350 Certification of Chief Executive Officer and Chief Financial Officer

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	OCEAN SHORE HOLDING CO.
	(Registrant)
Date: August 11, 2005	/s/ Steven E. Brady
	Steven E. Brady
	President and Chief Executive Officer
Date: August 11, 2005	/s/ Donald F. Morgenweck
	Donald F. Morgenweck
	Chief Financial Officer and Senior Vice President

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