Ocean Shore Holding 10-Q 2005 Q3 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 September 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 by check mark whether the registrant is a shell company (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 September 30, 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	1
	Unaudited Condensed Consolidated Statements of Financial Condition at September 30, 2005 and December 31, 2004	1
	Unaudited Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2005 and 2004	2
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2005 and 2004	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 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	25
Item 4.	Controls and Procedures	25
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults upon Senior Securities	26
Item 4.	Submission of Matters to a Vote of Security Holders	26
Item 5.	Other Information	27
Item 6.	Exhibits	27
SIGNATURES		28

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	September 30, 2005			December 31, 2004
ASSETS
Cash and amounts due from depository institutions	$	15,673,368		$	7,895,819
Federal funds sold		26,000,000			39,500,000
Cash and cash equivalents		41,673,368			47,395,819
Investment securities held to maturity (estimated fair value— 2005, $5,196,191; 2004, $8,398,135)		5,192,600			8,387,127
Investment securities available for sale (amortized cost— 2005, $50,219,505; 2004, $54,067,590)		50,103,315			54,233,783
Mortgage-backed securities held to maturity (estimated fair value— 2005, $5,617,150; 2004, $2,161,900)		5,687,110			2,156,901
Mortgage-backed securities available for sale (amortized cost— 2005, $40,374,009; 2004, $51,732,377)		40,066,563			52,024,635
Loans receivable—net		397,280,266			340,585,224
Accrued interest receivable:
Loans		1,441,703			1,182,138
Mortgage-backed securities		188,085			219,992
Investment securities		470,465			627,103
Federal Home Loan Bank stock—at cost		3,391,100			3,101,600
Office properties and equipment—net		8,547,534			8,075,696
Prepaid expenses and other assets		3,177,103			2,734,054
Cash surrender value of life insurance		7,276,413			6,992,313
Deferred tax asset		757,657			727,727
TOTAL ASSETS	$	565,253,282		$	528,444,112
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Non-interest bearing deposits	$	50,612,421		$	35,318,241
Interest bearing deposits		399,145,604			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		25,080,000			22,840,000
Advances from borrowers for taxes and insurance		2,234,850			1,995,772
Accrued interest payable		488,769			821,013
Other liabilities		2,454,154			2,200,012
Total liabilities		505,479,798			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		38,390,745			38,387,523
Retained earnings - partially restricted		26,867,976			24,557,370
Deferred compensation plan trust		(361,941	)		(321,260	)
Common stock acquired for employee benefit plans		(4,955,084	)		(3,205,990	)
Accumulated other comprehensive income (loss)		(255,839	)		289,966
Total stockholders’ equity		59,773,484			59,795,236
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	565,253,282		$	528,444,112

See notes to unaudited condensed consolidated financial statements.

1

OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended September 30,				Nine Months Ended September 30,
	2005		2004		2005		2004
INTEREST AND DIVIDEND INCOME:
Taxable interest and fees on loans	$	5,490,539	$	4,388,062	$	15,286,954	$	13,022,437
Taxable interest on mortgage-backed securities		515,131		548,107		1,669,473		1,806,581
Non-taxable interest on municipal securities		92,257		74,394		295,271		236,325
Taxable interest and dividends on investments securities		658,802		635,295		2,007,436		1,735,797
Total interest and dividend income		6,756,729		5,645,858		19,259,134		16,801,140
INTEREST EXPENSE:
Deposits		2,103,366		1,594,993		5,796,171		4,603,850
Advances from Federal Home Loan Bank, securities sold under agreements to repurchase and other borrowed money		732,186		755,803		2,137,271		2,248,115
Total interest expense		2,835,552		2,350,796		7,933,442		6,851,965
NET INTEREST INCOME		3,921,177		3,295,062		11,325,692		9,949,175
PROVISION FOR LOAN LOSSES		75,000		90,000		225,000		270,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		3,846,177		3,205,062		11,100,692		9,679,175
OTHER INCOME:
Service charges		410,480		412,521		1,145,583		1,156,586
Cash surrender value of life insurance		63,000		85,481		199,000		235,445
Other		148,114		142,818		416,792		367,207
Total other income		621,594		640,820		1,761,375		1,759,238
OTHER EXPENSES:
Salaries and employee benefits		1,810,411		1,633,274		5,268,720		4,781,972
Occupancy and equipment		664,255		566,992		1,829,658		1,646,717
Federal insurance premiums		13,653		14,632		43,163		44,815
Advertising		114,550		111,861		315,529		286,399
Professional services		227,901		111,136		590,518		327,003
Other operating expenses		352,527		294,436		1,013,616		931,245
Total other expenses		3,183,297		2,732,331		9,061,204		8,018,151
INCOME BEFORE INCOME TAXES		1,284,474		1,113,551		3,800,863		3,420,262
INCOME TAX EXPENSE		506,029		470,627		1,490,257		1,358,212
NET INCOME	$	778,445	$	642,924	$	2,310,606	$	2,062,050
Basic and diluted earnings per share:	$	0.09		N/A	$	0.27		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 NINE MONTHS ENDED SEPTEMBER 30, 2005

	Common Stock		Additional Paid-In Capital		Retained Earnings - Partially Restricted		Common Stock Acquired for Employee Benefit Plans			Deferred Compensation Plan 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						2,310,606											2,310,606
Net change in unrealized loss on securities available for sale, net of taxes of $(336,283)														(545,805	)		(545,805	)
Comprehensive income																	1,764,801
Excess of fair market value above cost of employee benefit `shares				3,222													3,222
Purchase of shares for restricted stock plan								(1,987,080	)								(1,987,080	)
Restricted stock shares committed to be released								66,236									66,236
ESOP shares committed to be released								171,750									171,750
Purchase of shares by deferred compensation plans trust											(40,681	)					(40,681	)
BALANCE—September 30, 2005	$	87,627	$	38,390,745	$	26,867,976	$	(4,955,084	)	$	(361,941	)	$	(255,839	)	$	59,773,484
See notes to unaudited condensed consolidated financial statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
	Common Stock		Additional Paid-In Capital		Retained Earnings - Partially Restricted		Common Stock Acquired for Employee Benefit Plans			Deferred Compensation Plan Trust			Accumulated Other Comprehensive Income (Loss)			Total Equity
BALANCE—January 1, 2004		—		—	$	23,250,893		—			—		$	723,813		$	23,974,706
Comprehensive income:
Net income						2,062,050											2,062,050
Net change in unrealized loss on securities available for sale, net of taxes of $(168,913)														(249,281	)		(249,281	)
Comprehensive income																	1,812,769
BALANCE—September 30, 2004		—		—	$	25,312,943		—			—		$	474,532		$	25,787,475

See notes to unaudited condensed consolidated financial statements.

3

OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended September 30,
	2005			2004
OPERATING ACTIVITIES:
Net income	$	2,310,606		$	2,062,050
Adjustments to reconcile net income to net cash provided by (used in) operating activities:					—
Depreciation and amortization		1,020,419			1,224,999
Provision for loan losses		225,000			270,000
Deferred income taxes		306,353			132,045
Loss on sale of office properties and equipment		—			1,754
Increase in cash surrender value of life insurance		(199,000	)		(260,445	)
ESOP and restricted shares committed to be released		237,986			—
Excess of fair market value above cost of ESOP shares		3,222			—
Changes in assets and liabilities which provided (used) cash:
Accrued interest receivable		(71,020	)		110,015
Prepaid expenses and other assets		(443,048	)		(346,573	)
Accrued interest payable		(332,244	)		(332,231	)
Other liabilities		254,141			(420	)
Net cash provided by operating activities		3,312,415			2,861,194
INVESTING ACTIVITIES:
Principal collected on:
Mortgage-backed securities held to maturity		456,299			223,311
Mortgage-backed securities available for sale		11,243,520			15,562,122
Loans originated, net of repayments		(57,082,898	)		(22,060,850	)
Purchases of:
Loans receivable		—			(464,000	)
Mortgage-backed securities held to maturity		(3,993,750	)		(1,070,442	)
Mortgage-backed securities available for sale		—			(3,527,358	)
Investment securities held to maturity		(5,742,600	)		(6,502,610	)
Investment securities available for sale		(5,509,375	)		(23,125,136	)
Federal Home Loan Bank Stock		(289,500	)		(286,300	)
Office properties and equipment		(1,032,555	)		(1,149,701	)
Proceeds from maturities of:
Investment securities held to maturity		8,931,851			2,785,010
Investment securities available for sale		9,187,979			30,602,265
Purchase of life insurance contracts		(85,100	)		(293,900	)
Net cash used in investing activities		(43,916,129	)		(9,307,589	)
FINANCING ACTIVITIES:
Increase in deposits		34,429,946			33,798,361
Increase (decrease) in securities sold under agreements to repurchase		2,240,000			(280,000	)
Repayment of other borrowings		—			(552,710	)
Purchase of shares by employee benefit plan trust		(1,987,080	)		—
Purchase of shares by deferred compensation plans trust		(40,681	)		—
Increase in advances from borrowers for taxes and insurance		239,078			203,039
Net cash provided by financing activities		34,881,263			33,168,690
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(5,722,451	)		26,722,295
CASH AND CASH EQUIVALENTS—Beginning of period		47,395,819			28,758,859
CASH AND CASH EQUIVALENTS—End of period	$	41,673,368		$	55,481,154
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION—Cash paid during the period for:
Interest	$	8,265,686		$	7,184,196
Income taxes	$	1,375,813		$	1,473,175

See notes to unaudited condensed consolidated financial statements.

4

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 nine months ended September 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 nine months ended September 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

5

determines that a security’s unrealized loss is other than temporary, a realized 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.

Stock Based Compensation – In August 2005, the shareholders of the Company approved the adoption of the 2005 Equity Based Incentive Plan (the “Equity Plan”). The Equity Plan provides for the grant of shares of common stock of the Company to certain officers and directors of the Company. In order to fund the grant of shares under the Equity Plan, the Equity Plan Trust (the “Trust”) purchased 171,300 shares of the Company’s common stock in the open market for approximately $2.0 million, an average price of $11.70 per share. The Company made sufficient contributions to the Trust to fund these purchases. No additional purchases are expected to be made by the Trust under this plan. Pursuant to the terms of the plan, all 171,300 shares acquired by the Trust were granted to certain officers and directors of the Company in August 2005. The Equity Plan shares will generally vest at the rate of 20% per year over five years. As of September 30, 2005, no shares have been fully vested, exercised or forfeited.

Compensation expense related to the shares granted is recognized ratably over the five year vesting period in an amount which totals the market price of the Company’s stock at the date of grant. During the three months and nine months ended September 30, 2005, approximately 5,700 shares were amortized to expense, based on the proportional vesting of the awarded shares. During the three months and nine months ended September 30, 2005, approximately $66,000 was recognized in compensation expense for the plan.

The Equity Plan also authorizes the grant of stock options to officers, employees and directors of the Company to acquire shares of common stock with an exercise price equal to the fair market value of the common stock on the grant date. Options will generally become vested and exercisable at the rate of 20% per year over five years. A total of 33,374 shares of common stock have been reserved for future issuance pursuant to the Equity Plan of which 396,000 were awarded on August 10, 2005.

Concurrent with the issuance of such options under the Option Plan, the Company adopted Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations in accounting for stock options and, accordingly, no compensation expense has been recognized in the financial statements related to the grant of such options. Had the Company determined compensation expense based on the fair value at the grant date for its stock options in accordance with the fair value method in SFAS No. 123, “Accounting for Stock-Based Compensation” the Company’s net income and earnings per share would have been reduced to the pro forma amounts indicated below:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2005		2004		2005		2004
Net income, as reported	$	778,445	$	642,924	$	2,310,606	$	2,061,950
Add: Total share-based compensation expense already included in reported in net income, net of tax		42,464		N/A		42,464		N/A
Less: Total share-based employee employee compensation compensation expense determined under fair value method for all awards, net of tax		77,590		N/A		77,590		N/A
Pro forma net income	$	743,319	$	642,924	$	2,275,480	$	2,061,950
Earnings per share:
Basic and diluted as reported	$	0.09		N/A	$	0.27		N/A
Basic and diluted pro forma	$	0.09		N/A	$	0.27		N/A
Basic shares outstanding		8,437,655		N/A		8,444,395		N/A
Diluted shares outstanding		8,456,456		N/A		8,450,731		N/A

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 granted share-based payments on August 10, 2005 under the Equity Plan. When FAS 123(R) is adopted, the Company expects pre-tax compensation expense of approximately $272,000 in 2006 related to the options issued under the Equity Plan.

The Emerging Issues Task Force on November 13, 2003 issued EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. This guidance was to be applied in other-than-temporary impairment evaluations performed in reporting periods beginning after June 15, 2004. Disclosures are effective in annual financial statements for fiscal years ending after December 15, 2003, for investments accounted for under FASB Statements No. 115, Accounting for Certain Investments in Debt and Equity Securities, and No. 124, Accounting for Certain Investments Held by Not-for-Profit Organizations. The disclosure requirements for all other investments are effective in annual financial statements for fiscal years ending after June 15, 2004. In September 2004, the FASB issued FASB Staff Position, (FSP) EITF Issue 03-1-1 which delays the effective date for the measurement and recognition guidance set forth in paragraphs 10—20 of EITF Issue No. 03-1 until additional implementation guidance is issued by the FASB. In July 2005, the FASB decided not to provide additional guidance on the meaning of other-than-temporary impairment, but to issue proposed FSP EITF 03-1-a, Implementation Guidance for the Application of Paragraph 16 of EITF issue No. 03-1, as final. The final FSP (retitled FSP FAS 115-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments) will supersede EITF Issue No. 03-1 and replace the guidance set forth in paragraphs 10-18 of the issue with references to existing other than temporary impairment guidance, such as FASB Statement No. 115, SEC Staff Accounting Bulletin 59, Accounting for Noncurrent Marketable Equity Securities, and APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. FSP FAS 115-1 will codify the guidance set forth in Topic D-44 and clarify that an investor should recognize an impairment loss no later than when the impairment is deemed other-than-temporary, even if a decision to sell has not been made. In September 2005, the FASB decided to include in the final FSP FAS 115-1 guidance similar to that provided in EITF Issue No. 03-1 regarding the accounting for debt securities subsequent to an other-than-temporary impairment. In addition, the FASB decided that FSP FAS 115-1 would be applied prospectively for reporting periods beginning after December 15, 2005. Given the nature of the Company’s investments, the Company does not expect the adoption of FSP FAS 115-1 or its implementation guidance to have a significant impact on its consolidated financial statements.

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2. INVESTMENT SECURITIES

Investment securities are summarized as follows:

	September 30, 2005
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
Held to Maturity
Debt securities -
Municipal securities	$	5,192,600	$	3,591	$	—	$	5,196,191
Available for Sale
Debt securities -
U.S. Government and Federal Agencies	$	23,707,086	$	8,428	$	334,765	$	23,380,749
Municipal securities		4,949,283		89,893		—		5,039,176
Corporate		13,534,366		282,146		93,442		13,723,070
Equity securities		8,028,770		160,804		229,254		7,960,320
Total available for sale securities	$	50,219,505	$	541,271	$	657,461	$	50,103,315
	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

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 September 30, 2005 and December 31, 2004:

	September 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	$	—	$	—	$	—	$	—	$	—	$	—
U.S. Government and Federal Agencies		6,585,807		80,793		15,987,887		253,972		22,573,694		334,765
Corporate		2,498,098		52,807		3,128,370		40,635		5,626,468		93,442
Equity securities		—		—		7,796,920		229,254		7,796,920		229,254
Total	$	9,083,905	$	133,600	$	26,913,177	$	523,861	$	35,997,082	$	657,461

7

	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 September 30, 2005, 13 debt and equity securities had aggregate depreciation of 1.52% 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.

At September 30, 2005, 2 equity securities had aggregate depreciation of 2.86% from the Company’s amortized cost basis for 12 months or longer. The unrealized loss relates principally to the changes in market interest rates. 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 that temporary.

The amortized cost and estimated fair value of debt securities available for sale at September 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.

	September 30, 2005
	Held to Maturity Securities				Available for Sale Securities
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due within 1 year	$	5,192,600	$	5,196,191	$	10,556,635	$	10,479,264
Due after 1 year through 5 years		—		—		14,520,829		14,246,381
Due after 5 years through 10 years		—		—		2,798,627		2,792,925
Due after 10 years		—		—		14,314,644		14,624,425
Total	$	5,192,600	$	5,196,191	$	42,190,735	$	42,142,995

8

3. MORTGAGE-BACKED SECURITIES

Mortgage-backed securities are summarized as follows:

	September 30, 2005
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
Held to Maturity
GNMA pass-through certificates	$	175,780	$	6,553	$	—	$	182,333
FHLMC pass-through certificates		4,256		382		—		4,638
FNMA pass-through certificates		5,507,074		3,143		80,038		5,430,179
Total	$	5,687,110	$	10,078	$	80,038	$	5,617,150
Available for Sale
FHLMC pass-through certificates	$	12,581,063	$	28,555	$	185,921	$	12,423,697
GNMA pass-through certificates		4,981,635		96,278		11,388		5,066,525
FNMA pass-through certificates		22,775,582		75,660		310,457		22,540,785
Small Business Administration certificates		35,729		—		173		35,556
Total	$	40,374,009	$	200,493	$	507,939	$	40,066,563
	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 September 30, 2005 and December 31, 2004:

��	September 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	$	4,328,323	$	55,608	$	922,559	$	24,430	$	5,250,882	$	80,038
SBA pass-through certificates		—		—		35,556		173		35,556		173
FHLMC pass-through certificates		6,081,856		75,063		5,171,425		110,858		11,253,281		185,921
GNMA pass-through certificates		1,124,424		11,388		—		—		1,124,424		11,388
FNMA pass-through certificates		10,046,187		165,070		8,514,642		145,387		18,560,829		310,457
Total	$	21,580,790	$	307,129	$	14,644,182	$	280,848	$	36,224,972	$	587,977
	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 September 30, 2005, 12 mortgage-backed securities had aggregate depreciation of 1.88% 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:

	September 30, 2005			December 31, 2004
Real estate - mortgage:
One-to four-family residential	$	285,513,928		$	247,610,013
Commercial and multi-family		28,693,311			26,482,515
Total real estate-mortgage		314,207,239			274,092,528
Real estate - construction:
Residential		10,605,814			5,034,900
Commercial		11,773,548			7,719,097
Total real estate - construction		22,379,362			12,753,997
Commercial		12,851,165			14,110,846
Consumer:
Home equity		46,695,610			39,264,550
Other consumer loans		1,707,895			1,244,022
Total consumer loans		48,403,505			40,508,572
Total loans		397,841,271			341,465,943
Net deferred loan cost		1,124,342			585,576
Allowance for loan losses		(1,685,347	)		(1,466,295	)
Net total loans	$	397,280,266		$	340,585,224

Changes in the allowance for loan losses are as follows:

	Nine Months Ended September 30,
	2005			2004
Balance at January 1	$	1,466,295		$	1,116,156
Provision for loan loss		225,000			270,000
Charge-offs		(8,930	)		(9,270	)
Recoveries		2,982			5,011
Balance at September 30	$	1,685,347		$	1,381,897

11

5. DEPOSITS

Deposits consist of the following major classifications:

	September 30, 2005			December 31, 2004
	Amount		Weighted Average Interest Rate	Amount		Weighted Average Interest Rate
NOW and other demand deposit accounts	$	239,816,359	1.45%	$	204,817,923	1.08%
Passbook savings and club accounts		86,938,126	1.17%		94,915,239	1.14%
Subtotal		326,754,485			299,733,162
Certificates with original maturities:
Within one year		39,457,302	2.88%		34,989,278	1.84%
One to three years		40,647,707	3.18%		39,920,944	2.73%
Three years and beyond		42,898,531	4.79%		40,684,695	4.80%
Total certificates		123,003,540			115,594,917
Total	$	449,758,025		$	415,328,079

The aggregate amount of certificate accounts in denominations of $100,000 or more at September 30, 2005 and December 31, 2004 amounted to $32,971,612 and $32,603,182, respectively.

Municipal demand deposit accounts in denominations of $100,000 or more at September 30, 2005 and December 31, 2004 amounted to $61,282,182 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 and restricted stock shares.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2005		2004		2005		2004
Numerator	$	778,445	$	642,924	$	2,310,606	$	2,061,950
Denominators:
Basic shares outstanding		8,437,655		N/A		8,444,395		N/A
Diluted shares outstanding		8,456,456		N/A		8,450,731		N/A
Earnings per share:
Basic and diluted	$	0.09		N/A	$	0.27		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.

13

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 SEPTEMBER 30, 2005 AND DECEMBER 31, 2004

Total assets of the Company increased by $36.9 million to $565.3 million at September 30, 2005, from $528.4 million at December 31, 2004. Total loans receivable increased $56.7 million, offset by decreases of $5.7 million of cash and cash equivalents and $15.8 million of mortgage-backed and investment securities.

Investments

Investments decreased $7.3 million to $55.3 million at September 30, 2005 from $62.6 million at December 31, 2004. Purchases of $11.3 million of agency notes and municipals were offset by maturities totaling $18.3 million. Mortgage-backed securities decreased by $8.4 million to $45.8 million at September 30, 2005 from $54.2 million at December 31, 2004, as purchases of $4.0 million were offset by payments received and fluctuations in the market value of investments totaling $12.4 million.

Loans

Loans receivable increased $56.7 million to $397.3 million at September 30, 2005 from $340.6 million at December 31, 2004. Loan originations totaled $125.3 million for the nine months ended September 30, 2005 including mortgage loan originations of $78.9 million, consumer loan originations of $25.9 million and $20.5 million in all categories of commercial loan originations. Total originations were offset by $68.6 million in normal loan payments and payoffs.

The following table summarizes changes in the loan portfolio in the nine months ended September 30, 2005.

	September 30, 2005			December 31, 2004			$ change			% change
	(Dollars in thousands)
Real estate - mortgage:
One-to four-family residential	$	285,514		$	247,610		$	37,904		15.3	%
Commercial and multi-family		28,693			26,483			2,210		8.3
Total real estate-mortgage		314,207			274,093			40,114		14.6
Real estate - construction:
Residential		10,605			5,035			5,570		110.6
Commercial		11,774			7,719			4,055		52.5
Total real estate - construction		22,379			12,754			9,625		75.5
Commercial		12,851			14,111			(1,260	)	(8.9	)
Consumer
Home equity		46,696			39,264			7,432		18.9
Other consumer loans		1,708			1,244			464		37.3
Total consumer loans		48,404			40,508			7,896		19.5
Total loans		397,841			341,466			56,375		16.5
Net deferred loan cost		1,124			585			539		92.1
Allowance for loan losses		(1,685	)		(1,466	)		(219	)	14.9
Net total loans	$	397,280		$	340,585		$	56,695		16.6

14

Non-Performing Assets

Non-performing assets totaled $60,000 at September 30, 2005. Net charge-offs were $6,000 in the nine months ended September 30, 2005, compared to $4,000 in the same period last year. The allowance for loan losses was 0.42% of total loans at September 30, 2005 compared to 0.41% of total loans at September 30, 2004.

	Nine Months Ended September 30,
	2005			2004
	(In thousands)
Allowance for Loan Losses:
Allowance at beginning of period	$	1,466		$	1,116
Provision for loan losses		225			270
Recoveries		3			5
Charge-offs		(9	)		(9	)
Net charge-offs		6			4
Allowance at end of period	$	1,685		$	1,382
Allowance for loan losses as a percent of total loans		0.42	%		0.41	%
Allowance for loan losses as a percent of nonperforming loans		N/M			N/M
	September 30, 2005			December 31, 2004
	(In thousands)
Nonperforming Assets
Nonaccrual loans:
Mortgage loans	$	60		$	–
Commercial business loans		–			–
Consumer loans		–			4
Total		60			4
Real estate owned		–			–
Other nonperforming assets		–			–
Total nonperforming assets	$	60		$	4
Nonperforming loans as a percent of total loans		N/M			N/M
Nonperforming assets as a percent of total assets		N/M			N/M

Deposits

Deposits increased by $34.4 million, or 8.3%, to $449.8 million at September 30, 2005 from $415.3 million at December 31, 2004. Increases in commercial checking of $11.2 million, consumer checking of $23.8 million and certificates of deposit of $7.4 million were offset by a decrease in savings accounts of $8.0 million.

15

The following table summarizes changes in deposits in the nine months ended September 30, 2005.

	September 30, 2005		December 31, 2004		$ Change			% Change
	(Dollars in thousands)
NOW and other demand deposit accounts	$	239,816	$	204,818	$	34,998		17.1	%
Passbook savings and club accounts		86,938		94,915		(7,977	)	(8.4	)
Subtotal		326,754		299,733		27,021		9.0
Certificates with original maturities:
Within one year		39,457		34,989		4,468		12.8
One to three years		40,648		39,921		727		1.8
Three years and beyond		42,899		40,685		2,214		5.4
Total certificates		123,004		115,595		7,409		6.4
Total	$	449,758	$	415,328	$	34,430		8.3

Borrowings

Federal Home Loan Bank advances were unchanged at September 30, 2005 from December 31, 2004. Other borrowings increased $2.4 million from $22.8 million at December 31, 2004 to $25.1 million September 30, 2005. Increases of $2.3 million in securities sold under agreements to repurchase were used to purchase mortgage-backed securities.

Stockholders’ Equity

Stockholders’ equity remained unchanged at $59.8 million at September 30, 2005 from December 31, 2005, as current period earnings of $2.3 million were offset by purchases of stock for employee benefit plans of $1.8 million and a decrease in accumulated other comprehensive income of $546,000.

COMPARISON OF OPERATING RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

Net income was $778,000 for the three months ended September 30, 2005 as compared to $643,000 for the three months ended September 30, 2004. The $135,000, or 21.1%, increase in 2005 from 2004 was primarily due to an increase in net interest income of $626,000, an increase in other expenses of $451,000 and an increase in income tax expense of $35,000. The decrease in return on average equity resulted from the proceeds of the December 2004 stock offering being added to stockholders’ equity.

Net income was $2.3 million for the nine months ended September 30, 2005 as compared to $2.1 million for the nine months ended September 30, 2004. The $249,000, or 12.1% increase in 2005 from 2004, was primarily due to an increase in net interest income of $1.4 million, a decrease in provision for loan losses of $45,000, an increase in other expenses of $1.0 million and an increase in income tax expense of $132,000. The decrease of return on average equity resulted from the proceeds of the December 2004 stock offering being added to stockholders’ equity.

16

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
	(Dollars in thousands, except share and per share data)
Net income	$	778		$	643		$	2,311		$	2,062
Basic and diluted earnings per share	$	0.09			N/A		$	0.27			N/A
Return on average assets (annualized)		0.56	%		0.51	%		0.57	%		0.56	%
Return on average equity (annualized)		5.04	%		10.25	%		5.06	%		10.99	%

Net Interest Income

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

	Three Months Ended September 30,
	2005		2004		$ Change			% Change
	(Dollars in thousands)
INTEREST INCOME:
Loans	$	5,491	$	4,388	$	1,103		25.1	%
Investment securities		1,138		1,137		2		0.2
Other interest-earning assets		128		121		7		5.8
Total interest income		6,757		5,646		1,111		19.7
INTEREST EXPENSE:
Deposits		2,104		1,595		508		31.9
Borrowings		732		756		(24	)	(3.2	)
Total interest expense		2,836		2,351		485		20.6
Net interest income	$	3,921	$	3,295	$	626		19.0	%

Interest income increased by $1.1 million in the third quarter of 2005 compared to the third quarter of 2004, reflecting an increase in loan income and other interest-earning assets income of $1.1 million. The increase in loan income resulted from an increase in the average balance of loans of $66.7 million and an increase in yield of 19 basis points. The increase in investment income resulted from an increase in yield of 11 basis points offset by a decrease in the average balance of $2.6 million. Other interest earning assets income increase resulted from an increase in the average yield in fed funds sold of 202 basis points offset by a lower average balance of $18.4 million.

Interest expense increased by $485,000, reflecting an increase in municipal deposit expense of $305,000, an increase in time deposit expense of $193,000, an increase in all other deposit expense of $10,000 and a decrease in interest expense on borrowings of $24,000. Municipal deposit expense increased as a result of rising interest rates, while time deposit expense increased as a result of deposit growth of $7.0 million and an increase in the average rate paid of 47 basis points. Borrowing expense decreased as a result of lower average balance of borrowings offset by an increase in the rate paid of 109 basis points. 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 2.76% and 3.09% respectively, for the three months ended September 30, 2005 compared to 2.75% and 2.86% 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.

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 September 30, 2005							Three Months Ended September 30, 2004
	Average Balance			Interest and Dividends		Yield/ Cost		Average Balance			Interest and Dividends		Yield/ Cost
	(Dollars in thousands)
Assets:
Interest-earning assets:
Loans	$	385,064		$	5,491	5.70	%	$	318,317		$	4,388	5.51	%
Investment securities		107,154			1,138	4.25	%		109,778			1,137	4.14	%
Other interest-earning assets		14,680			128	3.48	%		33,057			121	1.46	%
Total interest-earning assets		506,898			6,757	5.33	%		461,152			5,646	4.90	%
Noninterest-earning assets		45,488							41,134
Total assets	$	552,386						$	502,286
Liabilities and equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	178,104			757	1.70	%	$	167,767			434	1.03	%
Savings accounts		89,951			266	1.18	%		94,949			273	1.15	%
Certificates of deposit		121,550			1,081	3.56	%		114,994			888	3.09	%
Total interest-bearing deposits		389,605			2,104	2.16	%		377,710			1,595	1.69	%
FHLB advances		10,000			78	3.13	%		10,000			78	3.13	%
Securities sold under agreements to repurchase		25,808			319	4.94	%		33,043			318	3.85	%
Subordinated debt		15,464			335	8.67	%		15,464			335	8.67	%
Other borrowings		0			0	0.00	%		1,542			25	6.27	%
Total borrowings		51,272			732	5.71	%		60,049			756	5.03	%
Total interest-bearing liabilities		440,877			2,836	2.57	%		437,759			2,351	2.15	%
Noninterest-bearing liabilities		49,786							39,434
Total liabilities		490,663							477,193
Retained earnings		61,723							25,093
Total liabilities and retained earnings	$	552,386						$	502,286
Net interest income				$	3,921						$	3,295
Interest rate spread						2.76	%						2.75	%
Net interest margin						3.09	%						2.86	%
Average interest-earning assets to average interest-bearing liabilities		114.98	%						105.34	%

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

	Nine Months Ended September 30,
	2005		2004		$ Change			% Change
	(Dollars in thousands)
INTEREST INCOME:
Loans	$	15,287	$	13,022	$	2,265		17.4	%
Investment securities		3,519		3,546		(27	)	(0.8	)
Other interest-earning assets		453		233		220		94.4
Total interest income		19,259		16,801		2,458		14.6
INTEREST EXPENSE:
Deposits		5,796		4,604		1,192		25.9
Borrowings		2,137		2,248		(111	)	(4.9	)
Total interest expense		7,933		6,852		1,081		15.8
Net interest income	$	11,326	$	9,949	$	1,377		13.8	%

Interest income increased by $2.5 million in the nine months ended September 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 $51.8 million and an increase in the average yield of three basis points. Investment income decreased $27,000 as the average balance decreased by $3.0 million offset by an increase in the average yield of eight basis points. Income on other interest-earning assets increased by $220,000 as a decrease in average balance of federal funds sold of $4.7 million was offset by an increase in the average yield of 165 basis points.

Interest expense increased by $1.1 million in the nine months ended September 30, 2005 compared to the same period in 2004, reflecting an increase in all deposit expense categories totaling $1.2 million offset by a decrease in borrowed money expense of $111,000. The increase in interest expense on interest-bearing deposits resulted from an increase in the average balance of $13.5 million and an increase in the rate paid of 35 basis points. Savings account expense increased by $9,000 as the rate paid increased two basis points offset by a $1.0 million decrease in the average balance. The increase in certificate of deposit expense of $400,000 resulted from an increase in the average balance of $5.0 million and an increase in the rate paid of 32 basis points. Borrowing expense decreased by $111,000 as the average balance decreased by $10.8 million offset by an increase in the rate paid of 77 basis points. 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 2.74% and 3.04%, respectively, for the nine months ended September 30, 2005 compared to 2.84% and 2.94% 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 and the average balance of loans grew by 17% with an increased loan yield of three basis points. The continued rise in short-term interest rates increased the cost of interest expense on deposits and borrowings.

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.

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Average Balance Tables	Nine Months Ended September 30, 2005							Nine Months Ended September 30, 2004
	Average Balance			Interest and Dividends		Yield/ Cost		Average Balance			Interest and Dividends		Yield/ Cost
	(Dollars in thousands)
Assets:
Interest-earning assets:
Loans	$	362,511		$	15,287	5.62	%	$	310,685		$	13,022	5.59	%
Investment securities		112,240			3,519	4.18	%		115,194			3,546	4.10	%
Other interest-earning assets		21,246			453	2.85	%		25,994			233	1.20	%
Total interest-earning assets		495,997			19,259	5.18	%		451,873			16,801	4.96	%
Noninterest-earning assets		45,064							41,018
Total assets	$	541,061						$	492,891
Liabilities and equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	172,970			1,992	1.54	%	$	163,434			1,206	0.98	%
Savings accounts		92,784			808	1.16	%		93,754			799	1.14	%
Certificates of deposit		118,613			2,996	3.37	%		113,633			2,599	3.05	%
Total interest-bearing deposits		384,367			5,796	2.01	%		370,821			4,604	1.66	%
FHLB advances		10,000			233	3.10	%		10,000			233	3.11	%
Securities sold under agreements to repurchase		24,559			898	4.88	%		33,592			928	3.68	%
Subordinated debt		15,464			1,006	8.67	%		15,464			1,006	8.67	%
Other borrowings		0			0	0.00	%		1,727			81	6.26	%
Total borrowings		50,023			2,137	5.70	%		60,783			2,248	4.93	%
Total interest-bearing liabilities		434,390			7,933	2.44	%		431,604			6,852	2.12	%
Noninterest-bearing liabilities		45,829							36,266
Total liabilities		480,219							467,870
Retained earnings		60,842							25,021
Total liabilities and retained earnings	$	541,061						$	492,891
Net interest income				$	11,326						$	9,949
Interest rate spread						2.74	%						2.84	%
Net interest margin						3.04	%						2.94	%
Average interest-earning assets to average interest-bearing liabilities		114.18	%						104.70	%

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 $225,000 for the three and nine months ended September 30, 2005, respectively, compared to $90,000 and $270,000 for the three and nine months ended September 30, 2004. Net charge-offs (recoveries) were $4,000 and $6,000 for the three and nine months ended September 30, 2005, respectively, compared to $0 and $4,000 for the three and nine months ended September 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 compared to the prior year.

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Other Income

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

	Three Months Ended September 30,
	2005		2004		% Change
	(Dollars in thousands)
OTHER INCOME:
Service charges	$	410	$	413	(0.7	)%
Cash surrender value of life insurance		63		85	(26.3	)
Other		148		143	3.7
Total other income	$	621	$	641	(3.0	)

Other income decreased $20,000, or 3.0%, to $621,000 for the three-month period ended September 30, 2005 from the same period in 2004. An increase in service charges and other was offset by a decrease in the income from bank-owned life insurance.

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

	Nine Months Ended September 30,
	2005		2004		% Change
	(Dollars in thousands)
OTHER INCOME:
Service charges	$	1,145	$	1,157	(1.0	)%
Cash surrender value of life insurance		199		235	(15.4	)
Other		417		367	13.2
Total other income	$	1,761	$	1,759	0.1

Other income increased $2,000, or 0.1%, to $1.8 million for the nine-month period ended September 30, 2005 from the same period in 2004. The increase occurred in service charges, fees and loan servicing fees offset by a decrease from bank-owned life insurance.

Other Expense

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

	Three Months Ended September 30,
	2005		2004		% Change
	(Dollars in thousands)
OTHER EXPENSE:
Salaries and employee benefits	$	1,810	$	1,633	10.9	%
Occupancy and equipment		664		567	17.6
Federal insurance premiums		14		15	(7.7	)
Advertising		115		112	2.4
Professional services		228		111	105.1
Other operating expense		352		294	19.7
Total other expense	$	3,183	$	2,732	16.5

Other expenses increased $451,000 to $3.2 million for the three-month period ended September 30, 2005 from the same period in 2004. Salaries and benefits increased due to regular salary increases and the higher

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cost of employee benefits.Occupancy and equipment increased due to increased data processing expenses related to improvements to network security and costs associated with the opening of a new branch office. Other operating expenses increased as accounting and legal services increased due to additional compliance requirements associated with being a public company.

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

	Nine Months Ended September 30,
	2005		2004		% Change
	(Dollars in thousands)
OTHER EXPENSE:
Salaries and employee benefits	$	5,269	$	4,782	10.2	%
Occupancy and equipment		1,830		1,647	11.1
Federal insurance premiums		43		45	(3.7	)
Advertising		316		286	10.2
Professional services		591		327	80.6
Other operating expense		1,013		931	8.8
Total other expense	$	9,061	$	8,018	13.0

Other expenses increased $1.0 million to $9.1 million for the nine-month period ended September 30, 2005 from the same period in 2004. Salaries and benefits increased due to regular salary increases and the higher cost of employee benefits.Occupancy and equipment increased due to increased data processing expenses related to improvements to network security and costs associated with the opening of a new branch office. 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 $35,000 to $506,000 for an effective tax rate of 39.4% for the three months ended September 30, 2005 compared to $471,000 for an effective tax rate of 42.3% from the same period in 2004. The increase in the tax provision resulted from higher levels of pretax income of $1.3 million for the three months ended September 30, 2005 as compared to pretax income of $1.1 million for the comparable 2004 period.

Income taxes increased $132,000 to $1.5 million for an effective tax rate of 39.2% for the nine months ended September 30, 2005 compared to $1.4 million for an effective tax rate of 39.7% from the same period in 2004. The increase in the tax provision resulted from higher levels of pretax income of $3.8 million for the nine months ended September 30, 2005 as compared to pretax income of $3.4 million for the comparable 2004 period.

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.

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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 September 30, 2005, cash and cash equivalents totaled $41.7 million. Securities classified as available-for-sale whose market value exceeds our cost, which provide additional sources of liquidity, totaled $23.2 million at September 30, 2005. In addition, at September 30, 2005, we had the ability to borrow a total of approximately $183.2 million from the Federal Home Loan Bank of New York, which included available overnight lines of credit of $101.8 million. On that date, we had no overnight advances outstanding.

At September 30, 2005, we had $52.5 million in loan commitments outstanding, which included $24.7 million in undisbursed loans, $22.3 million in unused home equity lines of credit and $5.5 million in commercial lines of credit. Certificates of deposit due within one year of September 30, 2005 totaled $57.3 million, or 46.6%, 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 September 30, 2005, the Bank exceeded all of its regulatory capital requirements with tangible capital of $53.8 million, or 9.92% of total adjusted assets, which is above the required level of $8.1 million or 1.5%; core capital of $54.1 million, or 9.92% of total adjusted assets, which is above the required level of $21.7 million or 4%; and risk-based capital of $55.5 million, or 18.73% of risk-weighted assets, which is above the required level of $23.7 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 September 30, 2005 Percentage Change in Estimated Net Interest Income Over
	12 Months		24 Months
200 basis point increase in rates	(1.03	)%	0.37	%
100 basis point decrease in rates	1.17	%	(1.26	)%

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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 positively affected (within our internal guidelines) in the twelve-month period and adversely affected in the twenty-four-month period.

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 loss in market risk sensitive instruments in the event of a sudden and sustained 100 to 300 basis point increase or 100 to 300 basis point decrease in market interest rates with no effect given to any steps that we might take to counter the effect of that interest rate movement. 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 September 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	$	56,907	$	(27,730	)	(33	)%	10.25	%	(400	) bp
200		68,458		(16,179	)	(19	)%	12.01	%	(224	)
100		78,771		(5,866	)	(7	)%	13.49	%	(76	)
0		84,637		—		—		14.25	%	—
(100)		82,183		(2,454	)	(3	)%	13.78	%	(47	)
(200)		74,709		(9,928	)	(11	)%	12.58	%	(167	)
(300)		66,722		(17,915	)	(21	)%	11.27	%	(298	)

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.

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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 nine months ended September 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 “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 September 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.

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

Period	(a) Total number of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Appropriate Dollar Value) of Shares (or units) that May Yet Be Purchased Under the Plans or Programs
Month #1 July 1, 2005 through July 31, 2005	0		N/A	0	0
Month #2 August 1, 2005 through August 31, 2005	3,455	$	11.81	3,455	168,294	(1)
Month #3 September 1, 2005 through September 30, 2005	167,845	$	11.70	167,845	449	(1)
Total	171,300	$	11.70	171,300

(1) On August 10, 2005, the Company’s Board of Directors approved the formation and funding of a trust that will purchase 171,749 shares of the Company’s common stock in the open market with funds contributed by the Company. Purchases will be made from time to time at the discretion of the independent trustee of the trust and the shares will be used to fund restricted stock awards under the Company’s 2005 Equity Incentive Plan.

Item 3. Defaults Upon Senior Securities

Not applicable.

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

a. A Special Meeting of Stockholders (the “Special Meeting”) was held on July 13, 2005.

b. The only item voted upon at the Special Meeting and the vote for the proposal was as follows:

Approval of the Ocean Shore Holding Co. 2005 Equity Incentive Plan.

FOR	AGAINST	ABSTAIN	BROKER NON-VOTES
6,503,031	734,994	31,535	0

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Item 5. Other Information

None.

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: November 14, 2005		/s/ Steven E. Brady
		Steven E. Brady
		President and Chief Executive Officer
Date: November 14, 2005		/s/ Donald F. Morgenweck
		Donald F. Morgenweck
		Chief Financial Officer and Senior Vice President

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