Ocean Shore Holding 10-Q 2008 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, 2008

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 a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

Large Accelerated Filer  ¨	Accelerated Filer  ¨
Non-Accelerated Filer  ¨	Smaller Reporting Company  x
(Do not check if a smaller reporting company)

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 July 31, 2008, the registrant had 8,336,355 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, 2008 and December 31, 2007	1
	Unaudited Condensed Consolidated Statements of Income for the three months and six months ended June 30, 2008 and 2007	2
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2008 and 2007	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4T.	Controls and Procedures	29
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults upon Senior Securities	30
Item 4.	Submission of Matters to a Vote of Security Holders	30
Item 5.	Other Information	31
Item 6.	Exhibits	31
SIGNATURES

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	June 30, 2008			December 31, 2007
ASSETS
Cash and amounts due from depository institutions	$	10,978,129		$	9,540,392
Federal funds sold		—			—
Cash and cash equivalents		10,978,129			9,540,392
Investment securities held to maturity (estimated fair value—$12,580 at June 30, 2008; $0 at December 31, 2007)		12,580			—
Investment securities available for sale (amortized cost— $14,220,208 at June 30, 2008; $23,362,218 at December 31, 2007)		11,681,195			22,272,694
Mortgage-backed securities held to maturity (estimated fair value—$4,308,994 at June 30, 2008; $4,612,137 at December 31, 2007)		4,394,306			4,656,553
Mortgage-backed securities available for sale (amortized cost—$27,380,172 at June 30, 2008; $31,934,295 at December 31, 2007)		27,331,245			31,986,083
Loans—net of allowance for loan losses of $2,468,213 at June 30, 2008 and $2,307,225 at December 31, 2007		567,312,042			528,057,505
Accrued interest receivable:
Loans		2,128,707			2,067,470
Mortgage-backed securities		142,406			162,095
Investment securities		328,946			414,532
Federal Home Loan Bank stock—at cost		8,012,700			6,518,500
Office properties and equipment—net		10,598,583			9,621,383
Prepaid expenses and other assets		2,528,133			2,582,282
Cash surrender value of life insurance		10,643,902			10,433,849
Deferred tax asset		1,743,753			1,209,248
TOTAL ASSETS	$	657,836,627		$	629,522,586
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Non-interest bearing deposits	$	59,477,441		$	26,809,176
Interest bearing deposits		354,258,015			388,421,582
Advances from Federal Home Loan Bank		149,190,000			120,230,000
Junior subordinated debentures		15,464,000			15,464,000
Securities sold under agreements to repurchase		7,250,000			8,000,000
Advances from borrowers for taxes and insurance		3,228,863			2,832,905
Accrued interest payable		1,332,694			1,204,878
Other liabilities		4,084,304			3,512,931
Total liabilities		594,285,317			566,475,472
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; 8,336,355 and 8,362,080 shares outstanding at June 30, 2008 and December 31, 2007, respectively		87,627			87,627
Additional paid-in capital		38,264,297			37,968,848
Retained earnings—partially restricted		34,962,275			33,572,429
Treasury stock—at cost: 426,387 shares at June 30, 2008; 400,662 shares at December 31, 2007		(5,204,152	)		(4,939,626	)
Common stock acquired by employee benefits plans		(2,404,490	)		(2,518,990	)
Deferred compensation plans trust		(475,521	)		(460,147	)
Accumulated other comprehensive loss		(1,678,726	)		(663,027	)
Total stockholders’ equity		63,551,310			63,047,114
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	657,836,627		$	629,522,586

See notes to unaudited condensed consolidated financial statements.

1

OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended June 30,					Six Months Ended June 30,
	2008			2007		2008			2007
INTEREST AND DIVIDEND INCOME:
Taxable interest and fees on loans	$	8,147,684		$	6,763,276	$	16,082,828		$	13,268,772
Taxable interest on mortgage-backed securities		405,247			509,548		851,600			1,041,440
Non-taxable interest on municipal securities		23,394			36,070		46,782			72,140
Interest and dividends on investment securities		358,632			628,037		830,630			1,283,788
Total interest and dividend income		8,934,957			7,936,931		17,811,840			15,666,140
INTEREST EXPENSE:
Deposits		2,526,247			3,153,520		5,390,159			6,245,948
Advances from Federal Home Loan Bank, securities sold under agreements to repurchase and other borrowed money		1,783,909			1,110,785		3,471,158			2,112,337
Total interest expense		4,310,156			4,264,305		8,861,317			8,358,285
NET INTEREST INCOME		4,624,801			3,672,626		8,950,523			7,307,855
PROVISION FOR LOAN LOSSES		89,600			75,000		158,600			150,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		4,535,201			3,597,626		8,791,923			7,157,855
OTHER INCOME:
Service charges		442,264			397,879		808,407			773,359
Cash surrender value of life insurance		106,622			92,700		210,053			170,600
Gain (loss) on sale of securities		(54,041	)		—		(50,251	)		—
Impairment charge on AFS securities		—			—		(312,965	)		—
Other		171,820			146,120		321,997			290,918
Total other income		666,665			636,699		977,241			1,234,877
OTHER EXPENSE:
Salaries and employee benefits		2,045,035			1,832,833		3,976,391			3,837,283
Occupancy and equipment		748,862			719,242		1,511,257			1,430,239
Federal insurance premiums		11,744			12,629		24,057			25,530
Advertising		88,107			120,503		186,169			234,074
Professional services		156,937			167,937		367,948			320,343
Charitable contributions		30,000			30,000		60,000			60,000
Other operating expenses		333,715			325,498		663,495			633,117
Total other expenses		3,414,400			3,208,642		6,789,317			6,540,586
INCOME BEFORE INCOME TAXES		1,787,466			1,025,683		2,979,847			1,852,146
INCOME TAX EXPENSE		698,919			407,075		1,161,039			732,164
NET INCOME	$	1,088,547		$	618,608	$	1,818,808		$	1,119,982
Earnings per share basic:	$	0.14		$	0.08	$	0.23		$	0.14
Earnings per share diluted:	$	0.13		$	0.08	$	0.22		$	0.14

2

OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2008

	Common Stock		Additional Paid-In Capital			Retained Earnings - Partially Restricted			Treasury Stock			Common Stock Acquired by Employee Benefits Plan			Deferred Compensation Plans Trust			Accumulated Other Comprehensive Income (Loss)			Total Equity
BALANCE—January 1, 2008	$	87,627	$	37,968,848		$	33,572,429		$	(4,939,626	)	$	(2,518,990	)	$	(460,147	)	$	(663,027	)	$	63,047,114
Cumulative effect of the adoption of EITF 06-4							(250,194	)														(250,194	)
Comprehensive income:
Net income							1,818,808															1,818,808
Other comprehensive loss—
Unrealized holding (loss)—available for sale securities (net of tax $(659,503))																			(1,203,666	)		(1,203,666	)
Reclassification adjustment for other-than-temporary impairment (net of tax $124,998)																			187,967			187,967
Comprehensive income:																						803,109
Purchase of treasury stock										(264,526	)											(264,526	)
Unallocated ESOP shares committed to employees													114,500									114,500
Excess of fair value above cost of ESOP shares committed to be released				(1,603	)																	(1,603	)
Restricted stock shares				198,712																		198,712
Stock options				98,340																		98,340
Current year dividends declared							(178,768	)														(178,768	)
Purchase of shares by deferred compensation plans trust																(15,374	)					(15,374	)
BALANCE—June 30, 2008	$	87,627	$	38,264,297		$	34,962,275		$	(5,204,152	)	$	(2,404,490	)	$	(475,521	)	$	(1,678,726	)	$	63,551,310
FOR THE SIX MONTHS ENDED JUNE 30, 2007
BALANCE—January 1, 2007	$	87,627	$	37,299,692		$	30,781,914		$	(2,190,882	)	$	(2,747,990	)	$	(416,420	)	$	(263,427	)	$	62,550,514
Comprehensive income:
Net income							1,119,982															1,119,982
Other comprehensive loss—
Unrealized holding (loss) – available for sale securities (net of tax ($175,794))																			(270,336	)		(270,336	)
Comprehensive income:																						849,646
Purchase of treasury stock										(1,156,503	)											(1,156,503	)
Restricted stock APIC adjustment				18,296																		18,296
Unallocated ESOP shares committed to employees													114,500									114,500
Excess of fair value above cost of ESOP shares committed to be released				36,755																		36,755
Restricted stock shares				198,712																		198,712
Stock options				119,839																		119,839
Purchase of shares by deferred compensation plans trust																(30,080	)					(30,080	)
BALANCE—June 30, 2007	$	87,627	$	37,673,294		$	31,901,896		$	(3,347,385	)	$	(2,633,490	)	$	(446,500	)	$	(533,763	)	$	62,701,679

See notes to unaudited condensed consolidated financial statements.

3

OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended June 30,
	2008			2007
OPERATING ACTIVITIES:
Net income	$	1,818,808		$	1,119,982
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		865,592			847,818
Provision for loan losses		158,600			150,000
Stock based compensation expense		409,949			488,101
Impairment charge on AFS securities		312,965			—
Gain on call of AFS securities		(3,790	)		—
Loss on sale of AFS securities		54,040			—
Loss on disposal of office properties and equipment		—			408
Cash surrender value of life insurance		(210,053	)		(170,600	)
Changes in assets and liabilities which provided (used) cash:
Accrued interest receivable		44,037			(126,204	)
Prepaid expenses and other assets		54,148			(1,104,830	)
Accrued interest payable		127,817			110,250
Other liabilities		321,179			1,267,866
Net cash provided by operating activities		3,953,292			2,582,791
INVESTING ACTIVITIES:
Principal collected on:
Mortgage-backed securities available for sale		4,525,873			3,825,312
Mortgage-backed securities held to maturity		261,274			277,562
Loans originated, net of repayments		(37,510,774	)		(31,357,456	)
Purchases of:
Loans receivable		(2,307,378	)		(1,484,000	)
Investment securities held to maturity		(12,580	)		(2,955,673	)
Investment securities available for sale		—			(2,000,000	)
Federal Home Loan Bank stock		(2,754,800	)		(988,700	)
Office properties and equipment		(1,410,183	)		(116,945	)
Life insurance contracts		—			(2,000,000	)
Proceeds from sales of:
Federal Home Loan Bank stock		1,260,600			121,500
Investment securities AFS		7,642,571			—
Proceeds from maturities of:
Investment securities available for sale		1,137,855			3,000,000
Net cash (used in) investing activities		(29,167,542	)		(33,678,400	)
FINANCING ACTIVITIES:
(Decrease) increase in deposits		(1,495,303	)		396,131
(Decrease) in securities sold under agreements to repurchase		(750,000	)		(360,000	)
Advances from the Federal Home Loan Bank, net		28,960,000			18,000,000
Dividends paid		(178,768	)		—
Purchase of treasury stock		(264,526	)		(1,156,503	)
Purchase of shares by deferred compensation plans trust		(15,374	)		(30,080	)
Increase in advances from borrowers for taxes and insurance		395,958			420,622
Net cash provided by financing activities		26,651,987			17,270,170
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		1,437,736			(13,825,439	)
CASH AND CASH EQUIVALENTS—Beginning of period		9,540,392			33,356,934
CASH AND CASH EQUIVALENTS—End of period	$	10,978,129		$	19,531,495
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION—Cash paid during the period for:
Interest	$	8,733,500		$	8,248,035
Income taxes	$	916,055		$	715,000

See notes to unaudited condensed consolidated financial statements.

4

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 condensed 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, 2007. The results for the six months ended June 30, 2008 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2008 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 condensed consolidated financial statements and the reported amounts of income and expenses during the reporting period. The most significant estimates and assumptions relate to the allowance for loan losses and deferred income taxes. Actual results could differ from those estimates.

New Accounting Pronouncements—In September 2006, the FASB issued Statement No. 157,“Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 (i) defines fair value, (ii) establishes a framework for measuring fair value in GAAP and (iii) expands disclosure requirements about fair value measurements. SFAS No. 157 is effective for all financial statements issued for fiscal years beginning after November 15, 2007. SFAS No. 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. FASB Staff Position (“FSP”) No 157-2,Effective Date of FASB Statement No. 157, issued in February 2008, delays the effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in an entity’s financial statements on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008. The Company adopted SFAS No. 157 on January 1, 2008 for assets and liabilities that are not excluded from FSP No. 157-2 and it did not have a material impact on the Company’s financial position or results of operations.

In September 2006, the FASB issued SFAS No. 158,“Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106 and 132(R).” This statement requires an employer to recognize the overfunded or underfunded status of a defined benefit and postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur as a component of comprehensive income. The statement also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position. The requirement to recognize the funded status of a defined benefit postretirement plan was effective as of the end of the fiscal year ending after December 15, 2006. The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for the fiscal years ending after December 15, 2008. The impact of the adoption of this pronouncement and guidance did not have an effect on the Company’s financial position or results of operations.

5

In September 2006, the EITF reached a consensus on EITF Issue No. 06-4,“The Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements” (“EITF 06-4”). EITF 06-4 addresses whether the postretirement benefit associated with an endorsement split-dollar life insurance arrangement is effectively settled in accordance with Statement of Financial Accounting Standards No. 106,“Employers’ Accounting for Postretirement Benefits Other Than Pensions” and APB Opinion No. 12“Omnibus Opinion—1967” upon entering into such an arrangement. EITF 06-4 is effective for fiscal years beginning after December 15, 2007. The adoption of this guidance effective January 1, 2008 required the Company to record a cumulative-effect retrospective adjustment to retained earnings and offsetting deferred compensation liability of $250,194.

In February 2007, the FASB issued Statement No. 159,“The Fair Value Option for Financial Assets and Financial Liabilities”, (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure financial instruments and certain other items at fair value. Items eligible for fair value measurement option established by this statement are (i) recognized financial assets and financial liabilities (with some exceptions), (ii) firm commitments that would otherwise not be recognized at inception and that involve only financial instruments, (iii) nonfinancial insurance contracts and warranties that the insurer can settle by paying a third party to provide those goods or services and (iv) host financial instruments resulting from separation of an embedded nonfinancial derivative instrument from a nonfinancial hybrid instrument. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company adopted SFAS No. 159 on January 1, 2008. SFAS No. 159 did not have an impact on the Company’s financial position or results of operation as the Company did not elect to fair value any of its financial assets and financial liabilities that are not currently required to be measured at fair value.

6

2. INVESTMENT SECURITIES

Investment securities are summarized as follows:

	June 30, 2008
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
Held to Maturity
Debt securities:
Municipal securities	$	12,580	$	—	$	—		$	12,580
Totals	$	12,580	$	—	$	—		$	12,580
Available for Sale
Debt securities:
U.S. Government and Federal Agencies	$	1,111,730	$	—	$	(7,928	)	$	1,103,802
Municipal securities		1,911,163		28,302		—			1,939,465
Corporate		11,194,719		56,951		(2,672,527	)		8,579,143
Equity securities		2,596		56,189		—			58,785
Totals	$	14,220,208	$	141,442	$	(2,680,455	)	$	11,681,195
	December 31, 2007
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
Available for Sale
Debt securities:
U.S. Federal Agencies	$	1,199,447	$	551	$	—		$	1,199,998
Municipal securities		2,956,682		37,289		—			2,993,971
Corporate		11,193,917		104,888		(1,067,758	)		10,231,047
Mutual Funds		8,012,172		104,147		(268,641	)		7,847,678
Totals	$	23,362,218	$	246,875	$	(1,336,399	)	$	22,272,694

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, 2008 and December 31, 2007:

	June 30, 2008
	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 -
U. S. Federal Agencies	$	1,103,802	$	(7,928	)	$	—	$	—		$	1,103,802	$	(7,928	)
Corporate		4,251,573		(2,435,675	)		2,273,030		(236,852	)		6,524,603		(2,672,527	)
Totals	$	5,355,375	$	(2,443,603	)	$	2,273,030	$	(236,852	)	$	7,628,405	$	(2,680,455	)

7

	December 31, 2007
	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 -
U.S. Federal Agencies	$	—	$	—		$	—	$	—		$	—	$	—
Corporate		4,312,534		(838,008	)		2,280,326		(229,750	)		6,592,860		(1,067,758	)
Mutual Funds		—		—			7,740,935		(268,641	)		7,740,935		(268,641	)
Totals	$	4,312,534	$	(838,008	)	$	10,021,261	$	(498,391	)	$	14,333,795	$	(1,336,399	)

Management believes that the estimated fair value of the securities is dependent upon the movement in market interest rate and the underlying credit rating of issuer 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 management were to determine that an other than temporary impairment exists.

At June 30, 2008, two debt securities had been in a continuous unrealized loss position for 12 months or longer. Those securities had aggregate depreciation of 9.44% from the Company’s amortized cost basis. The unrealized loss on these debt securities relates principally to the changes in market interest rates and a lack of liquidity currently in the financial markets. Management believes these unrealized losses to be temporary until those markets have stabilized and that the Company will receive all contractual principal and interest payments related to those investments. The corporate debt securities have no identified credit issues and have a current average credit rating of BBB. As management has the ability and intent to hold these debt securities until a forecasted recovery, which may be maturity, no decline is deemed to be other than temporary.

During the first quarter of 2008, the Company analyzed the continued decline in the fair value of the Company’s investment in its $8.0 million mutual funds portfolio and identified the impairment of these securities as other than temporary, recording a pretax loss of $312,965 as a charge against operating results. These mutual funds were subsequently sold in the second quarter at an additional pretax loss of $54,000.

8

The amortized cost and estimated fair value of debt securities held to maturity and available for sale at June 30, 2008 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, 2008
	Held to Maturity				Available for Sale Securities
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due within 1 year	$	12,580	$	12,580	$	—	$	—
Due after 1 year through 5 years		—		—		1,111,730		1,103,803
Due after 5 years through 10 years		—		—		1,000,000		805,530
Due after 10 years						12,105,882		9,713,078
Totals	$	12,580	$	12,580	$	14,217,612	$	11,622,411

9

3. MORTGAGE-BACKED SECURITIES

Mortgage-backed securities are summarized as follows:

	June 30, 2008
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
Held to Maturity
GNMA pass-through certificates	$	94,780	$	5,393	$	—		$	100,173
FHLMC pass-through certificates		512,943		7,719		—			520,662
FNMA pass-through certificates		3,786,583		1,697		(100,121	)		3,688,159
Totals	$	4,394,306	$	14,809	$	(100,121	)	$	4,308,994
Available for Sale
GNMA pass-through certificates	$	2,111,188	$	63,168	$	(1,181	)	$	2,173,175
FHLMC pass-through certificates		6,451,510		19,354		(72,212	)		6,398,652
FNMA pass-through certificates		18,817,474		55,414		(113,470	)		18,759,418
Totals	$	27,380,172	$	137,936	$	(186,863	)	$	27,331,245
	December 31, 2007
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
Held to Maturity
GNMA pass-through certificates	$	103,571	$	4,534	$	—		$	108,105
FHLMC pass-through certificates		516,207		9,568		—			525,775
FNMA pass-through certificates		4,036,775		1,915		(60,433	)		3,978,257
Totals	$	4,656,553	$	16,017	$	(60,433	)	$	4,612,137
Available for Sale
GNMA pass-through certificates	$	2,432,790	$	63,388	$	(1,575	)	$	2,494,603
FHLMC pass-through certificates		7,706,702		13,419		(68,518	)		7,651,603
FNMA pass-through certificates		21,794,803		126,852		(81,778	)		21,839,877
Totals	$	31,934,295	$	203,659	$	(151,871	)	$	31,986,083

10

The following table provides the gross unrealized losses and estimated fair value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position, at June 30, 2008 and December 31, 2007:

	June 30, 2008
	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	$	2,605,905	$	(66,192	)	$	980,787	$	(33,929	)	$	3,586,692	$	(100,121	)
GNMA pass-through certificates		338,951		(1,181	)		—		—			338,951		(1,181	)
FHLMC pass-through certificates		5,203,147		(72,212	)		—		—			5,203,147		(72,212	)
FNMA pass-through certificates		14,530,092		(104,248	)		995,760		(9,222	)		15,525,852		(113,470	)
Totals	$	22,678,095	$	(243,833	)	$	1,976,547	$	(43,151	)	$	24,654,642	$	(286,984	)
	December 31, 2007
	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	$	—	$	—		$	3,865,994	$	(60,433	)	$	3,865,994	$	(60,433	)
GNMA pass-through certificates		—		—			462,171		(1,575	)		462,171		(1,575	)
FHLMC pass-through certificates		752,545		(2,082	)		6,277,295		(66,436	)		7,029,840		(68,518	)
FNMA pass-through certificates		498,827		(1,932	)		7,414,109		(79,846	)		7,912,936		(81,778	)
Totals	$	1,251,372	$	(4,014	)	$	18,019,569	$	(208,290	)	$	19,270,941	$	(212,304	)

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. At June 30, 2008, five mortgage-backed securities had been in a continuous unrealized loss position for 12 months or longer. Those securities had aggregate depreciation of 2.14% from the Company’s amortized cost basis. The unrealized losses relate principally to the changes in market interest rates. These securities represent asset backed federal agency issues and are currently rated AAA by at least one bond credit rating agency. As management has the ability and intent to hold these debt securities until a forecasted recovery, which may be maturity, no declines are deemed to be other than temporary.

11

4. LOANS RECEIVABLE — NET

Loans receivable consist of the following:

	June 30, 2008			December 31, 2007
Real estate—mortgage:
One-to-four family residential	$	444,897,550		$	408,144,725
Commercial and multi-family		37,322,300			33,319,467
Total real estate-mortgage		482,219,850			441,464,192
Real estate—construction:
Residential		7,278,480			5,098,647
Commercial		3,475,273			5,143,624
Total real estate—construction		10,753,753			10,242,271
Commercial		16,220,837			17,323,682
Consumer:
Home equity		57,082,890			58,083,825
Other consumer loans		819,640			972,489
Total consumer loans		57,902,530			59,056,314
Total loans		567,096,970			528,086,459
Net deferred loan cost		2,683,285			2,278,271
Allowance for loan losses		(2,468,213	)		(2,307,225	)
Net total loans	$	567,312,042		$	528,057,505
Changes in the allowance for loan losses are as follows:
	Six Months Ended June 30,
	2008			2007
Balance, beginning of period	$	2,307,225		$	2,049,913
Provision for loan loss		158,600			150,000
Charge-offs		—			(747	)
Recoveries		2,388			2,864
Balance, end of period	$	2,468,213		$	2,202,030

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5. DEPOSITS

Deposits consist of the following major classifications:

	June 30, 2008				December 31, 2007
	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
NOW and other demand deposit accounts	$	190,494,103	1.19	%	$	190,870,360	1.84	%
Passbook savings and club accounts		55,644,104	1.11	%		52,501,484	1.11	%
Subtotal		246,138,207				243,371,844
Certificates with original maturities:
Within one year		70,680,274	3.39	%		85,464,138	4.76	%
One to three years		66,836,255	4.51	%		54,441,262	4.79	%
Three years and beyond		30,080,720	4.55	%		31,953,514	4.33	%
Total certificates		167,597,249				171,858,914
Total	$	413,735,456			$	415,230,758

The aggregate amount of certificate accounts in denominations of $100,000 or more at June 30, 2008 and December 31, 2007 amounted to $56,931,836 and $58,188,753, respectively.

Municipal demand deposit accounts in denominations of $100,000 or more at June 30, 2008 and December 31, 2007 amounted to $56,068,465 and $64,752,734, 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 basic average shares outstanding, for the purposes of calculating basic earnings per share (“EPS”), is a result of subtracting unallocated ESOP shares, unvested restricted stock shares and treasury stock purchases from issued shares.

The calculated basic and dilutive EPS are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2008		2007		2008		2007
Numerator	$	1,088,547	$	618,608	$	1,818,808	$	1,119,982
Denominators:
Basic average shares outstanding		7,990,246		8,127,619		7,995,153		8,147,779
Effect of diluted securities		89,039		107,846		93,603		113,206
Dilutive average shares outstanding		8,079,285		8,235,465		8,088,756		8,260,985
Earnings per share:
Basic	$	0.14	$	0.08	$	0.23	$	0.14
Diluted	$	0.13	$	0.08	$	0.22	$	0.14

At June 30, 2008 and 2007, there were 426,374 and 380,038 outstanding options that were anti-dilutive.

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7. STOCK BASED COMPENSATION

The Company’s 2005 Equity Based Incentive Plan (the “Equity Plan”) provides for the grant of shares of common stock of the Company to certain officers, directors and employees 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 June 30, 2008, 68,520 shares were fully vested and no shares were 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 and six months ended June 30, 2008, approximately $99,356 and $198,712 was recognized in compensation expense for the plan, respectively.

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 429,374 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, 24,000 were awarded on November 21, 2006 and 38,874 were awarded November 20, 2007. As of June 30, 2008, 426,374 options were outstanding. During the three and six months ended June 30, 2008, approximately $49,170 and $98,340, respectively, was recognized in compensation expense for the plan.

On January 1, 2006, the Company adopted Statement of Financial Accounting Standards (“SFAS”) 123(R) using a modified prospective application. Accordingly, prior period amounts have not been restated. The adoption required a reclassification to additional paid in capital of $(1,821,000) from common stock acquired by employee benefits plans trust. As of June 30, 2008, expenses totaling $828,000 remain to be recognized over the next 2.1 years.

The estimated fair value of options granted during 2007 was $2.10 per share. The fair value was estimated on the date of grant using the Black-Scholes Single Option Pricing Model with the following weighted average assumptions used:

	Year Ended December 31, 2007
Dividend yield	0.00	%
Expected volatility	25.95	%
Risk-free interest rate	3.25	%
Expected life of options	5.0

The dividend yield is zero because the Company had not declared any dividends and at the time of the grant, did not anticipate declaring any over the life of the options. The risk-free interest rate used was based on the rates of treasury securities with maturities equal to the expected lives of the options.

14

A summary of the status of the Company’s stock options under the Equity Plan as of June 30, 2008 and changes during the six months ended June 30, 2008 are presented below:

	Six Months Ended June 30, 2008
	Number of shares		Weighted average exercise price
Outstanding at the beginning of the period	428,874		$	11.64
Granted	—			—
Exercised	—			—
Forfeited	(2,500	)	$	11.60
Outstanding at the end of the period	426,374		$	11.57
Exercisable at the end of the period	150,200		$	11.64

The following table summarizes all stock options outstanding under the Equity Plan as of June 30, 2008:

	Options Outstanding
Grant Date	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
August 2005	363,500	$	11.60	7.1 years
November 2006	24,000	$	13.00	8.3 years
November 2007	38,874	$	9.95	9.3 years

8. STOCK REPURCHASE PLAN

On April 18, 2007, the Company’s Board of Directors approved the repurchase of 200,000 shares of the Company’s common stock in the open market. As of June 30, 2008, 200,000 shares had been purchased at an average cost of $11.37 per share. During the six months ended June 30, 2008, the Company purchased 25,725 shares at an average cost of $10.28.

9. INCOME TAXES

Income taxes were $1.2 million for an effective tax rate of 39.0% for the six months ended June 30, 2008 compared to $732,000 for an effective tax rate of 39.5% for the same period in 2007. The Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes in the consolidated income statement. As of January 1, 2008, the tax years ended December 31, 2004, 2005, 2006 and 2007 were subject to examination by all tax jurisdictions. As of June 30, 2008, no audits were in process by a major tax jurisdiction that, if completed during the next twelve months, would be expected to result in a material change to the Company’s unrecognized tax benefits, as none exist.

10. DECLARATION OF DIVIDEND

On April 16, 2008, the Company declared an initial quarterly cash dividend on the Company’s outstanding shares of common stock of $.05 per share that was paid on or about May 23, 2008 to stockholders of record as of the close of business on May 2, 2008.

15

11. FAIR VALUE MEASUREMENT

Effective January 1, 2008, the Company adopted SFAS 157. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements. The definition of fair value retains the exchange price notion in earlier definitions of fair value. SFAS No. 157 clarifies that the exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability in the market in which the reporting entity would transact for the asset or liability. The definition focuses on the price that would be received to sell the asset or paid to transfer the liability (an exit price), not the price that would be paid to acquire the asset or received to assume the liability (an entry price). SFAS No. 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. FASB Staff Position (“FSP”) No. 157-2,Effective Date of FASB Statement No. 157, issued in February 2008, delays the effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in an entity’s financial statements on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008.

SFAS No. 157 describes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

In addition, SFAS No. 157 requires the Company to disclose the fair value for financial assets on both a recurring and non-recurring basis. The Company currently measures restricted equity investments on a non-recurring basis.

Those assets which will continue to be measured at fair value on a recurring basis are as follows:

	Category Used for Fair Value Measurement
	Level 1	Level 2		Level 3
Assets:
Securities available for sale:
U.S. Government agencies and mortgage-backed securities	—	$	28,435,047	—
State and municipal obligations	—		1,939,465	—
Corporate securities			8,579,143
Equity securities	—		58,785	—
Totals	—	$	39,012,440	—

16

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, 2007 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.

COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2008 AND DECEMBER 31, 2007

Total assets of the Company increased by $28.3 million to $657.8 million at June 30, 2008, from $629.5 million at December 31, 2007. Loans receivable, net, increased $39.3 million, investment and mortgage-backed securities decreased $15.5 million and cash and cash equivalents increased by $1.4 million.

Investments

Investments decreased $10.6 million to $11.7 million at June 30, 2008 from $22.3 million at December 31, 2007. The decrease was the result of the sale of mutual funds totaling $8.0 million and the call of municipal securities of $1.0 million. Mortgage-backed securities decreased by $4.9 million to $31.7 million from $36.6 million at December 31, 2007 due to repayments of principal.

Loans

Loans receivable, net, increased $39.2 million to $567.3 million at June 30, 2008 from $528.1 million at December 31, 2007. Loan originations totaled $92.2 million for the six months ended June 30, 2008 resulting in a 24.4% increase over the $74.3 million originated in the six months ended June 30, 2007. Real estate mortgage loan originations totaled $68.0 million, real estate construction originations totaled $5.7 million, consumer loan originations totaled $11.4 million and commercial loan originations totaled $7.0 million for the six months ended June 30, 2008. Origination activity was offset by $53.3 million of normal loan payments and payoffs.

17

The following table summarizes changes in the loan portfolio in the six months ended June 30, 2008.

	June 30, 2008			December 31, 2007			$ change			% change
	(Dollars in thousands)
Real estate – mortgage:
One-to-four-family residential	$	444,898		$	408,145		$	36,753		9.00
Commercial and multi-family		37,322			33,319			4,003		12.01
Total real estate – mortgage		482,220			441,464			40,756		9.23
Real estate – construction:
Residential		7,278			5,099			2,179		42.75
Commercial		3,475			5,143			(1,668	)	(32.44	)
Total real estate – construction		10,753			10,242			511		4.99
Commercial		16,221			17,324			(1,103	)	(6.37	)
Consumer:
Home equity		57,083			58,084			(1,001	)	(1.72	)
Other consumer loans		820			972			(152	)	(15.72	)
Total consumer loans		57,903			59,056			(1,153	)	(1.95	)
Total loans		567,097			528,086			39,011		7.39
Net deferred loan costs (fees)		2,683			2,279			404		17.78
Allowance for loan losses		(2,468	)		(2,307	)		(161	)	6.98
Net total loans	$	567,312		$	528,058		$	39,254		7.43

Non-Performing Assets

Non-performing assets totaled $1.9 million at June 30, 2008. Net charge-offs (recoveries) were $(2,000) in the six months ended June 30, 2008, compared to $(2,000) in the same period last year. The allowance for loan losses was 0.44% of total loans at June 30, 2008 versus 0.47% and June 30, 2007.

	Six Months Ended June 30,
	2008			2007
	(In thousands)
Allowance for loan losses:
Allowance at beginning of period	$	2,307		$	2,050
Provision for loan losses		159			150
Recoveries		2			3
Charge-offs		—			1
Net (recoveries)charge-offs		(2	)		(2	)
Allowance at end of period	$	2,468		$	2,202
Allowance for loan losses as a percent of total loans		0.44	%		0.47	%
Allowance for loan losses as a percent of non-performing loans		129.06	%		685.9	%

18

	June 30, 2008			December 31, 2007
	(In thousands)
Nonaccrual loans:
Real estate mortgage loans	$	320		$	295
Commercial		1,551			—
Consumer loans		41			1
Total of non-accrual and 90 days or more past due loans	$	1,912		$	296
Total non-performing loans to total loans		0.34	%		0.06	%
Total non-performing loans to total assets		0.29	%		0.05	%
Total non-performing assets and troubled debt restructurings to total assets		0.29	%		0.05	%

Deposits

Deposits decreased by $1.5 million, or 0.4%, to $413.7 million at June 30, 2008 from $415.2 million at December 31, 2007. Non-interest bearing checking accounts increased $31.3 million and interest bearing demand deposits decreased $31.7 million as the Company stopped paying interest on $31.8 million in interest-bearing demand accounts in April of 2008. In addition, time deposits decreased $4.3 million and savings accounts increased $3.1 million. The Company continued its focus on attracting core deposits, which increased $2.8 million to $246.1 million or 59.5% of total deposits.

The following table summarizes changes in deposits in the six months ended June 30, 2008.

	June 30, 2008		December 31, 2007		$ change			% change
	(Dollars in thousands)
Noninterest-bearing demand deposits	$	58,137	$	26,809	$	31,328		116.9	%
Interest-bearing demand deposits		132,357		164,061		(31,704	)	(19.3	)
Savings accounts		55,644		52,502		3,142		6.0
Certificates of deposit		167,597		171,859		(4,262	)	(2.4	)
Total	$	413,735	$	415,231	$	(1,496	)	(0.4	)

Borrowings

Federal Home Loan Bank advances increased $29.0 million, or 24.1%, to $149.2 million at June 30, 2008 from December 31, 2007. Other borrowings decreased $750,000 to $22.7 million at June 30, 2008 from $23.5 million at December 31, 2007. The increase in Federal Home Loan Bank borrowings was used to fund new loan originations not funded by deposit growth.

Stockholders’ Equity

Stockholders’ equity increased by $500,000 to $63.5 million at June 30, 2008, from $63.0 million at December 31, 2007. The increase was the result of an increase from current period earnings of $1.8 million, offset by treasury stock purchases of $265,000, dividends paid of $178,000 and increases in the accumulated other comprehensive loss of $1.0 million.

19

COMPARISON OF OPERATING RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007

Net income was $1,089,000 for the three months ended June 30, 2008 as compared to $619,000 for the three months ended June 30, 2007. The $470,000, or 76.0%, increase in 2008 from 2007 was due to increases in net interest income of $952,000 and other income of $30,000 offset by increases in other expense of $205,000 and provision for loan losses of $14,600.

Net income was $1,819,000 for the six months ended June 30, 2008 as compared to $1,120,000 for the six months ended June 30, 2007. The $699,000, or 62.4%, increase in 2008 from 2007 was due to increases in net interest income of $1.6 million offset by a decrease in other income of $258,000 and increases in other expense of $249,000 and provision for loan losses of $9,000.

	Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008			2007
	(Dollars in thousands, except per share data)						(Dollars in thousands, except per share data)
Net income	$	1,089		$	619		$	1,819		$	1,120
Basic earnings per share	$	0.14		$	0.08		$	0.23		$	0.14
Basic and diluted earnings per share	$	0.13		$	0.08		$	0.22		$	0.14
Return on average assets (annualized)		0.66	%		0.43	%		0.56	%		0.39	%
Return on average equity (annualized)		6.81	%		3.91	%		5.69	%		3.55	%

Net Interest Income

The following table summarizes changes in interest income and interest expense for the three-month periods ended June 30, 2008 and 2007.

	Three Months Ended June 30,
	2008		2007		$ Change			% Change
	(Dollars in thousands)
INTEREST INCOME:
Loans	$	8,148	$	6,763	$	1,385		20.5	%
Investment securities		746		959		(213	)	(22.2	)
Other interest-earning assets		41		215		(174	)	(80.9	)
Total interest income	$	8,935	$	7,937	$	998		12.6
INTEREST EXPENSE:
Deposits	$	2,526	$	3,154	$	(628	)	(19.9	)
Borrowings		1,784		1,110		674		60.7
Total interest expense		4,310		4,264		46		1.1
Net interest income	$	4,625	$	3,673	$	952		25.9

Interest income increased by $998,000 in the second quarter of 2008 compared to the second quarter of 2007. The increase was driven by a $1.5 million increase in mortgage loan income which was offset by decreases in income on consumer loans and commercial loans. Declines in interest income on investment securities and other interest-earning assets also offset the growth in loan income. The increase in loan income resulted from an increase in the average balance of $108.7 million offset by a decrease in yield of 17 basis points. The decrease in investment income resulted from a decrease in the average balance of $19.9 million offset by an increase in average yield of 61 basis points. The decrease in income in other interest-earning assets resulted from decreases in average balance of $7.9 million and yield of 336 basis points.

20

Interest expense increased by $46,000, or 1.1%, over the second quarter of 2007. Increased interest expense on borrowings of $674,000 and time deposits of $20,000 was offset by a decrease in interest expense on interest-bearing demand deposits of $632,000 and a decrease in interest expense on savings accounts of $15,000. Interest-bearing deposit expense decreased as a result of decreases in the average balance of $31.1 million and cost of 116 basis points, while time deposit expense increased as a result of increased average balances of $18.9 million offset by a decrease in the cost by 47 basis points. Overall, the cost of deposits decreased 53 basis points to 2.71% from 3.24% in second quarter of 2008 versus 2007, while the average balance of deposits declined $16.9 million. Borrowing expense increased as a result of an increase in the average balance of $77.7 million offset by a decrease in the cost by 79 basis points.

The interest rate spread and net interest margin were 2.58% and 3.00%, respectively, for the three months ended June 30, 2008 compared to 2.34% and 2.74% for the same period in 2007. The increase in average earning assets of $81.0 million and the decrease in average cost of funds of 37 basis points was offset by a rise of average interest bearing liabilities of $60.8 million and a decrease in the average yield on earning assets of 13 basis points.

The following table summarizes changes in interest income and interest expense for the six-month periods ended June 30, 2008 and 2007.

	Six Months Ended June 30,
	2008		2007		$ Change			% Change
	(Dollars in thousands)
INTEREST INCOME:
Loans	$	16,083	$	13,269	$	2,814		21.2	%
Investment securities		1,665		1,964		(299	)	(15.2	)
Other interest-earning assets		64		433		(369	)	(85.2	)
Total interest income	$	17,812	$	15,666	$	2,146		13.7
INTEREST EXPENSE:
Deposits	$	5,390	$	6,246	$	(856	)	(13.7	)
Borrowings		3,471		2,112		1,359		64.3
Total interest expense		8,861		8,358		503		6.0
Net interest income	$	8,951	$	7,308	$	1,643		22.5

Interest income increased by $2.1 million in the six months ended June 30, 2008 compared to the same period in 2007. The increase was driven by a $2.9 million increase in mortgage loan income which was offset by decreases in income on consumer loans and commercial loans. Declines in interest income on investment securities and other interest-earning assets also offset the growth in loan income. The increase in loan income resulted from an increase in the average balance of $104.5 million offset by a decrease in the average yield of 11 basis points. The decrease in investment income resulted from a decrease in the average balance of $16.0 million offset by an increase in the average yield of 63 basis points. The decrease in income in other interest-earning assets resulted from decreases in the average balance of $10.6 million and average yield of 304 basis points.

21

Interest expense increased by $503,000, including a decrease in interest-bearing deposits expense of $1.1 million, an increase in time deposit expense of $323,000, a decrease in savings account of $40,000 and an increase in interest expense on borrowings of $1.4 million. Interest-bearing deposit expense decreased as a result of decreases in the average balance of $18.7 million and cost by 112 basis points, while time deposit expense increased as a result of an increase in the average balance of $21.8 million offset by a decrease in the cost by 20 basis points. Overall, the cost of deposits decreased 42 basis points to 2.80% from 3.22% in second quarter of 2008 versus 2007, while the average balance of deposits declined $3.5 million. Borrowing expense increased as a result of an increase in the average balance of $72.9 million offset by a decrease in the average cost of funds of 28 basis points.

The interest rate spread and net interest margin of the Company were 2.59% and 2.95%, respectively, for the six months ended June 30, 2008 compared to 2.37% and 2.76% for the same period in 2007. The increase in average earning assets of $77.9 million and a decrease in average cost paid on liabilities of 28 basis points was offset by a rise of average interest bearing liabilities of $69.4 million and an decrease in the average yield on earning assets of 5 basis points.

22

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, 2008							Three Months Ended June 30, 2007
	Average Balance			Interest and Dividends		Yield/ Cost		Average Balance			Interest and Dividends		Yield/ Cost
	(Dollars in thousands)							(Dollars in thousands)
Assets:
Interest-earning assets:
Loans	$	561,576		$	8,148	5.80	%	$	452,846		$	6,763	5.97	%
Investment securities		47,163			746	6.33	%		67,018			959	5.72	%
Other interest-earning assets		7,932			41	2.07	%		15,857			215	5.43	%
Total interest-earning assets		616,671			8,935	5.80	%		535,721			7,937	5.93	%
Noninterest-earning assets		44,615							42,227
Total assets	$	661,286						$	577,948
Liabilities and equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	144,767		$	560	1.55	%	$	175,916		$	1,192	2.71	%
Savings accounts		55,304			152	1.10	%		59,904			167	1.11	%
Certificates of deposit		172,662			1,814	4.20	%		153,807			1,794	4.67	%
Total interest-bearing deposits		372,733			2,526	2.71	%		389,627			3,153	3.24	%
FHLB advances		141,148			1,363	3.86	%		64,397			686	4.26	%
Securities sold under agreements to repurchase		7,555			86	4.54	%		6,590			90	5.44	%
Subordinated debt		15,464			335	8.67	%		15,464			335	8.67	%
Total borrowings		164,167			1,784	4.35	%		86,451			1,111	5.14	%
Total interest-bearing liabilities		536,900			4,310	3.21	%		476,078			4,264	3.58	%
Noninterest-bearing demand accounts		53,088							33,023
Other		7,326							5,572
Total liabilities		597,314							514,662
Stockholders’ equity		63,972							63,286
Total liabilities and stockholders’ equity	$	661,286						$	577,948
Net interest income				$	4,625						$	3,673
Interest rate spread						2.58	%						2.34	%
Net interest margin						3.00	%						2.74	%
Average interest-earning assets to average interest-bearing liabilities		114.86	%						112.53	%

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Average Balance Tables

	Six Months Ended June 30, 2008							Six Months Ended June 30, 2007
	Average Balance			Interest and Dividends		Yield/ Cost		Average Balance			Interest and Dividends		Yield/ Cost
	(Dollars in thousands)							(Dollars in thousands)
Assets:
Interest-earning assets:
Loans	$	548,963		$	16,083	5.86	%	$	444,422		$	13,269	5.97	%
Investment securities		52,119			1,665	6.39	%		68,154			1,964	5.76	%
Other interest-earning assets		5,642			64	2.28	%		16,271			433	5.32	%
Total interest-earning assets		606,724			17,812	5.87	%		528,847			15,666	5.92	%
Noninterest-earning assets		44,010							42,128
Total assets	$	650,734						$	570,975
Liabilities and equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	157,859		$	1,276	1.62	%	$	176,510		$	2,414	2.74	%
Savings accounts		53,653			295	1.10	%		60,313			335	1.11	%
Certificates of deposit		173,389			3,819	4.41	%		151,617			3,497	4.61	%
Total interest-bearing deposits		384,901			5,390	2.80	%		388,440			6,246	3.22	%
FHLB advances		131,368			2,619	3.99	%		59,227			1,253	4.23	%
Securities sold under agreements to repurchase		7,777			182	4.68	%		6,994			189	5.41	%
Subordinated debt		15,464			670	8.67	%		15,464			670	8.67	%
Total borrowings		154,609			3,471	4.49	%		81,685			2,112	5.17	%
Total interest-bearing liabilities		539,510			8,861	3.28	%		470,125			8,358	3.56	%
Noninterest-bearing demand accounts		40,281							32,248
Other		7,065							5,422
Total liabilities		586,856							507,789
Stockholders’ equity		63,878							63,181
Total liabilities and stockholders’ equity	$	650,734						$	570,975
Net interest income				$	8,951						$	7,308
Interest rate spread						2.59	%						2.37	%
Net interest margin						2.95	%						2.76	%
Average interest-earning assets to average interest-bearing liabilities		112.46	%						112.49	%

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 $89,600 and $158,600 for the three and six months ended June 30, 2008, respectively, compared to $75,000 and $150,000 for the three and six months ended June 30, 2007, respectively. The provision for loan losses was primarily to maintain an allowance level deemed appropriate by management in light of factors such as the level of non-performing loans and the current market conditions.

24

Other Income

The following table summarizes other income for the three months ended June 30, 2008 and 2007 and the changes between the periods.

	Three Months Ended June 30,					% Change
	2008			2007
	(Dollars in thousands)
OTHER INCOME:
Service charges	$	442		$	398	11.2	%
Cash surrender value of life insurance		107			93	15.0
Loss on sale of securities		(54	)		—	N/M
Other		172			146	17.6
Total other income	$	667		$	637	4.7

Other income increased $30,000, or 4.7%, to $667,000 for the three-month period ended June 30, 2008 from the same period in 2007. The increase in income resulted from increases in income from service charges, cash surrender value of life insurance and other income totaling $84,000 offset by a loss on sale of securities of $54,000. The securities sold were identified as other than temporarily impaired in the first quarter of 2008.

The following table summarizes other income for the six months ended June 30, 2008 and 2007 and the changes between the periods.

	Six Months Ended June 30,					% Change
	2008			2007
	(Dollars in thousands)
OTHER INCOME:
Service charges	$	808		$	773	4.5	%
Cash surrender value of life insurance		210			171	22.8
Gain on call of AFS securities		4			—	N/M
Impairment charge on AFS securities		(313	)		—	N/M
Loss on sale of securities		(54	)		—	N/M
Other		322			291	10.7
Total other income	$	977		$	1,235	(20.9	)

Other income decreased $258,000, or 20.9%, to $977,000 for the six-month period ended June 30, 2008 from the same period in 2007. The decrease was the result of the Company’s identifying an impairment of fair value in an investment of its $8.0 million mutual fund portfolio as other than temporary resulting in a loss of $313,000 and the subsequent sale of those securities resulting in an additional loss of $54,000. These decreases were offset by increases in service charge income of $35,000, cash surrender value of life insurance of $39,000 and other income of $30,000.

25

Other Expense

The following table summarizes other expense for the three months ended June 30, 2008 and 2007 and the changes between the periods.

	Three Months Ended June 30,				% Change
	2008		2007
	(Dollars in thousands)
OTHER EXPENSE:
Salaries and employee benefits	$	2,046	$	1,833	11.6	%
Occupancy and equipment		748		719	4.0
Federal insurance premiums		12		13	(7.7	)
Advertising		88		121	(27.3	)
Professional services		156		168	(7.1	)
Other operating expense		364		355	2.5
Total other expense	$	3,414	$	3,209	6.4

Other expenses increased $205,000 to $3.4 million for the three-month period ended June 30, 2008 from the same period in 2007. The increase in other expenses was primarily the result of increases in salaries and employee benefits of $213,000 and occupancy and equipment of $29,000 offset by decreases in advertising and professional services of $45,000.

The following table summarizes other expense for the six months ended June 30, 2008 and 2007 and the changes between the periods.

	Six Months Ended June 30,				% Change
	2008		2007
	(Dollars in thousands)
OTHER EXPENSE:
Salaries and employee benefits	$	3,976	$	3,837	3.6	%
Occupancy and equipment		1,511		1,430	5.7
Federal insurance premiums		24		26	(7.7	)
Advertising		186		234	(20.5	)
Professional services		368		320	15.0
Other operating expense		724		693	4.5
Total other expense	$	6,789	$	6,541	3.8

Other expenses increased $248,000 to $6.8 million for the six-month period ended June 30, 2008 from the same period in 2007. The increase in other expenses was primarily the result of increases in salaries and employee benefits, occupancy and equipment, professional services and other operating expenses totaling $298,000 offset by decreases in federal insurance premiums and advertising totaling $50,000.

Income Taxes

Income taxes increased $292,000 to $699,000 for an effective tax rate of 39.1% for the three months ended June 30, 2008 compared to $407,000 for an effective tax rate of 39.7% for the same period in 2007. The increase in income taxes was a result of higher taxable income in 2008 compared to the same period in 2007.

Income taxes increased $429,000 to $1.2 million for an effective tax rate of 39.0% for the six months ended June 30, 2008 compared to $732,000 for an effective tax rate of 39.5% for the same period in 2007. The increase in income taxes was a result of higher taxable income in 2008 compared to the same period in 2007.

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.

26

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 federal funds sold. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At June 30, 2008, cash and cash equivalents totaled $11.0 million. Securities classified as available-for-sale whose market value exceeds our cost, which provide additional sources of liquidity, totaled $10.3 million at June 30, 2008. In addition, at June 30, 2008, we had the ability to borrow a total of approximately $46.5 million from the Federal Home Loan Bank of New York, which included available overnight lines of credit of $38.2 million. On that date, we had overnight advances outstanding of $9.2 million.

At June 30, 2008, we had $46.6 million in loan commitments outstanding, which included $13.0 million in undisbursed loans, $22.9 million in unused home equity lines of credit and $10.7 million in commercial lines of credit. Certificates of deposit due within one year of June 30, 2008 totaled $125.2 million, or 74.7% 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 have the ability to attract and retain deposits by adjusting the interest rates offered.

At June 30, 2008, the Bank exceeded all of its regulatory capital requirements with tangible capital of $62.8 million, or 9.77% of total adjusted assets, which is above the required level of $9.6 million or 1.5%; core capital of $62.8 million, or 9.77% of total adjusted assets which is above the required level of $25.7 million or 4.0%; and risk-based capital of $65.3 million, or 17.26% of risk-weighted assets, which is above the required level of $30.2 million or 8.0%. 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, 2008 Percentage Change in Estimated Net Interest Income Over
	12 Months		24 Months
200 basis point increase in rates	(7.18	)%	(8.00	)%
100 basis point decrease in rates	(2.11	)%	(6.55	)%

27

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 and twenty-four month period if rates rose by 200 basis points. The reason for the decrease in the twelve-month and twenty-four month period is that interest bearing liabilities will reprice faster than interest bearing assets. In addition, if rates declined by 100 basis points, net interest income would be adversely affected in the twelve-month and twenty-four month period. The reason for the decrease in the twelve-month and twenty-four month period is that interest bearing assets will reprice faster than interest bearing liabilities.

Net Portfolio Value Analysis

In addition to a net interest income simulation analysis, we use an interest rate sensitivity analysis prepared by the Office of Thrift Supervision to review our level of interest rate risk. This analysis measures interest rate risk by computing changes in net portfolio value of our 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 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 June 30, 2008 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	$	43,218	$	(46,061	)	(52	)%	6.91	%	(614	) bp
200		64,475		(24,804	)	(27	)	9.92		(313	)
100		76,279		(13,000	)	(15	)	11.45		(160	)
0		89,279		—		—		13.05		—
(100)		77,066		(12,213	)	(14	)	11.35		(170	)
(200)		64,055		(25,224	)	(28	)	9.49		(357	)
(300)		57,712		(31,567	)	(35	)	8.48		(457	)

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.

28

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, 2008, 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 4T. 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 officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

There have been no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2008 that have materially affected, or are 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 1A. Risk Factors

There have been no material changes in the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

29

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 (1)(2)
Month #1 April 1, 2008 through April 30, 2008	None	None	None	449
Month #2 May 1, 2008 through May 31, 2008	None	None	None	449
Month #3 June 1, 2008 through June 30, 2008	None	None	None	449
Total

_______________

(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. As of September 23, 2005, 171,300 shares were purchased. The remaining 449 shares have not been awarded and may be purchased 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

The Annual Meeting of Stockholders of the Company was held on May 21, 2008. 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	7,799,276	99,613
Christopher J. Ford	7,799,398	99,491
John L. VanDuyne, Jr.	7,792,244	106,645

2. The appointment of Deloitte & Touche LLP as auditors for the Company for the fiscal year ending December 31, 2008 was ratified by stockholders by the following vote:

For: 7,856,426; Against: 41,038; Abstain: 1,325

Broker non-votes totaled none.

30

Item 5. Other Information

None.

Item 6. Exhibits

10.0	Amended and Restated Salary Continuation Agreement by and between Ocean City Home Bank and Steven E. Brady
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 14, 2008	/s/ Steven E. Brady
	Steven E. Brady
	President and Chief Executive Officer
Date: August 14, 2008	/s/ Donald F. Morgenweck
	Donald F. Morgenweck
	Chief Financial Officer and Senior Vice President

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