Ocean Shore Holding 10-Q 2010 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, 2010

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: 0-53856

OCEAN SHORE HOLDING CO.

(Exact name of registrant as specified in its charter)

New Jersey	80-0282446
(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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    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	¨  (Do not check if a smaller reporting company)	Smaller Reporting Company	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 July 30, 2010, the registrant had 7,307,590 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 June 30, 2010 and December 31, 2009
	Unaudited Condensed Consolidated Statements of Income for the three and six months ended June 30, 2010 and 2009	2
	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2009	3
	Notes to Unaudited Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults upon Senior Securities	32
Item 4.	[RESERVED]	32
Item 5.	Other Information	32
Item 6.	Exhibits	32
SIGNATURES

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	June 30, 2010			December 31, 2009
ASSETS
Cash and amounts due from depository institutions	$	6,887,614		$	5,741,369
Interest-earning bank balances		43,074,830			27,286,341
Cash and cash equivalents		49,962,444			33,027,710
Investment securities held to maturity (estimated fair value—$4,763,474 at June 30, 2010; $3,579,611 at December 31, 2009)		4,554,244			3,440,275
Investment securities available for sale (amortized cost— $24,452,073 at June 30, 2010; $27,654,602 at December 31, 2009)		23,405,865			25,986,767
Loans—net of allowance for loan losses of $4,124,414 at June 30, 2010 and $3,476,040 at December 31, 2009		675,680,843			663,662,808
Accrued interest receivable:
Loans		2,528,772			2,377,498
Investment securities		154,301			247,903
Federal Home Loan Bank stock—at cost		6,271,600			6,148,000
Office properties and equipment—net		13,204,481			13,512,159
Prepaid expenses and other assets		5,345,754			5,457,455
Real estate owned		97,500			97,500
Cash surrender value of life insurance		14,611,374			12,837,789
Deferred tax asset		2,972,769			3,349,332
TOTAL ASSETS	$	798,789,947		$	770,145,196
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Non-interest bearing deposits	$	64,320,959		$	53,254,259
Interest bearing deposits		498,936,586			484,167,835
Advances from Federal Home Loan Bank		110,000,000			110,000,000
Junior subordinated debenture		15,464,000			15,464,000
Advances from borrowers for taxes and insurance		3,718,031			3,406,419
Accrued interest payable		1,139,975			1,145,412
Other liabilities		5,409,235			5,372,769
Total liabilities		698,988,786			672,810,693
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, 7,307,590 shares issued and outstanding at June 30, 2010; and 7,308,118 shares issued and outstanding at December 31, 2009		73,076			73,081
Additional paid-in capital		65,451,116			65,213,708
Retained earnings—partially restricted		39,632,867			37,934,456
Common stock acquired by employee benefits plans		(4,164,678	)		(4,321,878	)
Deferred compensation plans trust		(510,791	)		(495,741	)
Accumulated other comprehensive loss		(680,429	)		(1,069,123	)
Total stockholders’ equity		99,801,161			97,334,123
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	798,789,947		$	770,145,196

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,
	2010		2009			2010		2009
INTEREST AND DIVIDEND INCOME:
Taxable interest and fees on loans	$	9,058,506	$	8,592,233		$	18,089,112	$	17,053,907
Taxable interest on mortgage-backed securities		220,838		309,309			454,831		648,828
Non-taxable interest on municipal securities		19,060		17,898			36,400		41,044
Taxable interest and dividends on other investment securities		195,749		225,144			418,499		392,405
Total interest and dividend income		9,494,153		9,144,584			18,998,842		18,136,184
INTEREST EXPENSE:
Interest on deposits		1,931,453		2,236,365			3,957,788		4,548,741
Interest on borrowings		1,510,334		1,529,527			3,007,753		3,057,666
Total interest expense		3,441,787		3,765,892			6,965,541		7,606,407
NET INTEREST INCOME		6,052,366		5,378,692			12,033,301		10,529,777
PROVISION FOR LOAN LOSSES		539,700		251,800			691,361		404,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		5,512,666		5,126,892			11,341,940		10,125,777
OTHER INCOME:
Service charges		445,159		441,275			881,111		848,316
Cash surrender value of life insurance		138,800		106,180			273,584		209,970
Gain on sale of securities		—		—			5		6,132
Impairment charge on AFS securities(1)		—		(591,800	)		—		(1,077,400	)
Other		302,396		223,816			538,923		393,304
Total other income		886,355		179,471			1,693,623		380,322
OTHER EXPENSE:
Salaries and employee benefits		2,452,437		2,207,949			4,948,865		4,348,741
Occupancy and equipment		981,233		903,509			1,958,484		1,770,742
Federal insurance premiums		162,519		393,832			330,431		465,125
Advertising		111,800		101,394			227,775		198,265
Professional services		204,009		180,792			381,664		335,662
Real estate owned expense		1,573		3,338			2,521		10,668
Charitable contributions		34,500		30,000			69,000		60,000
Other operating expenses		426,527		385,594			908,614		757,990
Total other expenses		4,374,598		4,206,408			8,827,354		7,947,193
INCOME BEFORE INCOME TAXES		2,024,423		1,099,955			4,208,209		2,558,906
INCOME TAX EXPENSE		785,425		428,623			1,632,887		974,789
NET INCOME	$	1,238,998	$	671,332		$	2,575,322	$	1,584,117
Earnings per share, basic:	$	0.18	$	0.10	*	$	0.38	$	0.22	*
Earnings per share, diluted:	$	0.18	$	0.09	*	$	0.38	$	0.22	*

⁽¹⁾ Impairment charge on AFS securities required no bifurcation reclassification to Other Comprehensive Income upon adoption of FASB ASC 320-10-65 (formerly FSP FAS 115-2 and FAS 124-2,Recognition and Presentation of Other-Than-Temporary Impairments) as the entire amount of the charge was concluded to be credit impairment.

* Earnings per share for the prior periods have been adjusted to reflect the impact of the second-step conversion and reorganization of the Company, which occurred on December 18, 2009.

See notes to unaudited condensed consolidated financial statements.

2

OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended June 30,
	2010			2009
OPERATING ACTIVITIES:
Net income	$	2,575,322		$	1,584,117
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		489,962			438,537
Provision for loan losses		691,361			404,000
Stock based compensation expense		410,600			341,272
Impairment charge on AFS securities		—			1,077,400
Gain on call of AFS securities		(5	)		(6,133	)
Gain on sale real estate owned		—			(5,311	)
Cash surrender value of life insurance		(273,584	)		(209,970	)
Changes in assets and liabilities which provided (used) cash:
Accrued interest receivable		(57,673	)		(4,696	)
Prepaid expenses and other assets		255,332			(1,236,004	)
Accrued interest payable		(5,437	)		(7,789	)
Other liabilities		36,467			371,886
Net cash provided by operating activities		4,122,345			2,747,309
INVESTING ACTIVITIES:
Principal collected on:
Mortgage-backed securities available for sale		2,422,419			3,492,916
Mortgage-backed securities held to maturity		357,550			353,340
Investment securities available for sale		—			668,309
Loans originated, net of repayments		(12,672,662	)		(43,285,283	)
Purchases of:
Life insurance contracts		(1,500,000	)		—
Investment securities held to maturity		(1,474,102	)		(659,727	)
Federal Home Loan Bank stock		(123,600	)		(8,744,550	)
Office properties and equipment		(207,853	)		(798,128	)
Proceeds from sales of Federal Home Loan Bank stock		—			8,211,150
Proceeds from sale of real estate owned		—			773,375
Proceeds from maturities/ calls of:
Investment securities held to maturity		—			12,580
Investment securities available for sale		771,532			—
Net cash (used in) investing activities		(12,426,716	)		(39,976,018	)
FINANCING ACTIVITIES:
Increase in deposits		25,835,452			34,513,965
Increase in advances from the Federal Home Loan Bank, net		—			9,100,000
Dividends paid		(876,911	)		(356,237	)
Fractional share payouts on exchange		(15,998	)		—
Purchase of shares by deferred compensation plans trust		(15,050	)		(5,465	)
Increase in advances from borrowers for taxes and insurance		311,612			322,309
Net cash provided by financing activities		25,239,105			43,574,572
NET INCREASE IN CASH AND CASH EQUIVALENTS		16,934,734			6,345,863
CASH AND CASH EQUIVALENTS—Beginning of period		33,027,710			8,530,159
CASH AND CASH EQUIVALENTS—End of period	$	49,962,444		$	14,876,022
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION—Cash paid during the period for:
Interest	$	6,970,978		$	7,611,196
Income Taxes	$	2,148,080		$	1,721,784

See notes to unaudited condensed consolidated financial statements.

3

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, pursuant to the rules and regulations of the United States Securities and Exchange Commission (SEC) for interim information, 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 (“GAAP”). 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, 2009. The results for the six months ended June 30, 2010 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2010 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, deferred income taxes and the fair value measurement for investment securities available for sale. Actual results could differ from those estimates.

New Accounting Pronouncements -In July 2010, the FASB issued ASU 2010-20,Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. This guidance requires disclosure on a disaggregated basis at two levels, portfolio segments and classes of financing receivables. This guidance also requires a roll forward schedule of the allowance for loan losses on a portfolio segment basis, with the ending balance further disaggregated on the basis of the impairment method, the related recorded investment in financing receivables, the nonaccrual status of financing receivables by class, and impaired financing receivables by class. Additional disclosures are required that relate to the credit quality indicators of financing receivables at the end of the reporting period by class of financing receivables, the aging of past due financing receivables, the nature and extent of troubled debt restructurings and their effect on the allowance for loan losses, the nature and extent of financing receivables modified as troubled debt restructurings within the previous 12 months that defaulted during the reporting period by class of financing receivables and their effect on the allowance for credit losses, and significant purchases and sales of financing receivables during the period disaggregated by portfolio segment. The new guidance is effective for interim and annual reporting periods that beginning on or after December 15, 2010. The Company is continuing to evaluate the impact of the new guidance, but does not expect the guidance will have a material impact on the Company’s financial condition or results of operations.

In February 2010, the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update (“ASU”) 2010-09,Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements. This guidance removes the requirement for a SEC filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of GAAP. FASB ASU 2010-09 is intended to remove potential conflicts with the SEC’s literature and all of its amendments are effective upon issuance, except for the use of the issued date for conduit debt obligors, which will be effective for interim or annual periods ending after June 15, 2010. The Company adopted the new guidance, and it did not have a material impact on the Company’s financial condition, results of operations or cash flows.

4

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In January 2010, the FASB issued FASB ASU 2010-06,Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. This guidance requires: (1) disclosure of the significant amount transferred in and out of Level 1 and Level 2 fair value measurements and the reasons for the transfers; and (2) separate presentation of purchases, sales, issuances and settlements in the reconciliation for fair value measurements using significant unobservable inputs (Level 3). In addition, FASB ASU 2010-06 clarifies the requirements of the following existing disclosures set forth in FASB ASC 820,Fair Value Measurements and Disclosures: (1) For purposes of reporting fair value measurement for each class of assets and liabilities, a reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities; and (2) a reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. This guidance is effective for interim and annual reporting periods beginning January 1, 2010, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements, which are effective for fiscal years beginning January 1, 2011, and for interim periods within those fiscal years. The Company adopted the new guidance, and it did not have a material impact on the Company’s financial condition, results of operations or cash flows.

2. INVESTMENT SECURITIES

Investment securities are summarized as follows:

	June 30, 2010
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
Held to Maturity
Municipal securities	$	1,474,102	$	—	$	—		$	1,474,102
US treasury and government sponsored entity mortgage-backed securities		3,080,142		209,230		—			3,289,372
Totals	$	4,554,244	$	209,230	$	—		$	4,763,474
Available for Sale
Debt securities:
Municipal securities	$	1,419,500	$	11,491	$	—		$	1,430,991
Corporate		8,198,126		—		(2,005,923	)		6,192,203
Equity securities		2,596		14,641		—			17,237
US treasury and government sponsored entity mortgage-backed securities		14,831,851		933,583		—			15,765,434
Totals	$	24,452,073	$	959,715	$	(2,005,923	)	$	23,405,865

	December 31, 2009
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
Held to Maturity
US treasury and government sponsored entity mortgage-backed securities	$	3,440,275	$	139,336	$	—		$	3,579,611
Totals	$	3,440,275	$	139,336	$	—		$	3,579,611
Available for Sale
Debt securities:
U.S. Federal Agencies	$	771,507	$	1,954	$	—		$	773,461
Municipal		1,419,030		11,597		—			1,430,627
Corporate		8,197,324		—		(2,458,832	)		5,738,492
Equity securities		2,596		14,348		—			16,944
US treasury and government sponsored entity mortgage-backed securities		17,264,145		764,456		(1,358	)		18,027,243
Totals	$	27,654,602	$	792,355	$	(2,460,190	)	$	25,986,767

5

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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, 2010 and December 31, 2009:

	June 30, 2010
	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 -
Corporate	$	—	$	—	$	6,192,003	$	(2,005,923	)	$	6,192,003	$	(2,005,923	)
Totals	$	—	$	—	$	6,102,003	$	(2,005,923	)	$	6,192,003	$	(2,005,923	)

	December 31, 2009
	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 -
US Federal Agencies	$	—	$	—	$	358,789	$	(1,358	)	$	358,789	$	(1,358	)
Corporate		—		—		5,738,292		(2,458,832	)		5,738,292		(2,458,832	)
Totals	$	—	$	—	$	6,097,081	$	(2,460,190	)	$	6,097,081	$	(2,460,190	)

As of June 30, 2010, management has concluded that the unrealized losses on its investment securities (which totaled 6 individual securities) are temporary in nature since there currently is no indication that the entire amortized cost basis of these securities will not be recovered, the Company does not intend to sell these investments, and it is not more likely than not that the Company will be required to sell the investments, before recovery of their amortized cost basis, which may be maturity.

Two pooled trust preferred collateralized debt obligations (“CDOs”) backed by bank trust capital securities have been determined to be other-than-temporarily impaired due solely to credit related factors. During the second quarter of 2009 the company recognized the impairment for the entire carrying amount of these investments. Below is a roll forward of the anticipated credit losses on securities for which the Company has recorded other-than-temporary impairment (“OTTI”) charges through earnings and other comprehensive income.

6

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Beginning January 1, 2010		Beginning April 1, 2009
Credit component of OTTI as of beginning of the period	$	3,000,000	$	2,408,000
Additions for credit related OTTI charges on previously unimpaired securities		—		—
Reductions for securities sold during the period		—		—
Reductions for increases in cash flows expected to be collected and recognized over the remaining life of the security		—		—
Additional increases as a result of impairment charges recognized on investments for which an OTTI was previously recognized		—		592,000
Credit component of OTTI as of June 30,	$	3,000,000	$	3,000,000

These securities have Fitch credit ratings below investment grade at June 30, 2010. Each of the securities is in the mezzanine levels of credit subordination. The underlying collateral consists of the bank trust capital securities of over 50 institutions. A summary of key assumptions utilized to forecast future expected cash flows on the securities determined to have OTTI were as follows as of June 30, 2010 and 2009:

	June 30, 2010	June 30, 2009
Future loss rate assumption per annum	.8% to 1.2%	.8% to 1.2%
Expected cumulative loss percentage	27.8%	27.8%
Cumulative loss percentage to date	37.0% to 33.2%	27.7% to 21.1%
Remaining life	31 years	32 years

Corporate Debt Securities - The Company’s investments in the preceding table in corporate debt securities consist of corporate debt securities issued by large financial institutions and single issuer and pooled trust preferred/collateralized debt obligations backed by bank trust preferred capital securities.

At June 30, 2010, two corporate debt securities and four single issuer trust preferred securities had been in a continuous unrealized loss position for 12 months or longer, and had not experienced any other-than-temporary impairment in the past. Those securities had aggregate depreciation of 24.47% from the Company’s amortized cost basis. The decline is primarily attributable to depressed pricing of two private placement single issuer trust preferred securities. There has been limited secondary market trading for these types of securities, as a declining domestic economy and increasing credit losses in the banking industry have led to illiquidity in the market for these types of securities. The unrealized loss on these debt securities relates principally to the increased credit spread and a lack of liquidity currently in the financial markets for these types of investments. These securities were performing in accordance with their contractual terms as of June 30, 2010, and had paid all contractual cash flows since the Company’s initial investment. Management believes these unrealized losses are not other-than-temporary based upon the Company’s analysis that the securities will perform in accordance with their terms and the Company’s intent not to sell these investments for a period of time sufficient to allow for the anticipated recovery of fair value, which may be maturity. The Company expects recovery of fair value when market conditions have stabilized and that the Company will receive all contractual principal and interest payments related to those investments.

United States Treasury and Government Sponsored Enterprise Mortgage-backed Securities - The Company’s investments in the preceding table in United States government sponsored enterprise notes consist of debt obligations of the Federal Home Loan Bank (“FHLB”), Federal Home Loan Mortgage Corporation (“FHLMC”), and Federal National Mortgage Association (“FNMA”). These securities represent asset-backed issues that are issued or guaranteed by a U.S. Government sponsored agency or carrying the full faith and credit of the United States through a government agency and are currently rated AAA by at least one bond credit rating agency. At June 30, 2010, all agency mortgage-backed securities were in a gain position.

7

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The amortized cost and estimated fair value of debt securities available for sale at June 30, 2010 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, 2010
	Held to Maturity				Available for Sale Securities
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due within 1 year	$	1,474,102	$	1,474,102	$	—	$	—
Due after 1 year through 5 years		—		—		1,000,000		849,560
Due after 5 years through 10 years		—		—		—		—
Due after 10 years		—		—		8,617,626		6,773,634
Total	$	1,474,102	$	1,474,102	$	9,617,626	$	$7,623,194

Equity securities had a cost of $2,596 and a fair value of $17,237 as of June 30, 2010. Mortgage-backed securities had a cost of $17,911,993 and a fair value of $19,054,806. Stated maturities for theses securities bear nominal predictive value due to potential prepayments that are typical to these instruments.

3. LOANS RECEIVABLE — NET

Loans receivable consist of the following:

	June 30, 2010			December 31, 2009
Real estate—mortgage:
One-to-four family residential	$	526,822,938		$	521,361,263
Commercial and multi-family		50,705,240			49,801,620
Total real estate-mortgage		577,528,178			571,162,883
Real estate—construction:
Residential		9,813,451			5,605,724
Commercial		5,788,247			2,937,089
Total real estate—construction		15,601,698			8,542,813
Commercial		21,954,025			22,893,039
Consumer:
Home equity		60,908,196			60,729,520
Other consumer loans		761,594			795,761
Total consumer loans		61,669,790			61,525,281
Total loans		676,753,691			664,124,016
Net deferred loan cost		3,051,566			3,014,832
Allowance for loan losses		(4,124,414	)		(3,476,040	)
Net total loans	$	675,680,843		$	663,662,808

8

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Changes in the allowance for loan losses are as follows:

	Six Months Ended June 30,
	2010		2009
Balance, beginning of period	$	3,476,040	$	2,683,956
Provision for loan loss		691,361		404,000
Charge-offs		42,987		—
Recoveries		—		1,402
Balance, end of period	$	4,124,414	$	3,089,358
Non-performing loans:
	June 30, 2010		December 31, 2009
Real estate mortgage loans	$	2,008,877	$	1,592,639
Construction loans		780,970		139,405
Commercial loans		30,401		21,721
Consumer loans		378,543		91,085
Total non-performing loans		3,198,791		1,844,850
Real estate owned		97,500		97,500
Total non-performing assets	$	3,296,291	$	1,942,350

The allowance for loan losses is based upon past loan loss experiences, understanding of the current macroeconomic factors, and current portfolio trends. These factors are considered in establishing the reserves necessary to cover the losses inherent in the current loan portfolio. The allowance is comprised of collective reserves for portfolio loans evaluated on a pooled basis and specific reserves on loans specifically evaluated for impairment. A loan is considered to be impaired when, based upon current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan. An insignificant delay or insignificant shortfall in amount of payments does not necessarily result in the loan being identified as impaired. For this purpose, delays less than 90 days generally are considered to be insignificant. As of June 30, 2010 and December 31, 2009, the impairment was measured based on the fair value of the loans’ collateral, adjusted for cost to dispose. Loans collectively evaluated for impairment include residential real estate loans, consumer loans, and smaller balance commercial and commercial real estate loans.

The Company established a provision for loan losses of $539,700 and $691,361 for the three and six months ended June 30, 2010 as compared to $251,800 and $404,000 for the comparable periods in 2009.

As of June 30, 2010 and December 31, 2009 the recorded investment in loans that are considered to be impaired was as follows:

	June 30, 2010		December 31, 2009
Impaired collateral-dependant loans with related allowance	$	1,822,000	$	1,158,000
Impaired collateral-dependant loans with no related allowance		769,000		687,000

Other data for impaired loans as of June 30, 2010 and December 31, 2009 was as follows:

	June 30, 2010		December 31, 2009
Average impaired loans	$	2,303,476	$	629,988
Interest income recognized on impaired loans		—		—
Cash basis interest income recognized on impaired loans		—		—

9

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Non-performing loans at June 30, 2010 and December 31, 2009 consisted of non-accrual loans that amounted to approximately $3,198,791 and $1,844,850 respectively. The delinquent interest on non-performing loans totaled $106,713 and $90,757 at June 30, 2010 and December 31, 2009, respectively.

4. DEPOSITS

Deposits consist of the following major classifications:

	June 30, 2010				December 31, 2009
	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
NOW and other demand deposit accounts	$	264,223,889	0.88	%	$	249,422,646	0.94	%
Passbook savings and club accounts		85,797,719	1.05	%		73,976,828	1.14	%
Subtotal		350,021,608				323,399,474
Certificates with original maturities:
Within one year		106,642,151	1.45	%		113,814,174	1.69	%
One to three years		84,223,952	2.48	%		76,504,418	2.85	%
Three years and beyond		22,369,834	3.73	%		23,704,028	4.05	%
Total certificates		213,235,937				214,022,620
Total	$	563,257,545			$	537,422,094

The aggregate amount of certificate accounts in denominations of $100,000 or more at June 30, 2010 and December 31, 2009 amounted to $82,136,750 and $86,977,676, respectively.

Municipal demand deposit accounts in denominations of $100,000 or more at June 30, 2010 and December 31, 2009 amounted to $93,702,072 and $93,099,368, respectively.

5. EARNINGS PER SHARE

Basic net income per share is based upon the weighted average number of common shares outstanding, net of any treasury shares, while diluted net income per share is based upon the weighted average number of common shares outstanding, net of any treasury shares, after consideration of the potential dilutive effect of common stock equivalents, based upon the treasury stock method using an average market price for the period, and impact of unallocated ESOP shares. Earnings per share (“EPS”) and average common shares outstanding for the periods prior to 2010 have been adjusted to reflect the impact of the second-step conversion and reorganization of the Company, which occurred on December 18, 2009.

The calculated basic and dilutive EPS are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Numerator	$	1,238,998	$	671,332	$	2,575,322	$	1,584,117
Denominators:
Basic average shares outstanding		6,826,946		7,064,637		6,822,739		7,062,154
Effect of dilutive securities		7,579		59,467		12,613		60,250
Diluted average shares outstanding		6,834,525		7,124,104		6,835,352		7,122,404
Earnings per share:
Basic	$	0.18	$	0.10	$	0.38	$	0.22
Diluted	$	0.18	$	0.09	$	0.38	$	0.22

10

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

At June 30, 2010 and 2009, there were 366,997 and 373,592 outstanding anti-dilutive options, respectively, and 30,125 and 60,250 outstanding dilutive non-vested shares, respectively.

6. STOCK BASED COMPENSATION

Stock-based compensation is accounted for in accordance with FASB ASC 718, Compensation – Stock Compensation. The Company establishes fair value for its equity awards to determine their cost. The Company recognizes the related expense for employees over the appropriate vesting period, or when applicable, service period. However, consistent with the stock compensation topic of the FASB Accounting Standards Codification, the amount of stock-based compensation recognized at any date must at least equal the portion of the grant date value of the award that is vested at that date and as a result it may be necessary to recognize the expense using a ratable method. In accordance with FASB ASC 505-50,Equity-Based Payments to Non-Employees, the compensation expense for non-employees is recognized on the grant date, or when applicable, the service period.

The Company’s 2005 Equity-Based Incentive Plan (the “Equity Plan”) authorizes the issuance of shares of common stock pursuant to awards that may be granted in the form of stock options to purchase common stock (“options”) and awards of shares of common stock (“stock awards”). The purpose of the Equity Plan is to attract and retain personnel for positions of substantial responsibility and to provide additional incentive to certain officers, directors, advisory directors, employees and other persons to promote the success of the Company. Under the Equity Plan, options expire ten years after the date of grant, unless terminated earlier under the option terms. A committee of non-employee directors has the authority to determine the conditions upon which the options granted will vest. Options are granted at the then fair market value of the Company’s stock.

A summary of the status of the Company’s stock options under the Equity Plan as of June 30, 2010 and 2009 and changes during the six months ended June 30, 2010 and 2009 are presented below. The number of options and weighted average exercise price for all periods has been adjusted for the exchange ratio as a result of our second step conversion completed on December 31, 2009:

	Six Months Ended June 30, 2010			Six Months Ended June 30, 2009
	Number of shares	Weighted average exercise price		Number of shares	Weighted average exercise  price
Outstanding at the beginning of the period	373,592	$	13.10	373,592	$	13.10
Granted	—		—	—		—
Exercised	—		—	—		—
Forfeited	6,595	$	13.19	—		—
Outstanding at the end of the period	366,997	$	13.10	373,592	$	13.10
Exercisable at the end of the period	275,968	$	13.17	281,244	$	13.17
Stock options vested or expected to vest (1)	330,298	$	13.17	336,233	$	13.17

(1) Includes vested shares and nonvested shares after a forfeiture rate, which is based upon historical data, is applied.

The following table summarizes all stock options outstanding under the Equity Plan as of June 30, 2010. The number of options and weighted average exercise price for all periods has been adjusted for the exchange ratio as a result of our second step conversion:

	Options Outstanding
Date Issued	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
August 10, 2005	313,031	$	13.19	5.1 years
November 21, 2006	19,784	$	14.78	6.3 years
November 20, 2007	34,182	$	11.32	7.3 years
Total	366,997	$	13.10	5.4 years

11

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Summary of Non-vested Stock Award Activity:

	Six months ended June 30, 2010			Six months ended June 30, 2009
	Number of shares	Weighted avg grant date fair value		Number of shares	Weighted avg grant date fair value
Beginning of period	30,125	$	13.19	60,250	$	13.19
Issued	—		—	—		—
Vested	—		—	—		—
Outstanding at June 30, 2010	30,125	$	13.19	60,250	$	13.19

The compensation expense recognized for the three and six months ended June 30, 2010 was $115,994 and $231,988 as compared to $130,847 and $261,694 for the three and six months ended June 30, 2009.

At June 30, 2010, there was $28,070 of total unrecognized compensation cost related to options granted under the stock option plans. That cost is expected to be recognized over a weighted average period of 1.4 years.

As of June 30, 2010, there was $33,078 of total unrecognized compensation costs related to nonvested stock awards. That cost is expected to be recognized over a weighted average period of 0.1 years.

7. INCOME TAXES

Income taxes increased $658,000 to $1,633,000 for an effective tax rate of 38.8% for the six months ended June 30, 2010 compared to $974,789 for an effective tax rate of 38.1% for the same period in 2009.

Periodic reviews of the carrying amount of deferred tax assets are made to determine if the establishment of a valuation allowance is necessary. If based on the available evidence in future periods, it is more likely than not that all or a portion of the Company’s deferred tax assets will not be realized, a deferred tax valuation allowance would be established. Consideration is given to all positive and negative evidence related to the realization of the deferred tax assets.

Items considered in this evaluation include historical financial performance, expectation of future earnings, the ability to carry back losses to recoup taxes previously paid, length of statutory carry forward periods, experience with operating loss and tax credit carry forwards not expiring unused, tax planning strategies and timing of reversals of temporary differences. Significant judgment is required in assessing future earning trends and the timing of reversals of temporary differences. The evaluation is based on current tax laws as well as expectations of future performance.

At June 30, 2010 no valuation allowance has been recorded for any portfolio of the outstanding deferred tax asset.

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, 2010, the tax years ended December 31, 2006, 2007, 2008 and 2009 were subject to examination by all tax jurisdictions. As of June 30, 2010, 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.

12

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

8. DECLARATION OF DIVIDEND

During the second quarter of 2010, the Board of Directors of the Company declared a cash dividend of $0.06 per share, which was paid on or about May 28, 2010 to stockholders of record as of the close of business on May 7, 2010.

9. FAIR VALUE MEASUREMENTS

The Company accounts for fair value measurements in accordance with FASB ASC 820,Fair Value Measurements and Disclosures. The topic emphasizes that fair value is a market-based measurement and not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. FASB ASC 820 clarifies the application of fair value measurement in a market that is not active. FASB ASC 820 also includes additional factors for determining whether there has been a significant decrease in market activity, affirms the objective of fair value when a market is not active, eliminates the presumption that all transactions are not orderly unless proven otherwise, and requires an entity to disclose inputs and valuation techniques, and changes therein, used to measure fair value.

FASB ASC 820 establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the instrument’s fair value measurement. The three levels within the fair value hierarchy are described as follows:

• Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

• 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.

We measure financial assets and liabilities at fair value in accordance with FASB ASC 820. Investments available for sale are measured at fair value on a recurring basis by means of various valuation techniques and models, and the inputs used are classified based on the hierarchy outlined above. Where quoted prices for identical securities are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated using quoted prices of securities with similar characteristics or discounted cash flows based on observable market inputs and are classified within Level 2 of the fair value hierarchy. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy. Level 3 market value measurements include an internally developed discounted cash flow model combined with using market data points of similar securities with comparable credit ratings in addition to market yield curves with similar maturities in determining the discount rate. In addition, significant estimates and unobservable inputs are required in the determination of Level 3 market value measurements. If actual results differ significantly from the estimates and inputs applied, it could have a material effect on our consolidated financial statements.

13

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In addition, certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). We measure impaired loans, FHLB stock and loans transferred into other real estate owned at fair value on a non-recurring basis.

We review and validate the valuation techniques and models utilized for measuring financial assets and liabilities at least quarterly.

Recurring Fair Value Measurements:

Those assets at June 30, 2010 which will continue to be measured at fair value on a recurring basis are as follows:

	Category Used for Fair Value Measurement
Assets:	Level 1		Level 2		Level 3
Securities available for sale:
U.S. Government agencies and mortgage-backed securities	$	—	$	15,765,434	$	—
State and municipal obligations		—		1,430,991		—
Corporate securities		—		6,192,003		200
Equity securities		17,237		—		—
Totals	$	17,237	$	23,388,428	$	200

Those assets at December 31, 2009 which will continue to be measured at fair value on a recurring basis are as follows:

	Category Used for Fair Value Measurement
Assets:	Level 1		Level 2		Level 3
Securities available for sale:
U.S. Government agencies and mortgage-backed securities	$	—	$	18,800,704	$	—
State and municipal obligations		—		1,430,627		—
Corporate securities		—		5,738,292		200
Equity securities		16,944		—		—
Totals	$	16,944	$	25,969,623	$	200

In accordance with the fair value measurement and disclosures topic of the FASB Accounting Standards Codification, management assessed whether the volume and level of activity for certain assets have significantly decreased when compared with normal market conditions. The Company concluded that there has been a significant decrease in the volume and level of activity with respect to certain investments included in the corporate debt securities and classified as level 2 in accordance with the framework for fair value measurements. Fair value for such securities is obtained from third party broker quotes. The Company evaluated these values to determine that the quoted price is based on current information that reflects orderly transactions or a valuation technique that reflects market participant assumptions by benchmarking the valuation results and assumptions used against similar securities that are more actively traded in order to assess the reasonableness of the estimated fair values. The fair market value estimates we assign to these securities assume liquidation in an orderly fashion and not under distressed circumstances.

14

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Additionally, as a result of general market conditions and the illiquidity in the market for certain collateralized debt obligations, valuation is based upon an internally developed discounted cash flow model (Level 3). In arriving at the discount rate used in the model for each issue, the Company identified a trading group of similar securities quoted on the New York Stock Exchange or the NASDAQ over the counter market, based upon its review of market data points, such as Moody’s or comparable credit ratings, maturity, price, and yield. The Company indexed the individual securities within the trading group to a comparable interest rate swap (to maturity) in determining the spread. The average spread on the trading group was matched with the individual trust preferred issues based on their comparable credit rating, which was then used in arriving at the discount rate input to the model.

There were no transfers of assets between Level 1 and Level 2 of the fair value hierarchy during the six-month period ended June 30, 2010 and June 30, 2009.

The following provides details of the fair value measurement activity for Level 3 for the six-months ended June 30, 2010 and June 30, 2009:

Fair Value Measurement Activity – Level 3 (only)

	Fair Value Measurement Using Level 3 Inputs June 30, 2010				Fair Value Measurement Using Level 3 Inputs June 30, 2009
	Trust Preferred Securities		Total		Trust Preferred Securities			Total
Balance, January 1, 2010	$	200	$	200	$	1,014,180		$	1,014,180
Total gains (losses), realized/unrealized:
Included in earnings(1)		—		—		(1,077,400	)		(1,077,400	)
Included in accumulated other comprehensive loss		—		—		(63,420	)		(63,420	)
Purchases, maturities, prepayments and call, net		—		—		—			—
Transfers into Level 3(2)		—		—		—			—
Balance, June 30, 2010	$	200	$	200	$	200		$	200

(1) Amount included in impairment charge on available for sale securities on Consolidated Statement of Income.

(2) Transfers into Level 3 are assumed to occur at the end of the quarter in which the transfer occurred.

Non-recurring Fair Value Measurements:

Those assets that were measured on a non-recurring basis as of June 30, 2010 and December 31, 2009 are presented below:

	Category used for Fair Value Measurement
	Level 1		Level 2		Level 3		Total
June 30, 2010
Loans (1)	$	—	$	1,631,492	$	235,493	$	1,866,985
December 31, 2009
Loans (1)	$	—	$	1,158,000	$	—	$	1,158,000
Foreclosed assets (2)		—		97,500		—		97,500

(1) These balances are measured at fair value on a non-recurring basis using the fair value of the underlying collateral.

(2) Represents the fair value of foreclosed real estate that was measured at fair value subsequent to their initial classification as foreclosed assets.

15

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents the decrease in value of certain assets that are measured at fair value on a nonrecurring basis for which a fair value adjustment has been included in the income statement, relating to assets held at period end.

	Six months ended June 30,
	2010		2009
Loans	$	1,433,000	$	—
Foreclosed assets		—		101,000
	$	1,433,000	$	101,000

Impaired Loans

The Company considers loans to be impaired when it becomes probable that the Company will be unable to collect all amounts due in accordance with the contractual terms of the loan agreement. Under FASB ASC 310, collateral dependent impaired loans are valued based on the fair value of the collateral adjusted for the cost related to liquidation of such collateral. The fair value of each loan’s collateral is generally based on estimated market prices from an independently prepared appraisal, such valuation inputs result in a nonrecurring fair value measurement that is categorized as a Level 2 measurement. When adjustments are made to an appraised value to reflect various factors such as the age of the appraisal or known changes in the market or the collateral, such valuation inputs are considered unobservable and the fair value measurement is categorized as a Level 3 measurement. The impaired loans categorized as Level 3 also include unsecured loans and other secured loans whose fair values are based significantly on unobservable inputs such as the strength of a guarantor, cash flows discounted at the effective loan rate, and management’s judgment.

In the current period there were 9 loans categorized as level 2 and 13 loans categorized as Level 3. At June 30, 2010, total loans remeasured at fair value were $1,866,185. Such loans were carried at the value of $2,591,073 immediately prior to remeasurement, resulting in the recognition of impairment through earnings in the amount of $724,888. Specific reserves were calculated for impaired loans with the value prior to remeasurement of $1,821,916 and net carrying amount of $1,097,028. The collateral underlying these loans had a fair value of $3,010,000, while the claims against collateral from other third parties, shortfall in collateral to appraised amount and liquidation costs amounted to $1,912,172, resulting in specific reserves in the allowance for loan losses of $724,888. No specific reserve was calculated for impaired loans with an aggregate carrying amount of $769,157 at June 30, 2010, as the underlying collateral value was not below the carrying amount.

At June 30, 2009, specific reserves were calculated for an impaired loan with a carrying amount of $760,000. The collateral underlying this loan had a fair value of $630,000, resulting in a specific reserve in the allowance for loan losses of $130,000. No specific reserve was calculated for impaired loans with an aggregate carrying amount of $2.9 million at June 30, 2009, as the underlying collateral value was not below the carrying amount.

Federal Home Loan Bank Stock

The Company holds required equity investments in the stock of the Federal Home Loan Bank. Investment in the FHLB stock is evaluated for impairment in accordance FASB ASC 942-325. These investments may be measured based upon a discounted cash flow model reliant on observable and unobservable inputs, and therefore, the fair value measurement has been categorized as a Level 2 or 3, depending on such inputs used. At June 30, 2010 and June 30, 2009, the Company determined that there was no impairment and, therefore, fair value disclosure under the provision of the fair value measurement and disclosures topic is not required.

16

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Real Estate Owned

Once an asset is determined to be uncollectible, the underlying collateral is repossessed and reclassified to foreclosed real estate and repossessed assets. These assets are carried at lower of cost or fair value of the collateral, less cost to sell. The fair value of foreclosed real estate is generally based on estimated market prices from independently prepared current appraisals or negotiated sales prices with potential buyers; such valuation inputs result in a fair value measurement that is categorized as a Level 2 measurement on a nonrecurring basis. When a current appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value as a result of known changes in the market or the collateral and there is no observable market price, such valuation inputs result in a fair value measurement that is categorized as a Level 3 measurement. To the extent a negotiated sales price or reduced listing price represents a significant discount to an observable market price, such valuation input would result in a fair value measurement that is also considered a Level 3 measurement. The losses on foreclosed real estate shown above are write-downs based on either a recent appraisal obtained after foreclosure or an accepted purchase offer by an independent third party received after foreclosure.

At June 30, 2010 the Company did not have any remeasurement to fair value. At June 30, 2009, the Company deemed one loan uncollectible and took possession of the underlying collateral during the first quarter of 2009. The collateral underlying the loan had a fair value of $97,500, with an aggregate carrying value of $198,000, triggering a net charge-off of approximately $101,000. There have been no changes to the fair value of this property as described above.

Fair Value of Financial Instruments

In accordance with FASB ASC 825-10-50-10, the Company is required to disclose the fair value of financial instruments. The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a distressed sale. Fair value is best determined using observable market prices; however, for many of the Company’s financial instruments, no quoted market prices are readily available. In instances where quoted market prices are not readily available, fair value is determined using present value or other techniques appropriate for the particular instrument. These techniques involve some degree of judgment and, as a result, are not necessarily indicative of the amounts the Company would realize in a current market exchange. Different assumptions or estimation techniques may have a material effect on the estimated fair value. The following table summarizes these results:

	June 30, 2010				December 31, 2009
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets:
Cash and cash equivalents	$	49,962,444	$	49,962,444	$	33,027,710	$	33,027,710
Investment securities:
Held to maturity		4,554,244		4,763,474		3,440,275		3,579,611
Available for sale		23,405,865		23,405,865		25,986,767		25,986,767
Loans receivable, net		675,680,843		691,186,576		663,662,808		669,637,682
Federal Home Loan Bank stock		6,271,600		6,271,600		6,148,000		6,148,000
Liabilities:
NOW and other demand deposit accounts		264,223,889		275,285,889		249,422,646		261,166,646
Passbook savings and club accounts		85,797,719		93,318,719		73,976,828		81,675,828
Certificates		213,235,937		213,565,775		214,022,620		214,022,087
Advances from Federal Home Loan Bank		110,000,000		122,876,047		110,000,000		118,836,690
Junior subordinated debenture		15,464,000		9,278,400		15,464,000		7,732,000

17

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Cash and Cash Equivalents—For cash and cash equivalents, the carrying amount is a reasonable estimate of fair value.

Investment and Mortgage-Backed Securities—For investment securities, fair values are based on a combination of quoted prices for identical assets in active markets, quoted prices for similar assets in markets that are either actively or not actively traded and pricing models, discounted cash flow methodologies, or similar techniques that may contain unobservable inputs that are supported by little or no market activity and require significant judgment. For investment securities that do not actively trade in the marketplace, (primarily our investment in trust preferred securities of non-publicly traded companies) fair value is obtained from third party broker quotes. The Company evaluates prices from a third party pricing service, third party broker quotes, and from another independent third party valuation source to determine their estimated fair value. These quotes are benchmarked against similar securities that are more actively traded in order to assess the reasonableness of the estimated fair values. The fair market value estimates we assign to these securities assume liquidation in an orderly fashion and not under distressed circumstances. For securities classified as available for sale the changes in fair value are reflected in the carrying value of the asset and are shown as a separate component of stockholders’ equity.

Loans Receivable-Net—The fair value of loans receivable is estimated based on the present value using discounted cash flows based on estimated market discount rates at which similar loans would be made to borrowers and reflect similar credit ratings and interest rate risk for the same remaining maturities.

FHLB Stock—Although FHLB stock is an equity interest in an FHLB, it is carried at cost because it does not have a readily determinable fair value as its ownership is restricted and it lacks a market. While certain conditions are noted that required management to evaluate the stock for impairment, it is currently probable that the Company will realize its cost basis. Management concluded that no impairment existed as of June 30, 2010. The estimated fair value approximates the carrying amount.

NOW and Other Demand Deposit, Passbook Savings and Club, and Certificates Accounts—The fair value of NOW and other demand deposit accounts and passbook savings and club accounts is the amount payable on demand at the reporting date. The fair value of certificates is estimated by discounting future cash flows using interest rates currently offered on certificates with similar remaining maturities.

Advances from FHLB—The fair value was estimated by determining the cost or benefit for early termination of each individual borrowing.

Junior Subordinated Debenture—The fair value was estimated by discounting approximate cash flows of the borrowings by yields estimating the fair value of similar issues.

The fair value estimates presented herein are based on pertinent information available to management as of June 30, 2010 and December 31, 2009. Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively revalued for purposes of these consolidated financial statements since June 30, 2010 and December 31, 2009, and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

10. REAL ESTATE OWNED

Summary of Real Estate Owned (“REO”):

	June 30, 2010		December 31, 2009
Residential properties	$	97,500	$	97,500
Total	$	97,500	$	97,500

18

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, 2009 under “Item 1A. 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”) was incorporated on September 2, 2008 as a New Jersey corporation to become the holding company for Ocean City Home Bank (the “Bank”) upon completion of the conversion of Ocean City Home Bank from the mutual holding company form of organization to the stock holding company form. The conversion involved the sale by the Company of 4,186,250 shares of common stock in a public offering to depositors and members of the general public, the exchange of 3,121,868 shares of common stock of the Company for shares of common stock of the former Ocean Shore Holding Co. held by persons other than OC Financial MHC, and the elimination of the former Ocean Shore Holding Co. and OC Financial MHC. The conversion and related stock offering were completed on December 18, 2009. Each share of common stock of Ocean Shore Holding Co. was converted into the right to receive 0.8793 shares of common stock in the conversion. The Company’s assets consist of its investment in Ocean City Home Bank and its liquid investments. The Company is primarily engaged in the business of directing, planning, and coordinating the business activities of the Bank. The Company’s most significant asset is its investment in the Bank. In the future, Ocean Shore Holding may acquire or organize other operating subsidiaries; however, there are no current definitive agreements or understandings to do so.

Ocean City Home Bank is a federally chartered savings bank. The Bank operates as a community-oriented financial institution offering a wide range of financial services to consumers and businesses in our market area. The Bank attracts deposits from the general public, small businesses and municipalities and uses those funds to originate a variety of consumer and commercial loans, which we hold primarily for investment.

COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2010 AND DECEMBER 31, 2009

Total assets of the Company increased by $28.6 million to $798.8 million at June 30, 2010 from $770.1 million at December 31, 2009. Loans receivable, net, increased $12.0 million, investment and mortgage-backed securities decreased $1.5 million and cash and cash equivalents increased by $16.9 million. Asset growth was funded by an increase in deposits of $25.8 million while borrowings were unchanged at $125.5 million.

19

Investments

Investments decreased $1.5 million to $28.0 million at June 30, 2010 from $29.4 million at December 31, 2009. The decrease was the result of normal maturity and repayment activity, offset by purchases of $1.5 million and by improved valuation of AFS securities of $0.6 million.

Loans

Loans receivable, net, increased $12.0 million to $675.7 million at June 30, 2010 from $663.7 million at December 31, 2009. Loan originations totaled $67.1 million for the six months ended June 30, 2010 compared to $95.2 million originated in six months ended June 30, 2009. Real estate mortgage loan originations totaled $39.8 million, real estate construction loan originations totaled $10.4 million, consumer loan originations totaled $9.3 million and commercial loan originations totaled $7.6 million for the second quarter of 2010. Origination activity was offset by $54.5 million of normal loan payments and payoffs.

The following table summarizes changes in the loan portfolio in the six months ended June 30, 2010.

	June 30, 2010			December 31, 2009			$ change			% change
	(Dollars in thousands)
Real estate – mortgage:
One-to-four-family residential	$	526,823		$	521,361		$	5,462		1.0	%
Commercial and multi-family		50,705			49,802			903		1.8
Total real estate – mortgage		577,528			571,163			6,365		1.1
Real estate – construction:
Residential		9,814			5,606			4,208		75.1
Commercial		5,788			2,937			2,851		97.1
Total real estate – construction		15,602			8,543			7,059		82.6
Commercial		21,954			22,893			(939	)	(4.1	)
Consumer
Home equity		60,908			60,730			178		0.3
Other consumer loans		762			795			(33	)	(4.2	)
Total consumer loans		61,670			61,525			145		0.2
Total loans		676,754			664,124			12,630		1.9
Net deferred loan cost		3,051			3,015			36		1.2
Allowance for loan losses		(4,124	)		(3,476	)		(648	)	18.6
Net total loans	$	675,681		$	663,663		$	12,018		1.8	%

Non-Performing Assets

Non-performing assets totaled $3.3 million, or 0.41% of total assets, at June 30, 2010 compared to $1.9 million, or 0.25% of total assets, at December 31, 2009 and $4.6 million, or 0.63% of total assets, at June 30, 2009. The increase from December 31, 2009 was the result of an increase in the number of non-performing loans to 19 at June 30, 2010 from 13 at December 31, 2009. Non-performing assets consisted of seven residential mortgages totaling $2.0 million, four commercial mortgages totaling $781,000, one commercial loan totaling $30,000, seven consumer equity loans totaling $378,000 and one real estate owned property totaling $98,000. Specific reserves were recorded for 15 of the loans included above in the amount of $725,000 at June 30, 2010 as compared to 6 loans with specific allowance of $285,000 at December 31, 2009. Real estate owned remained unchanged at $97,500 at June 30, 2010. Charge-offs has totaled $43,000 in 2010 compared to no activity for the same period in 2009.

20

The allowance for loan losses increased $648,000 to $4.1 million, or 0.61% of total net loans, from $3.5 million at December 31, 2009, or 0.52% of total net loans. The increase in the provision for loan losses was primarily to maintain a reserve level deemed appropriate by management in light of factors such as the level of non-performing loans, growth in the loan portfolio and the current economic conditions. The loss factors used to calculate the allowance in June 2010 from December 31, 2009 were slightly higher due to increases in delinquencies. At June 30, 2010, the specific allowance on loans individually evaluated for impairment was $725,000 and pooled allowance on the remainder of the loan portfolio was $3.4 million as compared to specific allowance on loans individually evaluated for impairment of $285,000 and pooled allowance on the reminder of the loan portfolio of $3.2 million at December 31, 2009.

	Six Months Ended June 30,
	2010			2009
	(In thousands)
Allowance for loan losses:
Allowance at beginning of period	$	3,476		$	2,684
Provision for loan losses		691			404
Recoveries		—			1
Charge-offs		43			—
Net (charge-offs) recoveries		(43	)		1
Allowance at end of period	$	4,124		$	3,089
Allowance for loan losses as a percent of total loans		0.61	%		0.49	%
Allowance for loan losses as a percent of non-performing loans		128.9	%		68.5	%
	June 30, 2010			December 31, 2009
	(In thousands)
Nonaccrual loans:
Real estate mortgage loans	$	2,009		$	1,593
Construction		781			139
Commercial		30			22
Consumer loans		378			91
Total of non-accrual and 90 days or more past due loans		3,198			1,845
Real estate owned		98			98
Total non-performing assets	$	3,296		$	1,943
Total non-performing loans to total loans		0.47	%		0.28	%
Total non-performing loans to total assets		0.40	%		0.24	%
Total non-performing assets and troubled debt restructurings to total assets		0.41	%		0.25	%

Deposits

Deposits increased by $25.8 million, or 4.8%, to $563.2 million at June 30, 2010 from $537.4 million at December 31, 2009. Interest bearing demand deposits increased $3.7 million, non-interest bearing checking increased $11.1 million, savings accounts increased by $11.8 million and certificates of deposit decreased by $787,000. The Company continued its focus on attracting core deposits, which increased $26.6 million, and accounted for all of the increase in deposits, offsetting a small decrease in certificates of deposit.

21

The following table summarizes changes in deposits in the six months ended June 30, 2010.

	June 30, 2010		December 31, 2009		$ change			% change
	(Dollars in thousands)
Non-interest-bearing demand deposits	$	64,321	$	53,254	$	11,067		20.1	%
Interest-bearing demand deposits		199,903		196,168		3,735		1.9
Savings accounts		85,798		73,977		11,821		16.0
Time deposits		213,236		214,023		(787	)	(0.4	)
Total	$	563,258	$	537,422	$	25,836		4.8	%

Borrowings

Federal Home Loan Bank advances were unchanged at $110 million at June 30, 2010 December 31, 2009. Other borrowings were unchanged at $15.5 million at June 30, 2010 compared to December 31, 2009.

Stockholders’ Equity

Stockholders’ equity increased $2.5 million to $99.8 million at June 30, 2010, from $97.3 million at December 31, 2009, primarily as a result of current period earnings of $2.6 million

COMPARISON OF OPERATING RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009

Net income was $1.24 million for the three months ended June 30, 2010 as compared to $671,000 for the three months ended June 30, 2009. The increase of $568,000, or 84.6%, in 2010 from 2009 was due primarily to increased net interest income of $674,000 and other income $707,000, offset by an increase in provision for loan losses of $288,000, other expenses of $168,000 and income tax expense of $357,000.

Net income was $2.6 million for the six months ended June 30, 2010 as compared to $1.6 million for the six months ended June 30, 2009. The $1.0 million, or 62.6%, increase in 2010 from 2009 was due primarily to increased net interest income of $1.5 million and other income $1.3 million offset by an increase in provision for loan losses of $288,000, other expenses of $880,000 and income tax expense of $658,000.

	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
	(Dollars in thousands, except per share data)						(Dollars in thousands, except per share data)
Net income	$	1,239		$	671		$	2,575		$	1,584
Basic earnings per share	$	0.18		$	0.10		$	0.38		$	0.22
Diluted earnings per share	$	0.18		$	0.09		$	0.38		$	0.22
Return on average assets (annualized)		0.62	%		0.38	%		0.65	%		0.45	%
Return on average equity (annualized)		4.97	%		4.02	%		5.20	%		4.82	%

22

Net Interest Income

The following table summarizes changes in interest income and interest expense for the three-month periods ended June 30, 2010 and 2009.

	Three Months Ended June  30,
	2010		2009		$ change			% change
	(Dollars in thousands)
INTEREST INCOME:
Loans	$	9,059	$	8,593	$	466		5.4	%
Investment securities		435		552		(117	)	(21.2	)
Total interest income		9,494		9,145		349		3.8
INTEREST EXPENSE:
Deposits		1,932		2,236		(304	)	(13.6	)
Borrowings		1,510		1,530		(20	)	(1.3	)
Total interest expense		3,442		3,766		(324	)	(8.6	)
Net interest income	$	6,052	$	5,379	$	673		12.5

Interest income increased by $349,000, or 3.8%, for the quarter ended June 30, 2010 compared to June 30, 2009. The increase resulted from an increase in loan income of $466,000, offset by a decrease in investment income of $117,000. The increased interest income was driven primarily from higher loan balances in 2010 compared to 2009.

Interest expense decreased by $324,000, or 8.6%, over the same period last year due to a decrease in the interest paid on deposits of $305,000 and interest paid on borrowings of $20,000. The decrease in interest expense resulted primarily from lower rates paid on deposits, as market rates continued to remain low, offset by increased balances in deposits.

The interest rate spread and net interest margin of the Company were 3.28% and 3.48% respectively, for the three months ended June 30, 2010, compared to 2.96% and 3.27% for the same period in 2009. The improvement in the interest rate spread of 32 basis points and margin of 21 basis points resulted from a decrease in the average rate paid on interest-bearing liabilities of 41 basis points offset by a decrease in the rate earned on interest-earning assets of 10 basis points. An increase in the average balance of loans of $42.7 million was offset by decreases in the average rate on loans of 7 basis points, average rate on investments of 40 basis points and average balance of investments of $5.3 million. Additionally, decreases in the average rate paid on interest-bearing bearing deposits of 53 basis points and average balance on borrowings of $18.6 million was offset by increases in the average balance of interest-bearing deposits of $70.0 million and the average rate paid on borrowings of 57 basis points.

23

The following table summarizes changes in interest income and interest expense for the six-month periods ended June 30, 2010 and 2009.

	Six Months Ended June 30,
	2010		2009		$ Change			% Change
	(Dollars in thousands)
INTEREST INCOME:
Loans	$	18,089	$	17,054	$	1,035		6.1	%
Investment securities		910		1,082		(172	)	(15.9	)
Total interest income	$	18,999	$	18,136	$	863		4.8
INTEREST EXPENSE:
Deposits	$	3,958	$	4,549	$	(591	)	(13.0	)
Borrowings		3,008		3,057		(49	)	(1.6	)
Total interest expense		6,966		7,606		(640	)	(8.4	)
Net interest income	$	12,033	$	10,530	$	1,503		14.3

Interest income increased by $863,000, or 4.8%, for the six months ended June 30, 2010 compared to June 30, 2009. The increase resulted from an increase in loan income of $1.0 million, offset by a decrease in investment income of $173,000. The increased interest income was driven primarily from higher loan balances in 2010 compared to 2009.

Interest expense decreased by $640,000, or 8.4%, over the same period last year due to a decrease in the interest paid on deposits of $591,000 and interest paid on borrowings of $49,000. The decrease in interest expense resulted primarily from lower rates paid on deposits, as market rates continued to remain low, offset by increased balances in deposits.

The interest rate spread and net interest margin of the Company were 3.26% and 3.47% respectively, for the six months ended June 30, 2010, compared to 2.93% and 3.24% for the same period in 2009. The improvement in the interest rate spread of 33 basis points and margin of 23 basis points resulted from a decrease in the average rate paid on interest-bearing liabilities of 43 basis points offset by a decrease in the rate earned on interest-earning assets of 11 basis points. Increases in the average balance of loans of $50.6 million and average rate on investments of 28 basis points was offset by decreases in the average rate on loans of 11 basis points and average balance of investments of $6.8 million. Additionally, decreases in the average rate paid on interest-bearing bearing deposits of 55 basis points and average balance on borrowings of $20.5 million was offset by increases in the average balance of interest-bearing deposits of $74.5 million and average rate paid on borrowings of 61 basis points.

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 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 only included in average balances. 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.

24

Average Balance Tables

	Three Months Ended June 30, 2010							Three Months Ended June 30, 2009
	Average Balance			Interest and Dividends		Yield/ Cost		Average Balance			Interest and Dividends		Yield/ Cost
Assets:
Interest-earning assets:
Loans	$	668,691		$	9,059	5.42	%	$	626,004		$	8,593	5.49	%
Investment securities		27,271			435	6.38	%		32,591			552	6.78	%
Total interest-earning assets		695,962			9,494	5.46	%		658,595			9,145	5.55	%
Noninterest-earning assets		103,740							50,970
Total assets	$	799,702						$	709,565
Liabilities and equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	209,533			572	1.09	%	$	161,251			499	1.24	%
Savings accounts		83,977			220	1.05	%		62,051			172	1.11	%
Certificates of deposit		213,787			1,140	2.13	%		213,955			1,565	2.93	%
Total interest-bearing deposits		507,297			1,932	1.52	%		437,257			2,236	2.05	%
FHLB advances		110,000			1,175	4.27	%		128,574			1,195	3.72	%
Subordinated debt		15,464			335	8.67	%		15,464			335	8.67	%
Total borrowings		125,464			1,510	4.82	%		144,038			1,530	4.25	%
Total interest-bearing liabilities		632,761			3,442	2.18	%		581,295			3,766	2.59	%
Noninterest-bearing demand accounts		58,291							53,146
Other liabilities		8,916							8,311
Total liabilities		699,968							642,752
Stockholders’ equity		99,734							66,813
Total liabilities and stockholders’ equity	$	799,702						$	709,565
Net interest income				$	6,052						$	5,379
Interest rate spread						3.28	%						2.96	%
Net interest margin						3.48	%						3.27	%
Average interest-earning assets to average interest-bearing liabilities		109.99	%						113.30	%

25

Average Balance Tables

	Six Months Ended June 30, 2010							Six Months Ended June 30, 2009
	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	$	666,240		$	18,089	5.43	%	$	615,685		$	17,054	5.54	%
Investment securities		27,869			910	6.53	%		34,655			1,082	6.25	%
Total interest-earning assets		694,109			18,999	5.47	%		650,340			18,136	5.58	%
Noninterest-earning assets		98,455							49,408
Total assets	$	792,564						$	699,748
Liabilities and equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	208,073		$	1,177	1.13	%	$	159,438		$	993	1.25	%
Savings accounts		80,402			437	1.09	%		59,223			326	1.10	%
Certificates of deposit		214,086			2,344	2.19	%		209,446			3,230	3.08	%
Total interest-bearing deposits		502,561			3,958	1.58	%		428,107			4,549	2.13	%
FHLB advances		110,000			2,338	4.25	%		130,534			2,387	3.66	%
Subordinated debt		15,464			670	8.67	%		15,464			670	8.67	%
Total borrowings		125,464			3,008	4.80	%		145,998			3,057	4.19	%
Total interest-bearing liabilities		628,025			6,966	2.22	%		574,105			7,606	2.65	%
Noninterest-bearing demand accounts		56,571							51,706
Other		8,877							8,262
Total liabilities		693,473							634,073
Stockholders’ equity		99,091							65,675
Total liabilities and stockholders’ equity	$	792,564						$	699,748
Net interest income				$	12,033						$	10,530
Interest rate spread						3.26	%						2.93	%
Net interest margin						3.47	%						3.24	%
Average interest-earning assets to average interest-bearing liabilities		110.52	%						113.28	%

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 $540,000 and $691,000 in the three and six months ended June 30, 2010 compared to $252,000 and $404,000 in the three and six months ended June 30, 2009. The provision was primarily to maintain a reserve level deemed appropriate by management in light of factors such as the level of non-performing loans, growth in the loan portfolio and the current economic environment. The specific reserve component of the provision was $475,000 and $476,000 in the three and six months ended June 30, 2010.

26

Other Income

The following table summarizes other income for the three months ended June 30, 2010 and 2009 and the changes between the periods.

	Three Months Ended June 30,					% Change
	2010		2009
	(Dollars in thousands)
OTHER INCOME:
Service charges	$	445	$	441		0.9	%
Cash surrender value of life insurance		139		106		31.1
Impairment charge on AFS securities		—		(592	)	(100.0	)
Other		302		224		34.8
Total other income	$	886	$	179		395.0

Other income increased $707,000 to $886,000 for the three-month period ended June 30, 2010 from the same period in 2009. Increases in income resulted from increases in service charges and fees on deposit accounts, the cash surrender value of bank owned life insurance and debit card commissions. Additionally, the Company did not record any other-than-temporary impairment charges on securities in the second quarter of 2010 compared to $592,000 for the same period in 2009.

The following table summarizes other income for the six months ended June 30, 2010 and 2009 and the changes between the periods.

	Six Months Ended June 30,					% Change
	2010		2009
	(Dollars in thousands)
OTHER INCOME:
Service charges	$	881	$	848		3.9	%
Cash surrender value of life insurance		274		210		30.5
Gain on call of AFS securities		—		6		(100.0	)
Impairment charge on AFS securities		—		(1,077	)	(100.0	)
Other		539		393		37.2
Total other income	$	1,694	$	380		345.8

Other income increased $1,314,000 to $1,694,000 for the six-month period ended June 30, 2010 from the same period in 2009. Increases in income resulted from increases in service charges and fees on deposit accounts, the cash surrender value of bank owned life insurance and debit card commissions. Additionally, the Company did not record any other-than-temporary impairment charges on securities in the six months ended June 30, 2010 compared to $1,077,000 for the same period in 2009.

Other Expense

The following table summarizes other expense for the three months ended June 30, 2010 and 2009 and the changes between periods.

	Three Months Ended June 30,				% Change
	2010		2009
	(Dollars in thousands)
OTHER EXPENSE:
Salaries and employee benefits	$	2,452	$	2,208	11.1	%
Occupancy and equipment		981		904	8.5
Federal insurance premiums		163		394	(58.6	)
Advertising		112		101	10.9
Professional services		204		181	12.7
Real estate owned expense		2		3	(33.3	)
Other operating expense		461		415	11.1
Total other expense	$	4,375	$	4,206	4.0

27

Other expenses increased $169,000, or 4.0%, to $4.4 million for the three-month period ended June 30, 2010 from the same period in 2009. All expense categories increased a total of $144,000 as a result of costs associated with the opening of the Company’s tenth branch in the fall of 2009. Salaries and benefits increased $174,000, excluding new branch expenses, resulting from $121,000 in normal salary and benefit increases and a decrease of $53,000 in qualified deferred personnel cost credits associated with fewer closed loans during the second quarter of 2010 compared to the same period in 2009. FDIC insurance decrease of $231,000 was the result of a special assessment payment made of $324,000 in 2009 not required in 2010, offset by increased premiums of $93,000 in 2010. Excluding new branch expenses, occupancy, marketing, real estate owned, professional services and other operating expenses increased $87,000 through normal activity.

The following table summarizes other expense for the six months ended June 30, 2010 and 2009 and the changes between the periods.

	Six Months Ended June 30,				% Change
	2010		2009
	(Dollars in thousands)
OTHER EXPENSE:
Salaries and employee benefits	$	4,949	$	4,349	13.8	%
Occupancy and equipment		1,958		1,771	10.6
Federal insurance premiums		330		465	(29.0	)
Advertising		228		198	15.2
Professional services		382		336	13.7
Real estate owned expense		3		11	(72.7	)
Other operating expense		977		817	19.6
Total other expense	$	8,827	$	7,947	11.1

Other expenses increased $880,000, or 11.1%, to $8.8 million for the six-month period ended June 30, 2010 from the same period in 2009. All expense categories increased a total of $282,000 as a result of costs associated with the opening of the Company’s tenth branch in the fall of 2009. Salaries and benefits increased $464,000, excluding new branch expenses, resulting from $204,000 in normal salary and benefit increases and a decrease of $260,000 in qualified deferred personnel cost credits associated with fewer closed loans during the six months of 2010 compared to the same period in 2009. FDIC insurance decrease of $135,000 was the result of a special assessment payment of $324,000 made in 2009 not required in 2010, offset by increased premiums of $189,000 in 2010. Excluding new branch expenses, occupancy, marketing, real estate owned, professional services and other operating expenses increased $281,000 through normal activity.

Income Taxes

Income taxes increased $357,000 to $785,000 for an effective tax rate of 38.8% for the three months ended June 30, 2010, compared to $429,000 for an effective tax rate of 39.0% from the same period in 2009. The increase was a result of higher taxable income.

Income taxes increased $658,000 to $1,633,000 for an effective tax rate of 38.8% for the six months ended June 30, 2010, compared to $975,000 for an effective tax rate of 38.1% from the same period in 2009. The increase was a result of higher taxable income.

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.

28

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

Our most liquid assets are cash and cash equivalents and interest-bearing deposits. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At June 30, 2010, cash and cash equivalents totaled $50.0 million. Securities classified as available-for-sale whose market value exceeds our cost, which provide additional sources of liquidity, totaled $16.3 million at June 30, 2010. In addition, at June 30, 2010, we had the ability to borrow a total of approximately $248.8 million from the Federal Home Loan Bank of New York, which included available overnight lines of credit of $48.5 million. On that date, we had no overnight advances outstanding.

At June 30, 2010, we had $54.9 million in loan commitments outstanding, which included $16.4 million in undisbursed loans, $24.4 million in unused home equity lines of credit and $14.1 million in commercial lines and letters of credit. Certificates of deposit due within one year of June 30, 2010 totaled $147.9 million, or 69.4% 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, 2010, the Bank exceeded all of its regulatory capital requirements with tangible capital of $85.2 million, or 10.81% of total adjusted assets, which is above the required level of $11.8 million or 1.5%; core capital of $85.2 million, or 10.81% of total adjusted assets which is above the required level of $31.5 million or 4.0%; and risk-based capital of $88.6 million, or 19.55% of risk-weighted assets, which is above the required level of $36.3 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 the Company:

	At March 31, 2010 Percentage Change in Estimated Net Interest Income Over
	12 Months		24 Months
200 basis point increase in rates	(1.51	)%	0.69	%
100 basis point decrease in rates	(7.19	)%	(13.78	)%

The 200 and 100 basis point change in rates in the above table is assumed to occur evenly over the following 12 months. Based on the scenario above, net interest income would be adversely affected (within our internal guidelines) in the 12-month if rates rose by 200 basis points. In addition, if rates declined by 100 basis points net interest income would be adversely affected (within our internal guidelines) in both the 12- and 24-month periods.

29

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 50 to 300 basis point increase or a sustained 50 to 100 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 March 31, 2010 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	$	65,164	$	(49,009	)	(43	)%	8.69	%	(536	)bp
200		84,007		(30,165	)	(26	)	10.87		(317	)
100		101,608		(12,565	)	(11	)	12.78		(126	)
50		108,583		(5,589	)	(5	)	13.49		(55	)
0		114,172						14.04
(50)		116,867		2,694		2		14.26		22
(100)		117,721		3,548		3		14.29		25

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

OFF-BALANCE SHEET ARRANGEMENTS

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

30

For the three months and six ended June 30, 2010 and June 30, 2009, 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 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, 2010 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

The following supplements the risk factors discussed in the 2009 Annual Report on Form 10-K:

Recently enacted regulatory reform may have a material impact on our operations.

On July 21, 2010, the President signed into law The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). The Dodd-Frank Act restructures the regulation of depository institutions. Under the Dodd-Frank Act, the Office of Thrift Supervision will be merged into the Office of the Comptroller of the Currency, which regulates national banks. Savings and loan holding companies will be regulated by the Federal Reserve Board. The Dodd-Frank Act contains various provisions designed to enhance the regulation of depository institutions and prevent the recurrence of a financial crisis such as occurred in 2008-2009. Also included is the creation of a new federal agency to administer and enforce consumer and fair lending laws, a function that is now performed by the depository institution regulators. The federal preemption of state laws currently accorded federally chartered depository institutions will be reduced as well. The Dodd-Frank Act also will impose consolidated capital requirements on savings and loan holding companies effective in five years, which will limit our ability to borrow at the holding company and invest the proceeds from such borrowings as capital in Ocean City Home Bank that could be leveraged to support additional growth. The full impact of the Dodd-Frank Act on our business and operations will not be known for years until regulations implementing the statute are written and adopted. The Dodd-Frank Act may have a material impact on our operations, particularly through increased compliance costs resulting from possible future consumer and fair lending regulations.

31

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 (1)(2)	(d) Maximum Number (or Appropriate  Dollar Value) of Shares (or units) that May Yet Be Purchased Under the Plans or Programs
Month #1 April 1, 2010 through April 30, 2010	None	None	None
Month #2 May 1, 2010 through May 31, 2010	None	None	None
Month #3 June 1, 2010 through June 30, 2010	None	None	None
Total

(1) On August 10, 2005, the Company’s Board of Directors approved the formation and funding of a trust that will purchase 151,018 shares of the Company’s common stock in the open market with funds contributed by the Company. As of June 30, 2010, 150,624 shares were purchased. The remaining 394 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. The above shares have been adjusted to reflect the impact of the second-step conversion and reorganization of the Company which occurred on December 18, 2009.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. [RESERVED]

Item 5. Other Information

None.

Item 6. Exhibits

3.1	Certificate of Incorporation of Ocean Shore Holding Co., (incorporated by reference to Exhibit 3.1 to the Ocean Shore Holding Co. Registration Statement on Form S-1 (File No. 333-153454), as amended, initially filed on September 12, 2008).
3.2	Bylaws of Ocean Shore Holding Co., (incorporated by reference to Exhibit 3.2 to the Ocean Shore Holding Co. Registration Statement on Form S-1 (File No. 333-153454), as amended, initially filed on September 12, 2008).

32

4.1	Specimen Stock Certificate of Ocean Shore Holding Co., (incorporated by reference to Exhibit 4.0 the Ocean Shore Holding Co. Registration Statement on Form S-1 (File No. 333-153454), as amended, initially filed on September 12, 2008).
4.2	No long-term debt instrument issued by Ocean Shore Holding Co. exceeds 10% of consolidated assets or is registered. In accordance with paragraph 4(iii) of Item 601(b) of Regulation S-K, Ocean Shore Holding Co. will furnish the Securities and Exchange Commission copies of long-term debt instruments and related agreements upon request.
14.0	Code of Ethics and Business Conduct (incorporated by reference to Exhibit 14.0 to the Ocean Shore Holding Co. (File No. 000-51000) Annual Report on Form 10-K for the year ended December 31, 2004).
21.0	List of Subsidiaries (incorporated by reference to Exhibit 21.0 to the Ocean Shore Holding Co. (File No. 000-51000) Annual Report on Form 10-K for the year ended December 31, 2008).
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 Office.

33

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 6, 2010	/S/    STEVEN E. BRADY
	Steven E. Brady
	President and Chief Executive Officer
Date: August 6, 2010	/S/    DONALD F. MORGENWECK
	Donald F. Morgenweck
	Chief Financial Officer and Senior Vice President

34