10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 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 November 1, 2010, the registrant had 7,296,904 shares of $0.01 par value common stock outstanding.

OCEAN SHORE HOLDING CO.

FORM 10-Q

INDEX

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Statements of Financial Condition at September 30, 2010 and December 31, 2009		1
	Unaudited Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2010 and 2009		2
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 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		21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		33
Item 4.	Controls and Procedures		33
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings		33
Item 1A.	Risk Factors		34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		34
Item 3.	Defaults upon Senior Securities		35
Item 4.	[RESERVED]		35
Item 5.	Other Information		35
Item 6.	Exhibits		35
SIGNATURES			36

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	September 30, 2010			December 31, 2009
ASSETS
Cash and amounts due from depository institutions	$	7,190,606		$	5,741,369
Interest-earning bank balances		91,243,667			27,286,341
Cash and cash equivalents		98,434,273			33,027,710
Investment securities held to maturity (estimated fair value—$3,106,357 at September 30, 2010; $3,579,611 at December 31, 2009)		2,923,855			3,440,275
Investment securities available for sale (amortized cost—$23,349,142 at September 30, 2010; $27,654,602 at December 31, 2009)		22,438,745			25,986,767
Loans—net of allowance for loan losses of $3,982,306 at September 30, 2010 and $3,476,040 at December 31, 2009		669,867,578			663,662,808
Accrued interest receivable:
Loans		2,533,726			2,377,498
Investment securities		53,525			247,903
Federal Home Loan Bank stock—at cost		6,271,600			6,148,000
Office properties and equipment—net		13,016,159			13,512,159
Prepaid expenses and other assets		4,855,712			5,457,455
Real estate owned		97,500			97,500
Cash surrender value of life insurance		14,749,364			12,837,789
Deferred tax asset		2,922,889			3,349,332
TOTAL ASSETS	$	838,164,926		$	770,145,196
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Non-interest bearing deposits	$	59,979,604		$	53,254,259
Interest bearing deposits		543,567,866			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		3,478,952			3,406,419
Accrued interest payable		806,728			1,145,412
Other liabilities		5,553,335			5,372,769
Total liabilities		738,850,485			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, 7,296,904 shares outstanding at September 30, 2010; 7,308,118 shares issued and outstanding at December 31, 2009		73,076			73,081
Additional paid-in capital		63,913,623			65,213,708
Retained earnings - partially restricted		40,635,562			37,934,456
Treasury stock – at cost: 10,686 shares at September 30, 2010; 0 shares at December 31, 2009		(113,806	)		—
Common stock acquired by employee benefits plans		(4,086,078	)		(4,321,878	)
Deferred compensation plans trust		(513,442	)		(495,741	)
Accumulated other comprehensive loss		(594,494	)		(1,069,123	)
Total stockholders’ equity		99,314,441			97,334,123
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	838,164,926		$	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 September 30,					Nine Months Ended September 30,
	2010		2009			2010		2009
INTEREST AND DIVIDEND INCOME:
Taxable interest and fees on loans	$	9,004,043	$	8,969,287		$	27,093,155	$	26,023,194
Taxable interest on mortgage-backed securities		204,916		294,000			659,747		942,828
Non-taxable interest on municipal securities		19,305		17,750			55,706		58,794
Taxable interest and dividends on other investment securities		218,954		221,639			637,452		614,044
Total interest and dividend income		9,447,218		9,502,676			28,446,060		27,638,860
INTEREST EXPENSE:
Interest on deposits		1,983,053		2,214,540			5,940,841		6,763,280
Interest on borrowings		1,523,247		1,530,940			4,531,000		4,588,606
Total interest expense		3,506,300		3,745,480			10,471,841		11,351,886
NET INTEREST INCOME		5,940,918		5,757,196			17,974,219		16,286,974
PROVISION FOR LOAN LOSSES		124,705		490,500			816,066		894,500
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		5,816,213		5,266,696			17,158,153		15,392,474
OTHER INCOME:
Service charges		396,526		442,898			1,277,637		1,291,215
Cash surrender value of life insurance		137,990		108,386			411,575		318,355
Gain on call of securities		—		—			5		6,133
Impairment charge on AFS securities(1)		—		—			—		(1,077,400	)
Other		301,601		238,669			840,522		631,973
Total other income		836,117		789,953			2,529,739		1,170,276
OTHER EXPENSE:
Salaries and employee benefits		2,458,654		2,164,347			7,407,519		6,513,088
Occupancy and equipment		970,439		908,025			2,928,922		2,678,766
Federal insurance premiums		166,103		158,002			496,533		623,127
Advertising		85,515		93,892			313,291		292,158
Professional services		211,280		163,629			592,944		499,291
Real estate owned expense		1,344		19,706			3,865		30,374
Charitable contributions		34,500		40,500			103,500		100,500
Other operating expenses		391,033		390,625			1,299,647		1,148,616
Total other expenses		4,318,868		3,938,726			13,146,221		11,885,920
INCOME BEFORE INCOME TAXES		2,333,462		2,117,923			6,541,671		4,676,830
INCOME TAX EXPENSE		892,323		804,985			2,525,210		1,779,774
NET INCOME	$	1,441,139	$	1,312,938		$	4,016,461	$	2,897,056
Earnings per share, basic:	$	0.21	$	0.19	*	$	0.59	$	0.41	*
Earnings per share, diluted:	$	0.21	$	0.18	*	$	0.59	$	0.41	*

⁽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

	Nine Months Ended September 30,
	2010			2009
OPERATING ACTIVITIES:
Net income	$	4,016,461		$	2,897,056
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		773,195			590,939
Provision for loan losses		816,066			894,500
Stock based compensation expense		585,767			507,277
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		(411,575	)		(318,355	)
Changes in assets and liabilities which provided (used) cash:
Accrued interest receivable		38,149			(62,998	)
Prepaid expenses and other assets		745,378			(1,266,555	)
Accrued interest payable		(338,684	)		(337,124	)
Other liabilities		180,567			224,168
Net cash provided by operating activities		6,405,319			4,194,863
INVESTING ACTIVITIES:
Principal collected on:
Mortgage-backed securities available for sale		3,522,851			5,115,269
Mortgage-backed securities held to maturity		513,661			538,440
Investment securities available for sale		—			238,137
Loans originated, net of repayments		(7,050,923	)		(62,725,079	)
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	)		(11,521,050	)
Office properties and equipment		(233,267	)		(1,933,788	)
Proceeds from sales of:
Federal Home Loan Bank stock		—			12,112,650
Real estate owned		—			773,378
Proceeds from maturities/ calls of:
Investment securities held to maturity		1,474,102			672,307
Investment securities available for sale		771,533			500,000
Net cash (used in) investing activities		(4,099,745	)		(56,889,463	)
FINANCING ACTIVITIES:
Increase in deposits		66,125,376			76,887,882
Fractional share payouts on exchange		(15,998	)		—
Increase in advances from the Federal Home Loan Bank, net		—			(15,900,000	)
Dividends paid		(1,315,356	)		(534,356	)
Purchase of treasury stock		(113,806	)		(97,023	)
Purchase of shares by deferred compensation plans trust		(1,651,760	)		(8,070	)
Increase in advances from borrowers for taxes and insurance		72,533			266,519
Net cash provided by financing activities		63,100,989			60,614,952
NET INCREASE IN CASH AND CASH EQUIVALENTS		65,406,563			7,920,352
CASH AND CASH EQUIVALENTS—Beginning of period		33,027,710			8,530,159
CASH AND CASH EQUIVALENTS—End of period		98,434,273			16,450,511
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION—Cash paid during the period for:
Interest	$	10,810,525		$	11,689,010
Income Taxes	$	2,563,080		$	2,646,784

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 nine months ended September 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 Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update (“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 begin on or after December 15, 2010. The Company is continuing to evaluate the impact of the new guidance on its required disclosures.

In February 2010, the FASB issued 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

4

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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.

In January 2010, the FASB issued 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.

5

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

2. INVESTMENT SECURITIES

Investment securities are summarized as follows:

	September 30, 2010
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
Held to Maturity
US treasury and government sponsored entity mortgage-backed securities	$	2,923,855	$	182,502	$	—		$	3,106,357
Totals	$	2,923,855	$	182,502	$	—		$	3,106,357
Available for Sale
Debt securities:
Municipal securities	$	1,419,735	$	20,444	$	—		$	1,440,179
Corporate		8,198,527		18,671		(1,792,349	)		6,424,849
Equity securities		2,596		11,615		(1,711	)		12,500
US treasury and government sponsored entity mortgage-backed securities		13,728,284		832,933		—			14,561,217
Totals	$	23,349,142	$	883,663	$	(1,794,060	)	$	22,438,745
	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 securities		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

6

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 September 30, 2010 and December 31, 2009:

	September 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	$	—	$	—		$	5,735,076	$	(1,792,349	)	$	5,735,076	$	(1,792,349	)
Equity securities		884		(1,711	)		—		—			884		(1,711	)
Totals	$	884	$	(1,711	)	$	5,735,076	$	(1,792,349	)	$	5,375,960	$	(1,794,060	)
	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 treasury and government sponsored entity mortgage-backed securities	$	—	$	—		$	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 September 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.

	2010		2009
Credit component of OTTI as of January 1	$	3,000,000	$	1,922,600
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 OTTI was previously recognized		—		1,077,400
Credit component of OTTI as of September 30	$	3,000,000	$	3,000,000

7

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

These securities have Fitch credit ratings below investment grade at September 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 September 30, 2010 and 2009:

	September 30, 2010	September 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 21.2%
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 September 30, 2010, one corporate debt security 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 25.01% 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 September 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 September 30, 2010, all agency mortgage-backed securities were in a gain position.

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

8

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	September 30, 2010
	Available for Sale Securities
	Amortized Cost		Estimated Fair Value
Due within 1 year	$	—	$	—
Due after 1 year through 5 years		1,000,000		859,980
Due after 5 years through 10 years		—		—
Due after 10 years		8,618,262		7,005,048
Total	$	9,618,262	$	7,865,028

Equity securities had a cost of $2,596 and a fair value of $12,500 as of September 30, 2010. Mortgage-backed securities had a cost of $16,652,139 and a fair value of $17,667,574. 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:

	September 30, 2010			December 31, 2009
Real estate - mortgage:
One- to- four family residential	$	524,946,198		$	521,361,263
Commercial and multi-family		55,332,592			49,801,620
Total real estate-mortgage		580,278,790			571,162,883
Real estate - construction:
Residential		7,069,957			5,605,724
Commercial		2,959,718			2,937,089
Total real estate - construction		10,029,675			8,542,813
Commercial		20,776,084			22,893,039
Consumer:
Home equity		58,968,170			60,729,520
Other consumer loans		812,420			795,761
Total consumer loans		59,780,590			61,525,281
Total loans		670,865,139			664,124,016
Net deferred loan cost		2,984,745			3,014,832
Allowance for loan losses		(3,982,306	)		(3,476,040	)
Net total loans	$	669,867,578		$	663,662,808

9

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Changes in the allowance for loan losses are as follows:

	Nine Months  Ended September 30,
	2010			2009
Balance, beginning of period	$	3,476,040		$	2,683,956
Provision for loan loss		816,066			894,500
Charge-offs		(309,800	)		(101,500	)
Recoveries		—			1,402
Balance, end of period	$	3,982,306		$	3,478,843

Non-performing loans:

	September 30, 2010		December 31, 2009
Real estate mortgage loans	$	3,106,580	$	1,592,639
Real estate commercial loans		537,853		139,405
Commercial loans		162,606		21,721
Consumer loans		146,801		91,085
Total non-performing loans		3,953,840		1,844,850
Real estate owned		97,500		97,500
Total non-performing assets	$	4,051,340	$	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 September 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 $124,705 and $816,066 for the three and nine months ended September 30, 2010 as compared to $490,500 and $894,500 for the comparable periods in 2009.

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

	September 30, 2010		December 31, 2009
Impaired collateral-dependant loans with related allowance	$	1,697,727	$	1,158,000
Impaired collateral-dependant loans with no related allowance		769,157		687,000

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

	September 30, 2010		December 31, 2009
Average impaired loans	$	2,208,088	$	649,246
Interest income recognized on impaired loans		—		—
Cash basis interest income recognized on impaired loans		—		—

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Non-performing loans at September 30, 2010 and December 31, 2009 consisted of non-accrual loans that amounted to $3,953,840 and $1,844,850 respectively. The delinquent interest on non-performing loans totaled $175,879 and $90,757 at September 30, 2010 and December 31, 2009, respectively.

4. DEPOSITS

Deposits consist of the following major classifications:

	September 30,					December 31,
	2010					2009
	Amount		Weighted Average Interest Rate			Amount		Weighted Average Interest Rate
NOW and other demand deposit accounts	$	291,515,282		0.84	%	$	249,422,646		0.94	%
Passbook savings and club accounts		95,783,186		1.07	%		73,976,828		1.14	%
Subtotal		387,298,468					323,399,474
Certificates with original maturities:
Within one year		100,776,987		1.34	%		113,814,174		1.69	%
One to three years		92,142,537		2.30	%		76,504,418		2.85	%
Three years and beyond		23,329,478		3.61	%		23,704,028		4.05	%
Total certificates		216,249,002					214,022,620
Total	$	603,547,470				$	537,422,094

The aggregate amount of certificate accounts in denominations of $100,000 or more at September 30, 2010 and December 31, 2009 amounted to $85,739,226 and $86,977,676, respectively.

Municipal demand deposit accounts in denominations of $100,000 or more at September 30, 2010 and December 31, 2009 amounted to $120,972,932 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 Employee Stock Ownership Plan (“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.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The calculated basic and dilutive EPS are as follows:

	Three Months  Ended September 30,				Nine Months  Ended September 30,
	2010		2009		2010		2009
Numerator	$	1,441,139	$	1,312,938	$	4,016,461	$	2,897,056
Denominators:
Basic average shares outstanding		6,826,698		7,080,802		6,824,073		7,068,439
Effect of dilutive securities		8,823		43,223		—		54,511
Diluted average shares outstanding		6,835,521		7,124,025		6,824,073		7,122,950
Earnings per share:
Basic	$	0.21	$	0.19	$	0.59	$	0.41
Diluted	$	0.21	$	0.18	$	0.59	$	0.41

At September 30, 2010 and 2009, there were 624,007 and 373,592 outstanding anti-dilutive options, respectively, and 99,000 and 30,125 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 and 2010 Equity-Based Incentive Plans (the “Equity Plans”) 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 Plans 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 Plans, 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.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

A summary of the status of the Company’s stock options under the Equity Plans as of September 30, 2010 and 2009 and changes during the nine months ended September 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:

	Nine Months Ended September 30, 2010				Nine Months Ended September 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		257,010	$	10.21		—
Exercised		—				—
Forfeited		6,595	$	13.19		—
Outstanding at the end of the period		624,007	$	11.91		373,592	$	13.10
Exercisable at the end of the period		338,573	$	13.11		270,451	$	13.19
Stock options vested or expected to vest (1)		561,606	$	11.91		336,233	$	13.10

(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 Plans as of September 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		4.9 years
November 21, 2006		19,784	$	14.78		6.1 years
November 21, 2007		34,182	$	11.32		7.1 years
August 18, 2010		257,010	$	10.21		9.9 years
Total		624,007	$	11.91		7.1 years

Summary of Non-vested Stock Award Activity:

	Nine Months  Ended September 30, 2010				Nine Months  Ended September 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		99,000		10.21		—		—
Vested		30,125		13.19		30,125		13.19
Outstanding at September 30		99,000	$	10.21		30,125	$	13.19

The compensation expense recognized for the three and nine months ended September 30, 2010 was $83,161 and $315,149 as compared to $123,811 and $385,506 for the three and nine months ended September 30, 2009.

At September 30, 2010, there was $714,577 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 4.9 years.

As of September 30, 2010, there was $985,520 of total unrecognized compensation costs related to nonvested stock awards. That cost is expected to be recognized over a weighted average period of 4.9 years.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

7. INCOME TAXES

Income taxes increased $745,000 to $2.5 million for an effective tax rate of 38.6% for the nine months ended September 30, 2010 compared to $1.8 million 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 carryforwards not expiring unused, tax planning strategies and timing of reversals of temporary differences. Significant judgment is required in assessing future earnings 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 September 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 September 30, 2010, the tax years ended December 31, 2007 through 2009 were subject to examination by the Internal Revenue Service (“IRS”), while the tax years ended December 31, 2006 through 2009 were subject to state examination. As of September 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.

8. DECLARATION OF DIVIDEND

During the third 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 August 27, 2010 to stockholders of record as of the close of business on August 6, 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.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

• 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.

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.

15

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Recurring Fair Value Measurements:

Those assets at September 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. treasury and government sponsored entity mortgage-backed securities	$	—	$	14,561,217	$	—
State and municipal obligations		—		1,440,179		—
Corporate securities		—		6,424,649		200
Equity securities		12,500		—		—
Totals	$	12,500	$	22,426,045	$	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. treasury and government sponsored entity 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.

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 Stock 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.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

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

Fair Value Measurement Activity – Level 3 (only)

	Fair Value Measurement Using Level 3 Inputs September 30, 2010				Fair Value Measurement Using Level 3 Inputs September 30, 2009
	Trust Preferred Securities		Total		Trust Preferred Securities			Total
Balance, January 1,	$	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, September 30,	$	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 September 30, 2010 and 2009 are presented below:

	Category used for Fair Value Measurement						Total		Total Gains (Losses)
Nine months ended	Level 1		Level 2		Level 3
September 30, 2010
Loans (1)	$	—	$	1,309,550	$	652,680	$	1,962,230	$	(341,678	)
Foreclosed assets (2)		—		97,500		—		97,500		—
September 30, 2009
Loans (1)	$	—	$	2,160,000		—	$	2,160,000	$	(400,000	)
Foreclosed assets (2)		—		97,500		—		97,500		(101,000	)

(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.

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

17

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 ten loans categorized as level 2 and nine loans categorized as Level 3. At September 30, 2010, total loans remeasured at fair value were $1,962,230. Such loans were carried at the value of $2,448,884 immediately prior to remeasurement, resulting in the recognition of impairment through earnings in the amount of $486,654. Specific reserves were calculated for impaired loans with the value prior to remeasurement of $1,679,727 and net carrying amount of $1,193,073. The collateral underlying these loans had a fair value of $2,069,000, while the claims against collateral from other third parties, shortfall in collateral to appraised amount and liquidation costs amounted to $875,927, resulting in specific reserves in the allowance for loan losses of $486,654. No specific reserve was calculated for impaired loans with an aggregate carrying amount of $769,157 at September 30, 2010, as the underlying collateral value was not below the carrying amount.

At September 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 $360,000, resulting in a specific reserve in the allowance for loan losses of $400,000. No specific reserve was calculated for impaired loans with an aggregate carrying amount of $1.8 million at September 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 September 30, 2010 and September 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.

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 September 30, 2010, the Company did not have any remeasurement to fair value to its foreclosed real estate and repossessed assets since the original recording. At September 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.

18

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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:

	September 30, 2010				December 31, 2009
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets:
Cash and cash equivalents	$	98,434,273	$	98,434,273	$	33,027,710	$	33,027,710
Investment securities:
Held to maturity		2,923,855		3,106,357		3,440,275		3,579,611
Available for sale		22,438,745		22,438,745		25,986,767		25,986,767
Loans receivable, net		669,867,578		685,167,796		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		291,515,282		300,273,282		249,422,646		261,166,646
Passbook savings and club accounts		95,783,186		102,523,186		73,976,828		81,675,828
Certificates		216,249,003		216,663,898		214,022,620		214,022,087
Advances from Federal Home Loan Bank		110,000,000		125,902,722		110,000,000		118,836,690
Junior subordinated debenture		15,464,000		9,278,400		15,464,000		7,732,000

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.

19

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 September 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 September 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 September 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”):

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

20

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 Company’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 SEPTEMBER 30, 2010 AND DECEMBER 31, 2009

Total assets of the Company increased by $68.0 million to $838.2 million at September 30, 2010 from $770.1 million at December 31, 2009. Loans receivable, net, increased $6.2 million, investment and mortgage-backed securities decreased $4.0 million and cash and cash equivalents increased by $65.4 million. Asset growth was funded by an increase in deposits of $66.1 million while borrowings were unchanged at $125.5 million.

21

Investments

Investments decreased by $4.0 million to $25.4 million at September 30, 2010 from $29.4 million at December 31, 2009. The decrease was the result of normal maturity and repayment activity, offset by improved valuation of AFS securities of $0.8 million.

Loans

Loans receivable, net, increased $6.2 million to $669.9 million at September 30, 2010 from $663.7 million at December 31, 2009. Loan originations totaled $99.5 million for the nine months ended September 30, 2010 compared to $137.7 million originated in the nine months ended September 30, 2009. Real estate mortgage loan originations totaled $22.1 million, real estate construction loan originations totaled $3.1 million, consumer loan originations totaled $4.4 million and commercial loan originations totaled $2.8 million for the third quarter of 2010.

The following table summarizes changes in the loan portfolio in the nine months ended September 30, 2010.

	September 30, 2010			December 31, 2009			$ change			% change
	(Dollars in thousands)
Real estate – mortgage:
One-to-four-family residential	$	524,946		$	521,361		$	3,585			0.7	%
Commercial and multi-family		55,333			49,802			5,531			11.1
Total real estate – mortgage		580,279			571,163			9,116			1.6
Real estate – construction:
Residential		7,070			5,606			1,464			26.1
Commercial		2,960			2,937			23			0.8
Total real estate – construction		10,030			8,543			1,487			17.4
Commercial		20,776			22,893			(2,117	)		(9.2	)
Consumer
Home equity		58,968			60,730			(1,762	)		(2.9	)
Other consumer loans		812			795			17			2.1
Total consumer loans		59,780			61,525			(1,745	)		(2.8	)
Total loans		670,865			664,124			6,741			1.0
Net deferred loan cost		2,985			3,015			(30	)		(1.0	)
Allowance for loan losses		(3,982	)		(3,476	)		(506	)		14.6
Net total loans	$	669,868		$	663,663		$	6,205			0.9	%

Non-Performing Assets

Non-performing assets totaled $4.1 million, or 0.48% of total assets, at September 30, 2010 compared to $1.9 million, or 0.25% of total assets, at December 31, 2009 and $2.7 million, or 0.36% of total assets, at September 30, 2009. The increase from December 31, 2009 was the result of an increase in the number of non-performing loans to twenty at September 30, 2010 from thirteen at December 31, 2009. Non-performing assets consisted of eleven residential mortgages totaling $3.1 million, two commercial mortgages totaling $538,000, three commercial loans totaling $163,000, four consumer equity loans totaling $147,000 and one real estate owned property totaling $98,000. Specific reserves were recorded for twelve of the loans included above in the amount of $487,000 at September 30, 2010 as compared to six loans with specific allowance of $285,000 at December 31, 2009. Real estate owned remained unchanged at $98,000 at September 30, 2010. Charge-offs has totaled $310,000 in 2010 compared to $102,000 for the same period in 2009.

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The allowance for loan losses increased $506,000 to $4.0 million, or 0.59% 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 September 2010 from December 31, 2009 were slightly higher due to increases in delinquencies and charge-offs. At September 30, 2010, the specific allowance on loans individually evaluated for impairment was $487,000 and pooled allowance on the remainder of the loan portfolio was $3.5 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.

	Nine Months  Ended September 30,
	2010			2009
	(In thousands)
Allowance for loan losses:
Allowance at beginning of period	$	3,476		$	2,684
Provision for loan losses		816			895
Recoveries		—			1
Charge-offs		(310	)		(102	)
Net (charge-offs) recoveries		(310	)		(101	)
Allowance at end of period	$	3,982		$	3,478
Allowance for loan losses as a percent of total loans		0.59	%		0.53	%
Allowance for loan losses as a percent of non-performing loans		100.7	%		137.7	%
	September 30, 2010			December 31, 2009
	(In thousands)
Nonaccrual loans:
Real estate mortgage loans	$	3,107		$	1,593
Construction		538			139
Commercial		162			22
Consumer loans		147			91
Total of non-accrual and 90 days or more past due loans		3,954			1,845
Real estate owned		98			98
Total non-performing assets	$	4,052		$	1,943
Total non-performing loans to total loans		0.59	%		0.28	%
Total non-performing loans to total assets		0.47	%		0.24	%
Total non-performing assets and troubled debt restructurings to total assets		0.48	%		0.25	%

Deposits

Deposits increased by $66.1 million, or 12.3%, to $603.5 million at September 30, 2010 from $537.4 million at December 31, 2009. Interest bearing demand deposits increased $35.4 million, non-interest bearing checking increased $6.7 million, savings accounts increased by $21.8 million and certificates of deposit increased by $2.2 million. The Company continued its focus on attracting core deposits, which increased $63.9 million, and accounted for 96.7% of the increase in deposits.

23

The following table summarizes changes in deposits in the Nine Months Ended September 30, 2010.

	September 30, 2010		December 31, 2009		$ change		% change
	(Dollars in thousands)
Non-interest-bearing demand deposits	$	59,980	$	53,254	$	6,726		12.6	%
Interest-bearing demand deposits		231,535		196,168		35,367		18.0
Savings accounts		95,783		73,977		21,806		29.4
Time deposits		216,249		214,023		2,226		1.0
Total	$	603,547	$	537,422	$	66,125		12.3	%

Borrowings

Federal Home Loan Bank advances were unchanged at $110.0 million at September 30, 2010 and December 31, 2009. Other borrowings were unchanged at $15.5 million at September 30, 2010 compared to December 31, 2009.

Stockholders’ Equity

Stockholders’ equity increased $2.0 million to $99.3 million at September 30, 2010, from $97.3 million at December 31, 2009, primarily as a result of current period earnings of $4.1 million partially offset by cash dividends paid of $1.3 million, an increase in treasury stock of $114,000, an increase in accumulated other comprehensive income of $474,000 and a $1.3 million decrease in additional paid-in capital resulting from changes in stock based employee benefit plans.

COMPARISON OF OPERATING RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

Net income was $1.44 million for the three months ended September 30, 2010 as compared to $1.31 million for the three months ended September 30, 2009. The increase of $128,000, or 9.8%, in 2010 from 2009 was due primarily to increased net interest income of $184,000 and other income of $46,000 and decreased provision for loan losses of $366,000 offset by increased other expense of $380,000 and income tax expense of $87,000.

Net income was $4.0 million for the nine months ended September 30, 2010 as compared to $2.9 million for the nine months ended September 30, 2009. The $1.1 million, or 38.6%, increase in 2010 from 2009 was due primarily to increased net interest income of $1.7 million and other income of $1.4 million and decreased provision for loan losses of $78,000 offset by increased other expense of $1.3 million and income tax expense of $745,000.

	Three Months  Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
	(Dollars in thousands, except per share data)						(Dollars in thousands, except per share data)
Net income	$	1,441		$	1,313		$	4,016		$	2,897
Basic earnings per share	$	0.21		$	0.16		$	0.59		$	0.41
Diluted earnings per share	$	0.21		$	0.16		$	0.59		$	0.41
Return on average assets (annualized)		0.69	%		0.71	%		0.66	%		0.54	%
Return on average equity (annualized)		5.72	%		7.70	%		5.37	%		5.84	%

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Net Interest Income

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

	Three Months  Ended September 30,
	2010		2009		$ change			% change
	(Dollars in thousands)
INTEREST INCOME:
Loans	$	9,004	$	8,969	$	35			0.4	%
Investment securities		443		533		(90	)		(16.9	)
Total interest income		9,447		9,502		(55	)		(0.6	)
INTEREST EXPENSE:
Deposits		1,983		2,214		(231	)		(10.4	)
Borrowings		1,523		1,531		(8	)		(0.5	)
Total interest expense		3,506		3,745		(239	)		(6.4	)
Net interest income	$	5,941	$	5,757	$	184			3.2

Interest income decreased by $55,000, or 0.6%, for the quarter ended September 30, 2010 compared to September 30, 2009. The decrease resulted from lower investment income of $90,000 offset by an increase in loan income of $35,000. The decreased interest income was driven primarily from lower investment balances and lower yield on loans offset by higher loan balances in the third quarter of 2010 compared to the same quarter in 2009.

Interest expense decreased by $239,000, or 6.4%, over the same period last year due to lower interest paid on deposits of $231,000. 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 3.39% respectively, for the three months ended September 30, 2010, compared to 3.12% and 3.40% for the same period in 2009. The improvement in the interest rate spread of 16 basis points and decrease in margin of 1 basis points resulted from a decrease in the average rate paid on interest-bearing liabilities of 36 basis points offset by a decrease in the rate earned on interest-earning assets of 21 basis points. An increase in the average balance of loans of $26.8 million was offset by decreases in the average rate on loans of 20 basis points, average rate on investments of 11 basis points and average balance of investments of $4.8 million. Additionally, decreases in the average rate paid on interest-bearing bearing deposits of 40 basis points and average balance on borrowings of $6.2 million was offset by increases in the average balance of interest-bearing deposits of $64.8 million and the average rate paid on borrowings of 20 basis points.

25

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

	Nine Months Ended September 30,
	2010		2009		$ Change			% Change
	(Dollars in thousands)
INTEREST INCOME:
Loans	$	27,093	$	26,023	$	1,070			4.1	%
Investment securities		1,353		1,616		(263	)		(16.3	)
Total interest income	$	28,446	$	27,639	$	807			2.9
INTEREST EXPENSE:
Deposits	$	5,941	$	6,763	$	(822	)		(12.2	)
Borrowings		4,531		4,589		(58	)		(1.3	)
Total interest expense		10,472		11,352		(880	)		(7.8	)
Net interest income	$	17,974	$	16,287	$	1,687			10.4

Interest income increased by $807,000, or 2.9%, for the nine months ended September 30, 2010 compared to September 30, 2009. The increase resulted from an increase in loan income of $1.1 million, offset by a decrease in investment income of $263,000. The increased interest income was driven primarily by higher loan balances offset by decreases in the balance of investments and yield on loans for the nine months ended September 2010 compared to the same period in 2009.

Interest expense decreased by $880,000, or 7.8%, for the nine months ended September 30, 2010 compared to September 30, 2009 due to a decrease in the interest paid on deposits of $822,000 and interest paid on borrowings of $58,000. 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 3.27% and 3.44% respectively, for the nine months ended September 30, 2010, compared to 2.99% and 3.29% for the same period in 2009. The improvement in the interest rate spread of 28 basis points and margin of 15 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 14 basis points. Increases in the average balance of loans of $42.6 million and average rate on investments of 16 basis points was offset by decreases in the average rate on loans of 14 basis points and average balance of investments of $6.1 million. Additionally, decreases in the average rate paid on interest-bearing bearing deposits of 50 basis points and average balance on borrowings of $15.7 million was offset by increases in the average balance of interest-bearing deposits of $71.2 million and average rate paid on borrowings of 48 basis points.

26

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.

Average Balance Tables

	Three Months  Ended September 30, 2010								Three Months  Ended September 30, 2009
	Average Balance			Interest and Dividends		Yield/ Cost			Average Balance			Interest and Dividends		Yield/ Cost
Assets:
Interest-earning assets:
Loans	$	674,048		$	9,004		5.34	%	$	647,212		$	8,969		5.54	%
Investment securities		26,074			443		6.80	%		30,881			533		6.91	%
Total Interest-earning assets		700,122			9,447		5.40	%		678,093			9,502		5.61	%
Noninterest-earning assets		135,642								57,567
Total assets	$	835,764							$	735,660
Liabilities and equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	234,869		$	651		1.11	%	$	196,778		$	610		1.24	%
Savings accounts		88,576			237		1.07	%		63,436			180		1.13	%
Certificates of deposit		213,261			1,095		2.05	%		211,686			1,424		2.69	%
Total interest-bearing deposits		536,706			1,983		1.48	%		471,900			2,214		1.88	%
FHLB advances		110,000			1,188		4.32	%		116,154			1,196		4.12	%
Subordinated debt		15,464			335		8.67	%		15,464			335		8.67	%
Total borrowings		125,464			1,523		4.86	%		131,618			1,531		4.65	%
Total interest-bearing liabilities		662,170			3,506		2.12	%		603,518			3,745		2.48	%
Noninterest-bearing demand accounts		63,169								55,391
Other liabilities		9,687								8,575
Total liabilities		735,026								667,484
Stockholders’ equity		100,738								68,176
Total liabilities and stockholders’ equity	$	835,764							$	735,660
Net interest income				$	5,941							$	5,757
Interest rate spread							3.28	%							3.12	%
Net interest margin							3.39	%							3.40	%
Average interest-earning assets to average interest-bearing liabilities		105.73	%							112.36	%

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Average Balance Tables

	Nine Months  Ended September 30, 2010								Nine Months  Ended September 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	$	668,872		$	27,093		5.40	%	$	626,309		$	26,023		5.54	%
Investment securities		27,264			1,353		6.62	%		33,383			1,616		6.45	%
Total interest-earning assets		696,136			28,446		5.45	%		659,692			27,639		5.59	%
Noninterest-earning assets		110,986								51,815
Total assets	$	807,122							$	711,507
Liabilities and equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	217,103		$	1,827		1.12	%	$	172,021		$	1,603		1.24	%
Savings accounts		83,157			674		1.08	%		60,643			506		1.11	%
Certificates of deposit		213,808			3,439		2.14	%		210,201			4,654		2.95	%
Total interest-bearing deposits		514,068			5,941		1.54	%		442,865			6,763		2.04	%
FHLB advances		110,000			3,525		4.27	%		125,688			3,583		3.80	%
Subordinated debt		15,464			1,006		8.67	%		15,464			1,006		8.67	%
Total borrowings		125,464			4,531		4.82	%		141,152			4,589		4.33	%
Total interest-bearing liabilities		639,532			10,472		2.18	%		584,017			11,352		2.59	%
Noninterest-bearing demand accounts		58,795								52,948
Other		9,149								8,367
Total liabilities		707,476								645,332
Stockholders’ equity		99,646								66,175
Total liabilities and stockholders’ equity	$	807,122							$	711,507
Net interest income				$	17,974							$	16,287
Interest rate spread							3.27	%							2.99	%
Net interest margin							3.44	%							3.29	%
Average interest-earning assets to average interest-bearing liabilities		108.85	%							112.96	%

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 $125,000 and $816,000 in the three and nine months ended September 30, 2010 compared to $491,000 and $895,000 in the three and nine months ended September 30, 2009, respectively. 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 $27,000 and $503,000 in the three and nine months ended September 30, 2010, respectively.

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Other Income

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

	Three Months  Ended September 30,				% Change
	2010		2009
	(Dollars in thousands)
OTHER INCOME:
Service charges	$	396	$	443		(10.6	)%
Cash surrender value of life insurance		138		108		27.8
Other		302		239		26.4
Total other income	$	836	$	790		5.8	%

Other income increased $46,000 to $836,000 for the three-month period ended September 30, 2010 from the same period in 2009. Increases in income resulted from increases in the cash surrender value of life insurance and debit card commissions offset by decreases in service charges and fees collected on deposit accounts.

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

	Nine Months  Ended September 30,					% Change
	2010		2009
	(Dollars in thousands)
OTHER INCOME:
Service charges	$	1,278	$	1,291			(1.0	)%
Cash surrender value of life insurance		412		318			29.6
Impairment charge on AFS securities		—		(1,077	)		N/M
Other		840		638			31.7
Total other income		$2,530		$1,170			116.2

N/M – not measurable

Other income increased $1.4 million to $2.5 million for the nine-month period ended September 30, 2010 from the same period in 2009. Increases in income resulted from increases in the cash surrender value of life insurance and debit card commissions offset by decreases in service charges and fees collected on deposit accounts. Additionally, the Company did not record any other-than-temporary impairment charges on securities in the nine months ended September 30, 2010 as compared to $1.1 million for the same period in 2009.

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Other Expense

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

	Three Months  Ended September 30,				% Change
	2010		2009
	(Dollars in thousands)
OTHER EXPENSE:
Salaries and employee benefits	$	2,459	$	2,164		13.6	%
Occupancy and equipment		970		908		6.8
Federal insurance premiums		166		158		5.1
Advertising		86		94		(8.5	)
Professional services		211		164		28.7
Real estate owned expense		1		20		(95.0	)
Other operating expense		426		431		(1.1	)
Total other expense	$	4,319	$	3,939		9.6	%

Other expenses increased $380,000, or 9.6%, to $4.3 million for the three-month period ended September 30, 2010 from the same period in 2009. All expense categories increased a total of $128,000 as a result of costs associated with the opening of the Company’s tenth branch in the fall of 2009. Additionally, excluding new branch expenses, salaries and benefits increased $226,000 resulting from $115,000 in normal salary and benefit increases and a decrease of $111,000 in qualified deferred personnel cost credits associated with fewer closed loans during the third quarter of 2010 compared to the same period in 2009. Excluding new branch expenses, occupancy, FDIC insurance, marketing, professional services, real estate owned and other operating expenses increased $26,000 through normal activity.

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

	Nine Months  Ended September 30,				% Change
	2010		2009
	(Dollars in thousands)
OTHER EXPENSE:
Salaries and employee benefits	$	7,408	$	6,513		13.7	%
Occupancy and equipment		2,929		2,679		9.3
Federal insurance premiums		496		623		(20.4	)
Advertising		313		292		7.2
Professional services		593		499		18.8
Real estate owned expense		4		31		(87.1	)
Other operating expense		1,403		1,249		12.3
Total other expense		$13,146		$11,886		10.6

Other expenses increased $1.3 million, or 10.6%, to $13.1 million for the nine-month period ended September 30, 2010 from the same period in 2009. All expense categories increased a total of $410,000 as a result of costs associated with the opening of the Company’s tenth branch in the fall of 2009. Additionally, excluding new branch expenses, salaries and benefits increased $690,000 resulting from $319,000 in normal salary and benefit increases and a decrease of $371,000 in qualified deferred personnel cost credits associated with fewer closed loans during the nine months of 2010 compared to the same period in 2009. FDIC insurance decrease of $127,000 was the result of a special assessment of $324,000 paid in 2009 not required in 2010, offset by increased premiums of $197,000 in 2010. Excluding new branch expenses, occupancy, marketing, professional services, real estate owned and other operating expenses increased $80,000 through normal activity.

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Income Taxes

Income taxes increased $87,000 to $892,000 for an effective tax rate of 38.2% for the three months ended September 30, 2010, compared to $805,000 for an effective tax rate of 38.0% from the same period in 2009. The increase was the result of higher taxable income.

Income taxes increased $745,000 to $2.5 million for an effective tax rate of 38.6% for the nine months ended September 30, 2010, compared to $1.8 million 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.

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 September 30, 2010, cash and cash equivalents totaled $98.4 million. Securities classified as available-for-sale whose market value exceeds our cost, which provide additional sources of liquidity, totaled $16.2 million at September 30, 2010. In addition, at September 30, 2010, we had the ability to borrow a total of approximately $247.9 million from the Federal Home Loan Bank of New York.

At September 30, 2010, we had $60.0 million in loan commitments outstanding, which included $20.9 million in undisbursed loans, $24.8 million in unused home equity lines of credit and $14.3 million in commercial lines and letters of credit. Certificates of deposit due within one year of September 30, 2010 totaled $140.0 million, or 64.8% 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 September 30, 2010, the Bank exceeded all of its regulatory capital requirements with tangible capital of $84.8 million, or 10.25% of total adjusted assets, which is above the required level of $12.4 million or 1.5%; core capital of $84.8 million, or 10.25% of total adjusted assets which is above the required level of $33.1 million or 4.0%; and risk-based capital of $88.3 million, or 19.67% of risk-weighted assets, which is above the required level of $35.9 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.

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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 June 30, 2010 Percentage Change in Estimated Net Interest Income Over
	12 Months			24 Months
200 basis point increase in rates		(1.67	)%		1.67	%
100 basis point decrease in rates		(11.88	)%		(21.99	)%

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.

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 June 30, 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.

Basis Point (“bp”) Change in Rates	Net Portfolio Value (Dollars in Thousands)								Net Portfolio Value as % of Portfolio Value of Assets
	$ Amount		$ Change			% Change			NPV Ratio			Change
300 bp	$	82,316	$	(37,120	)		(31	)%		10.47	%		(376	) bp
200		100,271		(19,165	)		(16	)		12.41			(182	)
100		114,765		(4,671	)		(4	)		13.87			(36	)
50		117,970		(1,466	)		(1	)		14.13			(10	)
0		119,436								14.23
(50)		117,435		(2,001	)		(2	)		13.95			(28	)
(100)		114,760		(4,675	)		(4	)		13.62			(61	)

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

32

maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable-rate mortgage loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, expected rates of prepayments on loans and early withdrawals from certificates could deviate significantly from those assumed in calculating the table.

OFF-BALANCE SHEET ARRANGEMENTS

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

For the three months and nine months ended September 30, 2010 and September 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 September 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.

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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.

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 July 1, 2010 through July 31, 2010		—		—		—		394
Month #2 August 1, 2010 through August 31, 2010		—		—		—		141,700
Month #3 September 1, 2010 through September 30, 2010		141,700	$	11.53		141,700		—
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. During September of 2010, the remaining 394 shares were purchased and were issued as restricted stock awards under the Company’s 2005 Equity Incentive Plan.

(2) On August 18, 2010, the Company’s Board of Directors approved the formation and funding of a trust that will purchase 141,306 shares of the Company’s common stock in the open market with funds contributed by the Company. All 141,306 shares were purchased during September of 2010. The Company issued 99,000 of the shares as restricted stock awards under the 2010 Equity Incentive Plan.

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Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. [RESERVED]

Item 5. Other Information

None.

Item 6. Exhibits

31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
32.0	Section 1350 Certification of Chief Executive Officer and Chief Financial Office.

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SIGNATURES

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

	OCEAN SHORE HOLDING CO.
	(Registrant)
Date: November 5, 2010	/S/    STEVEN E. BRADY
	Steven E. Brady
	President and Chief Executive Officer
Date: November 5, 2010	/s/    DONALD F. MORGENWECK
	Donald F. Morgenweck
	Chief Financial Officer and Senior Vice President

36

EX-31.1

EXHIBIT 31.1

RULE 13a-14(a)/15d-14(a)

CHIEF EXECUTIVE OFFICER CERTIFICATION

I, Steven E. Brady, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Ocean Shore Holding Co.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 5, 2010	/s/ Steven E. Brady
	Steven E. Brady
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

RULE 13a-14(a)/15d-14(a)

CHIEF FINANCIAL OFFICER CERTIFICATION

I, Donald F. Morgenweck, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Ocean Shore Holding Co.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 5, 2010	/s/ Donald F. Morgenweck
	Donald F. Morgenweck
	Chief Financial Officer and Senior Vice President

EX-32.0

EXHIBIT 32.0

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Ocean Shore Holding Co. (the “Company”) on Form 10-Q for the period ended September 30, 2010 as filed with the Securities and Exchange Commission (the “Report”), the undersigned hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

Date: November 5, 2010	/s/ Steven E. Brady
	Steven E. Brady
	President and Chief Executive Officer
Date: November 5, 2010	/s/ Donald F. Morgenweck
	Donald F. Morgenweck
	Chief Financial Officer and Senior Vice President