Ocean Shore Holding Co. - FORM 10-Q

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EX-32.0 - SECTION 1350 CERTIFICATION OF CHIEF EXECUTIVE OFFICER & CHIEF FINANCIAL OFFICER - Ocean Shore Holding Co.	dex320.htm
EX-31.2 - RULE 13A-14(A)/15D-14(A) CERTIFICATION OF CHIEF FINANCIAL OFFICER. - Ocean Shore Holding Co.	dex312.htm
EX-31.1 - RULE 13A-14(A)/15D-14(A) CERTIFICATION OF CHIEF EXECUTIVE OFFICER. - Ocean Shore Holding Co.	dex311.htm

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 March 31, 2011

¨	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)

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 May 1, 2011, the registrant had 7,296,780 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 March 31, 2011 and December 31, 2010		1

	Unaudited Condensed Consolidated Statements of Income for the three months ended March 31, 2011 and 2010		2

	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2011 and 2010		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		31

Item 4.	Controls and Procedures		31

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings		31

Item 1A.	Risk Factors		31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		32

Item 3.	Defaults upon Senior Securities		32

Item 4.	[RESERVED]		32

Item 5.	Other Information		32

Item 6.	Exhibits		32

SIGNATURES			33

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


	March 31, 2011			December 31, 2010
ASSETS
Cash and amounts due from depository institutions	$	7,019,202		$	5,330,211
Interest-earning bank balances		106,994,888			105,534,943

Cash and cash equivalents		114,014,090			110,865,154
Investment securities held to maturity (estimated fair value—$2,479,640 at March 31, 2011; $2,638,725 at December 31, 2010)		2,313,826			2,467,418
Investment securities available for sale (amortized cost—$40,391,478 at March 31, 2011; $22,230,208 at December 31, 2010)		39,817,338			21,253,675
Loans—net of allowance for loan losses of $4,062,876 at March 31, 2011 and $3,988,076 at December 31, 2010		660,385,245			660,340,007
Accrued interest receivable:
Loans		2,362,861			2,350,978
Investment securities		95,126			151,401
Federal Home Loan Bank stock—at cost		6,271,600			6,271,600
Office properties and equipment—net		12,856,187			12,905,526
Prepaid expenses and other assets		4,685,927			4,665,491
Real estate owned		97,500			97,500
Cash surrender value of life insurance		15,019,214			14,890,746
Deferred tax asset		3,446,382			3,597,612

TOTAL ASSETS	$	861,365,296		$	839,857,108

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Non-interest bearing deposits	$	68,237,026		$	62,070,772
Interest bearing deposits		555,447,988			541,263,654
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		3,728,603			3,494,418
Accrued interest payable		797,420			1,146,224
Other liabilities		5,939,910			5,864,523

Total liabilities		759,614,947			739,303,591

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, 7,308,118 shares issued; 7,296,780 shares outstanding at March 31, 2011 and December 31, 2010		73,076			73,076
Additional paid-in capital		64,109,749			64,013,608
Retained earnings - partially restricted		42,503,609			41,736,830
Treasury stock – at cost: 10,810 shares at March 31, 2011 and December 31, 2010		(115,208	)		(115,208	)
Common stock acquired by employee benefits plans		(3,921,978	)		(4,007,478	)
Deferred compensation plans trust		(518,894	)		(516,142	)
Accumulated other comprehensive loss		(380,005	)		(631,169	)

Total stockholders’ equity		101,750,349			100,553,517

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	861,365,296		$	839,857,108

See notes to unaudited condensed consolidated financial statements.

OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME


	Three Months Ended March 31,
	2011		2010
INTEREST AND DIVIDEND INCOME:
Taxable interest and fees on loans	$	8,554,572	$	9,030,606
Taxable interest on mortgage-backed securities		164,636		233,992
Non-taxable interest on municipal securities		10,646		17,340
Taxable interest and dividends on other investment securities		307,874		222,750

Total interest and dividend income		9,037,728		9,504,688

INTEREST EXPENSE:
Deposits		1,565,988		2,026,334
Advances from Federal Home Loan Bank, securities sold under agreements to repurchase and other borrowed money		1,497,431		1,497,420

Total interest expense		3,063,419		3,523,754

NET INTEREST INCOME		5,974,309		5,980,934
PROVISION FOR LOAN LOSSES		74,800		151,661

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		5,899,509		5,829,273

OTHER INCOME:
Service charges		359,795		435,953
Cash surrender value of life insurance		128,469		134,784
Gain on call of AFS security		10,014		5
Other		303,811		236,526

Total other income		802,089		807,268

OTHER EXPENSE:
Salaries and employee benefits		2,612,693		2,496,428
Occupancy and equipment		984,192		977,250
Federal insurance premiums		187,080		167,912
Advertising		106,030		115,975
Professional services		294,447		177,655
Real estate owned activity		1,250		948
Charitable contributions		36,000		34,500
Other operating expenses		434,174		482,087

Total other expenses		4,655,866		4,452,755

INCOME BEFORE INCOME TAXES		2,045,732		2,183,786
INCOME TAX EXPENSE		841,146		847,462

NET INCOME	$	1,204,586	$	1,336,324

Earnings per share basic:	$	0.18	$	0.20
Earnings per share diluted:	$	0.18	$	0.20

See notes to unaudited condensed consolidated financial statements.

OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended March 31,
	2011			2010
OPERATING ACTIVITIES:
Net income	$	1,204,586		$	1,336,324
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		222,461			281,754
Provision for loan losses		74,800			151,661
Stock based compensation expense		181,641			200,994
Gain on call of AFS securities		(10,014	)		(5	)
Cash surrender value of life insurance		(128,469	)		(134,784	)
Changes in assets and liabilities which provided (used) cash:
Accrued interest receivable		44,392			6,580
Prepaid expenses and other assets		(20,434	)		175,568
Accrued interest payable		(348,804	)		(347,729	)
Other liabilities		75,388			342,861

Net cash provided by operating activities		1,295,547			2,013,224

INVESTING ACTIVITIES:
Principal collected on:
Mortgage-backed securities available for sale		1,125,283			1,213,468
Mortgage-backed securities held to maturity		153,558			113,695
Loans originated, net of repayments		(111,081	)		(2,826,687	)
Purchases of:
Investment securities available for sale		(20,005,000	)		—
Office properties and equipment		(177,947	)		(112,333	)
Life insurance contracts		—			(1,500,000	)
Proceeds from maturities/ calls of:
Mortgage-backed securities available for sale		124,361			—
Investment securities available for sale		600,000			771,533

Net cash (used in) investing activities		(18,290,826	)		(2,340,324	)

FINANCING ACTIVITIES:
Increase in deposits		20,350,589			9,566,385
Dividends paid		(437,807	)		(438,455	)
Purchase of shares by deferred compensation plans trust		(2,752	)		(12,415	)
Costs associated with issuance of common stock		—			(15,998	)
Increase in advances from borrowers for taxes and insurance		234,185			272,429

Net cash provided by financing activities		20,144,215			9,371,946

NET INCREASE IN CASH AND CASH EQUIVALENTS		3,148,936			9,044,846
CASH AND CASH EQUIVALENTS—Beginning of period		110,865,154			33,027,710

CASH AND CASH EQUIVALENTS—End of period	$	114,014,090		$	42,072,556

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION—Cash paid during the period for:
Interest	$	3,412,222		$	3,871,484

Income Taxes	$	609,574		$	600,000

See notes to unaudited condensed consolidated financial statements.

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, 2010. The results for the three months ended March 31, 2011 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2011 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 April 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-02, A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring. This new guidance requires a creditor performing an evaluation of whether a restructuring constitutes a troubled debt restructuring, to separately conclude that both (i) the restructuring constitutes a concession and (ii) the debtor is experiencing financial difficulties. This standard clarifies the guidance on a creditor’s evaluation of whether it has granted a concession as well as the guidance on a creditor’s evaluation of whether a debtor is experiencing financial difficulties. The updated accounting guidance also requires entities to disclose additional quantitative activity regarding troubled debt restructurings of finance receivables that occurred during the period, as well as additional information regarding troubled debt restructurings that occurred within the previous twelve months and for which there was a payment default during the current period. The new accounting guidance is effective for the first interim or annual period beginning on or after June 15, 2011 and should be applied retrospectively to the beginning of the annual period of adoption. The Company does not anticipate the adoption to have a material impact on the consolidated financial statements.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

2. INVESTMENT SECURITIES

Investment securities are summarized as follows:


	March 31, 2011
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
Held to Maturity
US treasury and government sponsored entity mortgage-backed securities	$	2,313,826	$	165,814	$	—		$	2,479,640

Totals	$	2,313,826	$	165,814	$	—		$	2,479,640

Available for Sale
Debt securities:
U.S. Government and Federal Agencies	$	20,005,000	$	2,456	$	(31,092	)	$	19,976,364
Municipal securities		830,000		5,445		—			835,445
Corporate		8,199,328		—		(1,312,937	)		6,886,391
Equity securities		2,596		14,543		(992	)		16,147
US treasury and government sponsored entity mortgage-backed securities		11,354,554		749,782		(1,345	)		12,102,991

Totals	$	40,391,478	$	772,226	$	(1,346,366	)	$	39,817,338


	December 31, 2010
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
Held to Maturity
US treasury and government sponsored entity mortgage-backed securities	$	2,467,418	$	171,307	$	—		$	2,638,725

Totals	$	2,467,418	$	171,307	$	—		$	2,638,725

Available for Sale
Debt securities:
Municipal	$	1,419,971	$	11,410	$	—		$	1,431,381
Corporate		8,198,927		—		(1,795,691	)		6,403,326
Equity securities		2,596		13,562		(1,777	)		14,381
US treasury and government sponsored entity mortgage-backed securities		12,608,714		795,963		—			13,404,677

Totals	$	22,230,208	$	820,935	$	(1,797,468	)	$	21,253,675

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 March 31, 2011 and December 31, 2010:


	March 31, 2011
	Less Than 12 Months					12 Months or Longer					Total
	Estimated Fair Value		Gross Unrealized Loss			Estimated Fair Value		Gross Unrealized Loss			Estimated Fair Value		Gross Unrealized Loss
Debt securities -
U.S. Federal Agencies	$	13,968,908	$	(31,092	)	$	—	$	—		$	13,968,908	$	(31,092	)
Corporate		985,000		(45,017	)		5,401,192		(1,267,920	)		6,386,192		(1,312,937	)
Equity securities		1,604		(992	)		—		—			1,604		(992	)
US treasury and government sponsored entity mortgage-backed securities		287,068		(1,345	)		—		—			287,068		(1,345	)

Totals	$	15,242,580	$	(78,446	)	$	5,401,192	$	(1,267,920	)	$	20,643,772	$	(1,346,366	)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)


	December 31, 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	$	978,030	$	(52,429	)	$	5,425,006	$	(1,743,262	)	$	6,403,036	$	(1,795,691	)
Equity securities		819		(1,777	)		—		—			819		(1,777	)

Totals	$	978,849	$	(54,206	)	$	5,425,006	$	(1,743,262	)	$	6,403,855	$	(1,797,468	)

As of March 31, 2011, management has concluded that the unrealized losses on its investment securities, which totaled nine 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.


	2011		2010
Credit component of OTTI as of January 1	$	3,000,000	$	3,000,000
Additions for credit related OTTI charges on previously unimpaired securities		—		—
Reductions for securities sold during the period		—		—
Reductions for increases in cash flows expected to be collected and recognized over the remaining life of the security		—		—
Additional increases as a result of impairment charges recognized on investments for which an OTTI was previously recognized		—		—

Credit component of OTTI as of March 31,	$	3,000,000	$	3,000,000

These securities have Fitch credit ratings below investment grade at March 31, 2011. 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 March 31, 2011 and 2010:


	March 31, 2011	March 31, 2010
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%	37.0% to 33.2%
Remaining life	30 years	31 years

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 CDOs backed by bank trust preferred capital securities.

At March 31, 2011, one debt securities and three single issue trust preferred securities had been in a continuous unrealized loss position for 12 months or longer. Those securities had aggregate depreciation of 19% 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 March 31, 2011, 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, US Federal Agencies 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”). At March 31, 2011, the Company had no federal agencies and mortgage-backed security investments that had been in a continuous unrealized loss position for 12 months or longer.

The amortized cost and estimated fair value of debt securities available for sale at March 31, 2011 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.


	March 31, 2011
	Available for Sale Securities
	Amortized Cost		Estimated Fair Value
Due within 1 year	$	—	$	—
Due after 1 year through 5 years		1,000,000		967,600
Due after 5 years through 10 years		20,005,000		19,976,364
Due after 10 years		8,029,328		6,754,236

Total	$	29,034,328	$	27,698,200

Equity securities had a cost of $2,596 and a fair value of $16,147 as of March 31, 2011. Mortgage-backed securities had a cost of $13,668,380 and a fair value of $14,582,631 as of March 31, 2011.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

3. LOANS RECEIVABLE — NET

Loans receivable consist of the following:


	March 31, 2011			December 31, 2010
Real estate - mortgage:
One-to-four family residential	$	515,819,567		$	514,853,007
Commercial and multi-family		54,226,577			55,237,743

Total real estate-mortgage		570,046,144			570,090,750

Real estate - construction:
Residential		6,975,096			7,785,191
Commercial		3,418,306			3,723,800

Total real estate - construction		10,393,402			11,508,991

Commercial		24,831,445			21,963,288

Consumer:
Home equity		55,555,124			57,119,018
Other consumer loans		742,582			775,569

Total consumer loans		56,297,706			57,894,587

Total loans		661,568,697			661,457,616
Net deferred loan cost		2,879,424			2,870,467
Allowance for loan losses		(4,062,876	)		(3,988,076	)

Net total loans	$	660,385,245		$	660,340,007

Changes in the allowance for loan losses are as follows:


	Three Months Ended March 31,
	2011		2010
Balance, beginning of period	$	3,988,076	$	3,476,040
Provision for loan loss		74,800		151,661
Charge-offs		—		(26,206	)
Recoveries		—		—

Balance, end of period	$	4,062,876	$	3,601,495

The Company established a provision for loan losses of $74,800 for the quarter ended March 31, 2011 as compared to $151,661 for the comparable period in 2010. 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 March 31, 2011 and December 31, 2010, 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.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Non-performing loans at March 31, 2011 and December 31, 2010 consisted of non-accrual loans that amounted to $5,812,285 and $5,222,374 respectively. The reserve for delinquent interest on loans totaled $315,881 and $246,558, at March 31, 2011 and December 31, 2010, respectively.

Non-accrual loans segregated by class of loans are as follows:


	March 31, 2011		December 31, 2010
Real estate
One-to-four family residential	$	4,842,880	$	4,282,002
Commercial and multi-family		726,150		729,289
Real estate construction		—		—
Commercial		168,500		134,238
Consumer		74,755		76,845

Total	$	5,812,285	$	5,222,374

An age analysis of past due loans, segregated by class of loans, as of March 31, 2011 and December 31, 2010 is as follows:


	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable
March 31, 2011
Real Estate
1-4 Family Residential	$	1,311,593	$	198,248	$	4,842,880	$	6,352,721	$	509,466,846	$	515,819,567
Commercial and Multi-Family		—		—		726,151		726,151		53,500,426		54,226,577
Construction		—		—		—		—		10,393,402		10,393,402
Commercial		45,497		205,710		149,363		400,570		24,430,875		24,831,445
Consumer		238,735		—		74,755		313,490		55,984,216		56,297,706

Total	$	1,595,825	$	403,958	$	5,793,149	$	7,792,932	$	653,775,765	$	661,568,697

December 31, 2010
Real Estate
1-4 Family Residential	$	1,584,054	$	—	$	4,282,002	$	5,866,056	$	508,986,951	$	514,853,007
Commercial and Multi-Family		—		—		729,289		729,289		54,508,454		55,237,743
Construction		—		—		—		—		11,508,991		11,508,991
Commercial		—		—		134,238		134,238		21,829,050		21,963,288
Consumer		81,600		—		76,845		158,445		57,736,142		57,894,587

Total	$	1,665,654	$	—	$	5,222,374	$	6,888,028	$	654,569,588	$	661,457,616

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Impaired loans are set forth the in the following table. No interest income was recognized on impaired loans subsequent to their classification as impaired.


	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
March 31, 2011
With no related allowance recorded
Real Estate
1-4 Family Residential	$	2,990,719	$	2,990,719	$	—	$	747,680
Commercial and Multi-Family		726,150		726,150		—		242,050
Commercial		98,885		98,885		—		98,885
Consumer		25,828		25,828		—		25,828
With an allowance recorded
Real Estate
1-4 Family Residential		1,852,161		1,852,161		437,149		264,594
Commercial and Multi-Family		—		—		—		—
Commercial		69,615		69,615		72,375		23,205
Consumer		48,927		48,927		49,215		48,927
Total
Real Estate
1-4 Family Residential	$	4,842,880	$	4,842,880	$	437,149	$	1,012,274
Commercial and Multi-Family		726,150		726,150		—		242,050
Commercial		168,500		168,500		72,375		122,090
Consumer		74,755		74,755		49,215		74,755

December 31, 2010
With no related allowance recorded
Real Estate
1-4 Family Residential	$	2,997,524	$	2,997,524	$	—	$	428,218
Commercial and Multi-Family		729,289		729,289		—		243,096
Commercial		98,885		98,885		—		98,885
Consumer		27,919		27,919		—		27,919
With an allowance recorded
Real Estate
1-4 Family Residential		1,284,478		1,284,478		359,301		256,895
Commercial and Multi-Family		—		—		—		—
Commercial		35,353		35,353		73,285		35,353
Consumer		48,926		48,926		49,161		48,926
Total
Real Estate
1-4 Family Residential	$	4,282,002	$	4,282,002	$	359,301	$	685,113
Commercial and Multi-Family		729,289		729,289		—		243,096
Commercial		134,238		134,238		73,285		134,238
Consumer		76,845		76,845		49,161		76,845

Federal regulations require us to review and classify our assets on a regular basis. In addition, the Office of Thrift Supervision has the authority to identify problem assets and, if appropriate, require them to be classified. There are three classifications for problem assets: substandard, doubtful and loss. “Substandard assets” must have one or more defined weaknesses and are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. “Doubtful assets” have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. An asset classified as “loss” is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. The regulations also provide for a “special mention” category, described as assets which do not currently expose us to a sufficient degree of risk to warrant classification but do possess credit deficiencies or potential weaknesses deserving our close attention. When we classify an asset as substandard or doubtful we establish a specific allowance for loan losses. If we classify an asset as loss, we charge off an amount equal to 100% of the portion of the asset classified loss.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents classified loans by class of loans as of March 31, 2011 and December 31, 2010.


	Real Estate
	1-4 Family Residential				Commercial and Multi-Family				Construction				Commercial				Consumer
	3/31/2011		12/31/2010		3/31/2011		12/31/2010		3/31/2011		12/31/2010		3/31/2011		12/31/2010		3/31/2011		12/31/2010
Grade:
Special Mention	$	1,420,112	$	927,945	$	—	$	—	$	—	$	—	$	—	$	—	$	202,168	$	197,031
Substandard		8,539,371		8,291,507		1,497,462		1,310,396		—		—		285,459		476,895		321,030		302,046
Doubtful and Loss		288,977		288,977		—		—		—		—		69,614		70,686		48,926		48,926

Total	$	10,248,460	$	9,508,429	$	1,497,462	$	1,310,396	$	—	$	—	$	355,073	$	547,581	$	572,124	$	548,003

The following table presents the credit risk profile of loans based on payment activity as of March 31, 2011 and December 31, 2010.


	Real Estate
	1-4 Family Residential				Commercial and Multi-Family				Construction				Commercial				Consumer
	3/31/2011		12/31/2010		3/31/2011		12/31/2010		3/31/2011		12/31/2010		3/31/2011		12/31/2010		3/31/2011		12/31/2010
Performing	$	510,976,687	$	510,571,005	$	53,500,427	$	54,508,454	$	10,393,402	$	11,508,991	$	24,662,946	$	21,829,050	$	56,222,951	$	57,817,742
Non-Performing		4,842,880		4,282,002		726,150		729,289		—		—		168,500		134,238		74,755		76,845

Total	$	515,819,567	$	514,853,007	$	54,226,577	$	55,237,743	$	10,393,402	$	11,508,991	$	24,831,445	$	21,963,288	$	56,297,706	$	57,894,587

The following table details activity in the allowance for possible loan losses by portfolio segment for the periods ended March 31, 2011 and December 31, 2010. Allocation of a portion of the allowance to one category does not preclude its availability to absorb losses in other categories.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)


	Real Estate
	1-4 Family Residential			Commercial and Multi-Family			Construction			Commercial			Consumer			Total
March 31, 2011
Allowance for credit losses:
Beginning Balance	$	2,731,325		$	281,762		$	32,494		$	268,411		$	674,084		$	3,988,076
Charge-offs		—			—			—			—			—			—
Recoveries		—			—			—			—			—			—
Provision for loan losses		73,622			(2,552	)		(3,031	)		22,318			(15,557	)		74,800

Ending balance	$	2,804,947		$	279,210		$	29,463		$	290,729		$	658,527		$	4,062,876

Ending balance: individually evaluated for impairment	$	437,149		$	—		$	—		$	72,375		$	49,215		$	558,739

Ending balance: collectively evaluated for impairment	$	2,367,798		$	279,210		$	29,463		$	218,354		$	609,312		$	3,504,137

Loan Receivables:
Ending balance	$	515,819,567		$	54,226,577		$	10,393,402		$	24,831,445		$	56,297,706		$	661,568,697

Ending balance: individually evaluated for impairment	$	4,842,880		$	726,150		$	—		$	168,500		$	74,755		$	5,812,285

Ending balance: collectively evaluated for impairment	$	510,976,687		$	53,500,427		$	10,393,402		$	24,662,945		$	56,222,951		$	655,756,412

December 31, 2010
Allowance for credit losses:
Beginning Balance	$	2,220,529		$	524,107		$	49,680		$	275,826		$	405,898		$	3,476,040
Charge-offs		(16,316	)		(35,347	)		—			(10,860	)		(317,232	)		(379,755	)
Recoveries		—			—			—			—			—			—
Provision for loan losses		527,112			(206,998	)		(17,186	)		3,445			585,418			891,791

Ending balance	$	2,731,325		$	281,762		$	32,494		$	268,411		$	674,084		$	3,988,076

Ending balance: individually evaluated for impairment	$	359,300		$	—		$	—		$	73,285		$	49,510		$	482,095

Ending balance: collectively evaluated for impairment	$	2,372,025		$	281,762		$	32,494		$	195,126		$	624,574		$	3,505,981

Loan Receivables:
Ending balance	$	514,853,007		$	55,237,743		$	11,508,991		$	21,963,288		$	57,894,587		$	661,457,616

Ending balance: individually evaluated for impairment	$	4,282,002		$	729,289		$	—		$	134,238		$	76,845		$	5,222,374

Ending balance: collectively evaluated for impairment	$	510,571,005		$	54,508,454		$	11,508,991		$	21,829,050		$	57,817,742		$	656,235,242

4. DEPOSITS

Deposits consist of the following major classifications:


	March 31, 2011					December 31, 2010
	Amount		Weighted Average Interest Rate			Amount		Weighted Average Interest Rate
NOW and other demand deposit accounts	$	309,826,358		0.53	%	$	289,903,528		0.66	%
Passbook savings and club accounts		109,572,604		0.80	%		102,467,025		1.07	%

Subtotal		419,398,962					392,370,553

Certificates with original maturities:
Within one year		83,581,673		0.98	%		93,134,491		1.11	%
One to three years		96,514,709		2.06	%		94,347,156		2.17	%
Three years and beyond		24,189,670		3.39	%		23,482,226		3.48	%

Total certificates		204,286,052					210,963,873

Total	$	623,685,014				$	603,334,426

The aggregate amount of certificate accounts in denominations of $100,000 or more at March 31, 2011 and December 31, 2010 amounted to $80,553,767 and $83,439,728, respectively.

Municipal demand deposit accounts in denominations of $100,000 or more at March 31, 2011 and December 31, 2010 amounted to $124,658,615 and $108,593,238, respectively.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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.

The calculated basic and dilutive Earnings Per Share (“ EPS”) are as follows:


	Three Months Ended March 31,
	2011		2010
Numerator – Net Income	$	1,204,586	$	1,336,324
Denominators:
Basic average shares outstanding		6,730,331		6,818,485
Net effect of dilutive common stock equivalents		71,227		18,103

Dilutive average shares outstanding		6,801,558		6,836,588
Earnings per share:
Basic	$	0.18	$	0.20
Dilutive	$	0.18	$	0.20

At March 31, 2011 and 2010, there were 601,104 and 373,592 outstanding options that were anti-dilutive, 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.

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 March 31, 2011 and changes during the three months ended March 31, 2011 are presented below:


	Three Months Ended March 31, 2011
	Number of shares		Weighted average exercise price
Outstanding at the beginning of the period		587,504	$	11.92
Granted		13,600	$	12.06
Exercised		—
Forfeited		—

Outstanding at the end of the period		601,104	$	11.92

Exercisable at the end of the period		329,144	$	13.16

The following table summarizes all stock options outstanding under the Equity Plans as of March 31, 2011:


	Options Outstanding
Date Issued	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
August 10, 2005		294,127	$	13.19		4.4 years
November 21, 2006		19,784	$	14.78		5.6 years
November 20, 2007		31,983	$	11.32		6.6 years
August 18, 2010		241,610	$	10.21		9.4 years
March 15, 2011		13,600	$	12.06		9.9 years

Summary of Non-vested Stock Award Activity:


	Three Months Ended March 31, 2011
	Number of shares		Weighted average grant date fair value
Outstanding at January 1, 2011		99,000	$	10.21
Issued		4,950	$	12.06
Forfeited		4,950	$	10.21
Vested		—		—

Outstanding at March 31, 2011		99,000	$	10.30

As of March 31, 2011, there was $890,251 of total unrecognized compensation cost related to non-vested stock awards. The cost is expected to be recognized over a weighted average period of 4.4 years.

7. INCOME TAXES

Income taxes decreased $6,000 to $841,000 for an effective tax rate of 41.1% for the three months ended March 31, 2011 compared to $847,000 for an effective tax rate of 38.8% for the same period in 2010.

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.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Items considered in this evaluation include historical financial performance, expectation of future earnings, the ability to carry back losses to recoup taxes previously paid, length of statutory carry forward periods, experience with operating loss and tax credit carry forwards not expiring unused, tax planning strategies and timing of reversals of temporary differences. Significant judgment is required in assessing future 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 March 31, 2011, no valuation allowance was recorded for any 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 March 31, 2011, the tax years ended December 31, 2007 through 2010 were subject to examination by the Internal Revenue Service (“IRS”), while the tax years ended December 31, 2006 through 2010 were subject to state examination. As of March 31, 2011, 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 first quarter of 2011, the Board of Directors of the Company declared a cash dividend of $0.06 per share, which was paid on February 25, 2011 to stockholders of record as of the close of business on February 4, 2011.

9. FAIR VALUE MEASUREMENT

The Company accounts for fair value measurement in accordance with FASB ASC 820, Fair Value Measurements and Disclosures. FASB ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. FASB ASC 820 does not require any new fair value measurements. The definition of fair value retains the exchange price notion in earlier definitions of fair value. FASB ASC 820 clarifies that the exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability in the market in which the reporting entity would transact for the asset or liability. The definition focuses on the price that would be received to sell the asset or paid to transfer the liability (an exit price), not the price that would be paid to acquire the asset or received to assume the liability (an entry price). FASB ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. FASB ASC 820 also clarifies the application of fair value measurement in a market that is not active.

FASB ASC 820 describes three levels of inputs that may be used to measure fair value:

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

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

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

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In addition, the Company is to disclose the fair value measurements for financial assets on both a recurring and non-recurring basis.

Those assets at March 31, 2011 which will continue to be measured at fair value on a recurring basis are as follows:


	Category Used for Fair Value Measurement
Assets:	Level 1		Level 2		Level 3
Securities available for sale:
U.S. Government agencies and mortgage-backed securities	$	—	$	32,079,355	$	—
State and municipal obligations		—		835,445		—
Corporate securities		—		6,886,191		200
Equity securities		16,147		—		—

Totals	$	16,147	$	39,800,991	$	200

Those assets at December 31, 2010 which will continue to be measured at fair value on a recurring basis are as follows:


	Category Used for Fair Value Measurement
Assets:	Level 1		Level 2		Level 3
Securities available for sale:
U.S. Government agencies and mortgage-backed securities	$	—	$	13,404,677	$	—
State and municipal obligations		—		1,431,381		—
Corporate securities		—		6,403,036		200
Equity securities		14,381		—		—

Totals	$	14,381	$	21,239,094	$	200

In 2008, as a result of general market conditions and the illiquidity in the market for both single issuer and pooled trust preferred securities, management deemed it necessary to shift its market value measurement of each of the trust preferred securities from quoted prices for similar assets (Level 2) to an internally developed discounted cash flow model (Level 3). In arriving at the discount rate used in the model for each issue, the Company determined 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.

The following provides details of the fair value measurement activity for Level 3 for the quarters ended March 31, 2011 and March 31, 2010:

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Fair Value Measurement Activity – Level 3 (only)


	Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
	Trust Preferred Securities		Total
Balance, January 1, 2011	$	200	$	200
Total gains (losses), realized/unrealized:
Included in earnings ⁽¹⁾		—		—
Included in accumulated other comprehensive loss		—		—
Purchases, maturities, prepayments and call, net		—		—
Transfers into Level 3 ⁽²⁾		—		—

Balance, March 31, 2011	$	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.

Fair Value Measurement Activity – Level 3 (only)


	Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
	Trust Preferred Securities		Total
Balance, January 1, 2010	$	200	$	200
Total gains (losses), realized/unrealized:
Included in earnings ⁽¹⁾		—		—
Included in accumulated other comprehensive loss		—		—
Purchases, maturities, prepayments and call, net		—		—
Transfers into Level 3 ⁽²⁾		—		—

Balance, March 31, 2010	$	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.

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. Fair value for these 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.

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). The Company measures impaired loans, FHLB stock and loans or bank properties transferred into other real estate owned at fair value on a non-recurring basis.

Impaired Loans

The Company considers a loan 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, which is based on appraisals. In some cases, adjustments are made to the appraised values for various factors, including age of the appraisal, age of the comparables included in the appraisal, and known changes in the market and in the collateral. These adjustments are based upon unobservable inputs, and therefore, the fair value measurement has been categorized as a Level 3 measurement. At March 31, 2011, total loans

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

remeasured at fair value were $5,253,546. Such loans were carried at the value of $5,812,285 immediately prior to remeasurement, resulting in the recognition of impairment through earnings for the life of the loans in the amount of $558,739. Specific reserves were calculated for impaired loans with the value prior to remeasurement of $1,970,702 and net carrying amount of $1,411,963. The collateral underlying these loans had a fair value of $1,975,000, while the claims against collateral from other third parties, shortfall in collateral to appraised amount and liquidation costs amounted to $563,038, resulting in specific reserves in the allowance for loan losses of $558,739. No specific reserve was calculated for impaired loans with an aggregate carrying amount of $4,432,364 at March 31, 2011, as the underlying collateral value was not below the carrying amount.

At December 31, 2010, specific reserves were calculated for impaired loans with a carrying amount of $1,404,000. The collateral underlying these loans had a fair value of $922,000, resulting in specific reserves in the allowance for loan losses of $482,000. No specific reserve was calculated for impaired loans with an aggregate carrying amount of $3,854,000 at December 31, 2010, 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 (the “FHLB”). 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 March 31, 2011 and December 31, 2010, 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. In some cases, adjustments are made to the appraised values for various factors, including age of the appraisal, age of the comparables included in the appraisal, and known changes in the market and in the collateral. These adjustments are based upon unobservable inputs, and therefore, the fair value measurement has been categorized as a Level 3 measurement. At March 31, 2011, the Company did not have any remeasurement to fair value to its foreclosed real estate and repossessed assets since the original recording. At March 31, 2011 and December 31, 2010, the Company deemed one loan uncollectible and took possession of the underlying collateral during the first quarter of 2009. The collateral underlying the loan had a fair value of $97,500, with an aggregate carrying value of $198,000, triggering a net charge-off of approximately $101,000. There have been no changes to the fair value of this property as described above.

Fair Value of Financial Instruments

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

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)


	March 31, 2011				December 31, 2010
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets:
Cash and cash equivalents	$	114,014,090	$	114,014,090	$	110,865,154	$	110,865,154
Investment securities:
Held to maturity		2,313,826		2,479,640		2,467,418		2,683,725
Available for sale		39,817,338		39,817,338		21,253,675		21,253,675
Loans receivable, net		660,385,245		671,743,512		660,340,007		672,130,581
Federal Home Loan Bank stock		6,271,600		6,271,600		6,271,600		6,271,600
Liabilities:
NOW and other demand deposit accounts		309,826,359		320,218,359		289,903,528		297,533,528
Passbook savings and club accounts		109,572,604		117,285,604		102,467,025		107,987,025
Certificates		204,286,052		204,559,267		210,963,873		210,964,376
Advances from Federal Home Loan Bank		110,000,000		120,170,853		110,000,000		121,188,927
Junior subordinated debenture		15,464,000		10,051,600		15,464,000		9,278,400

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

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

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

FHLB Stock—Although FHLB stock is an equity interest in an FHLB, it is carried at cost because it does not have a readily determinable fair value as its ownership is restricted and it lacks a market. While certain conditions are noted that required management to evaluate the stock for impairment, it is currently probable that the Company will realize its cost basis. Management concluded that no impairment existed as of March 31, 2011 and December 31, 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.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 March 31, 2011 and December 31, 2010. 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 March 31, 2011 and December 31, 2010, 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”):


	Residential Property		Total
Balance, January 1, 2011	$	97,500	$	97,500
Transfers into Real Estate Owned		—		—
Sales of Real Estate Owned		—		—

Balance, March 31, 2011	$	97,500	$	97,500

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT

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

Management’s ability to predict results or the effect of future plans or strategies is inherently uncertain. These factors include, but are not limited to, general economic conditions, changes in the interest rate environment, legislative or regulatory changes that may adversely affect our business, changes in accounting policies and practices, changes in competition and demand for financial services, adverse changes in the securities markets and changes in the quality or composition of the Company’s loan or investment portfolios. Additional factors that may affect our results are discussed in our Annual Report on Form 10-K for the year ended December 31, 2010 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”) is the holding company for Ocean City Home Bank (the “Bank”). 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.

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.

ACQUISITION OF CBHC FINANCIALCORP, INC.

On February 15, 2011, the Company entered into an Agreement and Plan of Merger with CBHC Financialcorp, Inc., pursuant to which the Company will acquire CBHC Financialcorp in a transaction valued at approximately $11.9 million. CBHC Financialcorp is the holding company for Select Bank, a $135 million bank located in Egg Harbor City, New Jersey. Concurrent with the merger, Select Bank will merge with and into Ocean City Home Bank. The transaction is subject to customary closing conditions, including the receipt of regulatory approvals. The transaction has been approved by the shareholders of CBHC.

COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2011 AND DECEMBER 31, 2010

Total assets of the Company increased $21.5 million, or 2.6%, to $861.4 million at March 31, 2011 from $839.9 million at December 31, 2010. Loans receivable, net, were essentially unchanged at $660.4 million, investment and mortgage-backed securities increased $18.4 million and cash and cash equivalents increased by $3.1 million. Asset growth was funded by an increase in deposits of $20.4 million.

Investments

Investments increased $18.4 million to $42.1 million at March 31, 2011 from $23.7 million at December 31, 2010. The increase was the result of purchases of short term agency investments of $20.0 million offset by normal repayment and payoffs of $1.6 million.

Loans

Loans receivable, net, grew $100 thousand to $660.4 million at March 31, 2011 from $660.3 million at December 31, 2010. Loan originations totaled $34.7 million for the three months ended March 31, 2011 compared to $24.7 million originated in the three months ended March 31, 2010. Real estate mortgage loan originations totaled $23.2 million, real estate construction loan originations totaled $3.3 million, consumer loan originations totaled $2.9 million and commercial loan originations totaled $5.3 million for the first quarter of 2011. Origination activity was offset by $34.6 million of normal loan payments and payoffs.

The following table summarizes changes in the loan portfolio in the three months ended March 31, 2011.


	March 31, 2011			December 31, 2010			$ change			% change
	(Dollars in thousands)
Real estate – mortgage:
One-to-four-family residential	$	515,820		$	514,853		$	967			0.2	%
Commercial and multi-family		54,227			55,238			(1,011	)		(1.8	)

Total real estate – mortgage		570,047			570,091			(44	)		(0.0	)
Real estate – construction:
Residential		6,975			7,785			(810	)		(10.4	)
Commercial		3,418			3,724			(306	)		(8.2	)

Total real estate – construction		10,393			11,509			(1,116	)		(9.7	)
Commercial		24,831			21,963			2,868			13.1
Consumer
Home equity		55,555			57,119			(1,564	)		(2.7	)
Other consumer loans		743			776			(33	)		(4.3	)

Total consumer loans		56,298			57,895			(1,597	)		(2.7	)
Total loans		661,569			661,458			111			0.0

Net deferred loan cost		2,879			2,870			9			0.3
Allowance for loan losses		(4,063	)		(3,988	)		(75	)		(1.9	)

Net total loans	$	660,385		$	660,340		$	45			0.0	%

Non-Performing Assets

Non-performing assets totaled $5.9 million or 0.88% of total assets at March 31, 2011 compared to $5.3 million or 0.79% of total assets at December 31, 2010 and $2.6 million or 0.37% of total assets at March 31, 2010. The increase from December 31, 2010 was the result of two additional non-performing loans during the three months ended March 31, 2011. Non-performing assets consisted of eleven residential mortgages totaling $4.8 million, three commercial mortgages totaling $726 thousand, four commercial loans totaling $168 thousand, two consumer equity loans totaling $75 thousand and one real estate owned property totaling $98 thousand. Specific reserves were recorded for eleven of the loans included above in the amount of $559 thousand at March 31, 2011 as compared to eleven loans with specific reserves of $482 thousand at December 31, 2010. Real estate owned remained unchanged at $98 thousand at March 31, 2011. The Company recorded no charge-off activity for the quarter-ended March 31, 2011 as compared to $26 thousand for the same period in 2010.

The allowance for loan losses increased $75 thousand to $4.1 million, or 0.62% of total net loans, from $4.0 million at December 31, 2010, or 0.60% 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 March 2011 from December 31, 2010 were slightly higher due to increases in delinquencies and charge-offs. At March 31, 2011, the specific allowance on loans individually evaluated for impairment was $559 thousand 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 $482 thousand and pooled allowance on the reminder of the loan portfolio of $3.5 million at December 31, 2010.


	Three Months Ended March 31,
	2011			2010
	(Dollars in thousands)
Allowance for loan losses:
Allowance at beginning of period	$	3,988		$	3,476
Provision for loan losses		75			152
Charge-offs		—			26
Recoveries		—			—

Net recoveries		—			(26	)

Allowance at end of period	$	4,063		$	3,602

Allowance for loan losses as a percent of total loans		0.62	%		0.54	%
Allowance for loan losses as a percent of non-performing loans		69.91	%		139.70	%

	March 31, 2011			December 31, 2010
	(Dollars in thousands)
Nonaccrual loans:
Real estate mortgage loans	$	4,843		$	4,282
Construction		726			729
Commercial		168			134
Consumer loans		75			77

Total of non-accrual and 90 days or more past due loans		5,812			5,222
Real estate owned		98			98

Other nonperforming assets		—			—

Total non-performing assets	$	5,910		$	5,320
Troubled debt restructurings		—			—

Troubled debt restructurings and total non-performing assets	$	5,910		$	5,320

Total non-performing loans to total loans		0.88	%		0.79	%
Total non-performing loans to total assets		0.67	%		0.62	%
Total non-performing assets and troubled debt restructurings to total assets		0.69	%		0.63	%

Deposits

Deposits increased by $20.4 million, or 3.4%, to $623.7 million at March 31, 2011 from $603.3 million at December 31, 2010. Interest bearing demand deposits increased $13.8 million, certificates of deposit decreased by $6.7 million, savings accounts increased by $7.1 million and non-interest bearing checking increased $6.2 million. The Company continued its focus on attracting core deposits, which increased $27.0 million, and accounted for 132.4% of the $20.4 million increase in deposits.

The following table summarizes changes in deposits in the three months ended March 31, 2011.


	March 31, 2011		December 31, 2010		$ change			% change
	(Dollars in thousands)
Non-interest-bearing demand deposits	$	68,237	$	62,071	$	6,166			9.9	%
Interest-bearing demand deposits		241,589		227,832		13,757			6.0
Savings accounts		109,573		102,467		7,106			6.9
Time deposits		204,286		210,964		(6,678	)		(3.2	)

Total	$	623,685	$	603,334	$	20,351			3.4	%

Borrowings

Federal Home Loan Bank advances remained unchanged at $110 million at March 31, 2011 from December 31, 2010. Other borrowings were unchanged at $15.5 million at March 31, 2011 compared to December 31, 2010.

Stockholders’ Equity

Stockholders’ equity increased $1.2 million to $101.8 million at March 31, 2011, from $100.6 million at December 31, 2010, primarily as a result of an increase from net income of $1.2 million.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010

Net income was $1.2 million for the three months ended March 31, 2011 as compared to $1.3 million for the three months ended March 31, 2010. The $100 thousand, or 7.7%, decrease in 2011 from 2010 was due primarily to expenses of $89 thousand (net of tax) related to the previously announced acquisition of CBCH Financialcorp.


	Three Months Ended March 31,
	2011			2010
Net income (in thousands)	$	1,205		$	1,336
Basic and diluted earnings per share	$	0.18		$	0.20
Return on average assets (annualized)		0.55	%		0.68	%
Return on average equity (annualized)		4.74	%		5.43	%

Net Interest Income

The following table summarizes changes in interest income and interest expense for the three-month periods ended March 31, 2011 and 2010.


	Three Months Ended March 31,
	2011		2010		$ change			% change
	(Dollars in thousands)
INTEREST INCOME:
Loans	$	8,555	$	9,031	$	(476	)		(5.3	)%
Investment securities		483		474		9			1.9
Other interest-earning assets		—		—		—			—

Total interest income		9,038		9,505		(467	)		(4.9	)
INTEREST EXPENSE:
Deposits		1,566		2,027		(461	)		(22.7	)
Borrowings		1,497		1,497		—			—

Total interest expense		3,063		3,524		(461	)		(13.1	)

Net interest income	$	5,975	$	5,981	$	(6	)		(0.1	)

Interest income decreased by $467 thousand, or 4.9%, for the quarter ended March 31, 2011 compared to March 31, 2010. The decrease resulted from a decrease in the average balance of loans of $5.8 million and the average rate earned on interest earning assets of 24 basis points, offset by an increase in the average balance of investments of $2.2 million.

Interest expense decreased by $461 thousand, or 13.1%, over the same period last year due to a decrease in interest paid on deposits. The decrease in interest expense resulted primarily from a decrease in the rate paid on deposits offset by increased balances of deposits.

The interest rate spread and net interest margin of the Company were 3.50% and 3.47%, respectively, for the three months ended March 31, 2011, compared to 3.23% and 3.46% for the same period in 2010. The increase in the interest rate spread of 27 basis points and margin of one basis points resulted from a decrease in the average rate paid on interest-bearing liabilities of 51 basis points offset by a decrease in the rate earned on interest-earning assets of 24 basis points. The decrease in cost of interest bearing liabilities resulted from a decrease in the average rate paid on interest-bearing deposits of 54 basis points offset by an increase in the average balance of interest-bearing deposits of $76.3 million. The decrease in rate on interest earnings assets resulted from a decrease in the average balance loans of $5.8 million, a decrease in the average rate on loans of 24 basis points and a decrease in the average rate on investments of 36 basis points offset by an increase in the average balance of investments of $2.2 million.

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 March 31, 2011								Three Months Ended March 31, 2010
	Average Balance			Interest and Dividends		Yield/ Cost			Average Balance			Interest and Dividends		Yield/ Cost
	(Dollars in thousands)
Assets:
Interest-earning assets:
Loans	$	657,986		$	8,555		5.20	%	$	663,763		$	9,031		5.44	%
Investment securities		30,656			483		6.30	%		28,474			474		6.66	%

Total interest-earning assets		688,642			9,038		5.25	%		692,237			9,505		5.49	%
Noninterest-earning assets		184,217								93,110

Total assets	$	872,859							$	785,347

Liabilities and equity:
Interest-bearing liabilities:
Interest-bearing demand deposits		261,649			432		0.66	%		206,596			605		1.17	%
Savings accounts		104,519			207		0.79	%		76,789			217		1.13	%
Certificates of deposit		207,934			927		1.78	%		214,389			1,205		2.25	%

Total interest-bearing deposits		574,102			1,566		1.09	%		497,774			2,027		1.63	%
FHLB advances		110,000			1,162		4.23	%		110,000			1,162		4.23	%
Subordinated debt		15,464			335		8.67	%		15,464			335		8.67	%

Total borrowings		125,464			1,497		4.77	%		125,464			1,497		4.77	%

Total interest-bearing liabilities		699,566			3,063		1.75	%		623,238			3,524		2.26	%

Noninterest-bearing deposits		62,493								54,833
Noninterest-bearing liabilities		9,196								8,835

Total liabilities		771,255								686,906
Retained earnings		101,604								98,441

Total liabilities and retained earnings	$	872,859							$	785,347

Net interest income				$	5,975							$	5,981

Interest rate spread							3.50	%							3.23	%
Net interest margin							3.47	%							3.46	%
Average interest-earning assets to average interest-bearing liabilities		98.44	%							111.07	%

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 collectability of the loan portfolio. The provision for loan losses was $75 thousand in the three months ended March 31, 2011 compared to $152 thousand in the three months ended March 31, 2010. 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.

Other Income

The following table summarizes other income for the three months ended March 31, 2011 and 2010 and the changes between the periods.


	Three Months Ended March 31,				% Change
	2011		2010		% Change
	(Dollars in thousands)
OTHER INCOME:
Service charges	$	360	$	436		(17.4	)%
Cash surrender value of life insurance		128		135		(5.2	)
Gain on call of AFS securities		10		—		N/M
Other		304		236		28.8

Total other income	$	802	$	807		(0.6	)%

N/M – Not measurable

Other income decreased $5 thousand to $802 thousand, or 0.6%, for the three-month period ended March 31, 2011 from $807 thousand for the same period in 2010. The decrease in service charges income of $76 thousand resulted from lower service charges collected on deposit accounts. The decrease in cash surrender value of life insurance income of $7 thousand resulted from a lower yield earned on existing policies. Other income increased $68 thousand primarily from increased debit card commissions received.

Other Expense

The following table summarizes other expense for the three months ended March 31, 2011 and 2010 and the changes between periods.


	Three Months Ended March 31,				% Change
	2011		2010		% Change
	(Dollars in thousands)
OTHER EXPENSE:
Salaries and employee benefits	$	2,613	$	2,496		4.7	%
Occupancy and equipment		984		977		0.7
Federal insurance premiums		187		168		11.3
Advertising		106		116		(8.6	)
Professional services		294		178		65.2
Other operating expense		472		518		(8.9	)

Total other expense	$	4,656	$	4,453		4.6	%

Other expenses increased $203 thousand or 4.6%, to $4.7 million for the three-month period ended March 31, 2011 from $4.5 million for the same period in 2010. Costs associated with the pending acquisition of CBCH Financialcorp increased professional services $89 thousand. Additionally, increases in salaries and benefits, occupancy and equipment, FDIC insurance and professional services of $142 thousand were offset by decreases in marketing and other expense of $28 thousand.

Income Taxes

Income taxes increased $6 thousand to $841 thousand for an effective tax rate of 41.1% for the three months ended March 31, 2011, compared to $847 thousand for an effective tax rate of 38.8% from the same period in 2010. The decrease of $6 thousand was a result of lower taxable income while the increase in the effective tax rate resulted from $89 thousand of merger expense that are not tax deductible.

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 March 31, 2011, cash and cash equivalents totaled $114.0 million. Securities classified as available-for-sale whose market value exceeds our cost, which provide additional sources of liquidity, totaled $18.4 million at March 31, 2011. In addition, at March 31, 2011, we had the ability to borrow a total of approximately $216.0 million from the Federal Home Loan Bank of New York.

At March 31, 2011, we had $57.6 million in loan commitments outstanding, which included $19.4 million in undisbursed loans, $24.2 million in unused home equity lines of credit and $14.0 million in commercial lines and letter of credit. Certificates of deposit due within one year of March 31, 2011 totaled $124.7 million, or 61% 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 March 31, 2011, the Bank exceeded all of its regulatory capital requirements with tangible capital of $87.0 million, or 10.21% of total adjusted assets, which is above the required level of $12.8 million or 1.5%; core capital of $87.0 million, or 10.21% of total adjusted assets which is above the required level of $34.1 million or 4.0%; and risk-based capital of $90.5 million, or 20.20% 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.

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 December 31, 2010 Percentage Change in Estimated Net Interest Income Over
	12 Months			24 Months
200 basis point increase in rates		11.3	%		24.2	%
100 basis point decrease in rates		N/M			N/M

The 200 and 100 basis point change in rates in the above table is assumed to occur evenly over the following 12- and 24-month periods. Based on the scenario above, net interest income would be positively affected (within our internal guidelines) in the 12-month if rates rose by 200 basis points. In addition, a decline in rates by 100 basis points in both the 12- and 24-month periods has been determined by management as not possible and therefore deemed not measurable.

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 December 31, 2010 that would occur in the event of an immediate change in interest rates based on Office of Thrift Supervision assumptions, with no effect given to any steps that we might take to counteract that change.


Basis Point (“bp”) Change in Rates	Net Portfolio Value (Dollars in Thousands)								Net Portfolio Value as % of Portfolio Value of Assets
Basis Point (“bp”) Change in Rates	$ Amount		$ Change			% Change			NPV Ratio			Change
300 bp	$	80,852	$	(36,678	)		(31	)%		9.84	%		(356	)bp
200		96,653		(20,877	)		(18	)		11.47			(194	)
100		110,228		(7,302	)		(6	)		12.78			(62	)
50		114,797		(2,733	)		(2	)		13.19			(22	)
0		117,530								13.41
(50)		116,781		(749	)		(1	)		13.27			(14	)
(100)		117,604		74			—			13.3			(10	)

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

OFF-BALANCE SHEET ARRANGEMENTS

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

For the three months ended March 31, 2011, 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 March 31, 2011 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

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

Item 1A.

Risk Factors

There have been no material changes in the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

The Company did not repurchase any of its common stock during the quarter ended March 31, 2011 and did not have any outstanding repurchase authorizations.

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 Officer.

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: May 6, 2011				/S/ STEVEN E. BRADY
				Steven E. Brady
				President and Chief Executive Officer



Date: May 6, 2011				/s/ DONALD F. MORGENWECK
				Donald F. Morgenweck
				Chief Financial Officer and Senior Vice President

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