Ocean Shore Holding Co. - FORM 10-Q

Attached files

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EX-31.2 - EXHIBIT 31.2 - Ocean Shore Holding Co.	v310166_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - Ocean Shore Holding Co.	v310166_ex31-1.htm
EX-32.0 - EXHIBIT 32.0 - Ocean Shore Holding Co.	v310166_ex32-0.htm
EXCEL - IDEA: XBRL DOCUMENT - Ocean Shore Holding Co.	Financial_Report.xls

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2012

£ 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 T 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 T 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 T
Non-accelerated Filer £	Smaller Reporting Company £
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes £ No T

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, 2012, the registrant had 7,291,643 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, 2012 and December 31, 2011	1

	Unaudited Condensed Consolidated Statements of Income and Comprehensive Income for the three months ended March 31, 2012 and 2011	2

	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2012 and 2011	3

	Notes to Unaudited Condensed Consolidated Financial Statements	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

Item 4.	Controls and Procedures	32

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	32

Item 1A.	Risk Factors	32

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3.	Defaults upon Senior Securities	33

Item 4.	Mine Safety Disclosures	33

Item 5.	Other Information	33

Item 6.	Exhibits	33

SIGNATURES

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
	March 31,			December 31,
ASSETS	2012			2011

Cash and amounts due from depository institutions	$	7,839,420		$	6,616,214
Interest-earning bank balances		145,647,408			149,036,727

Cash and cash equivalents		153,486,828			155,652,941

Investment securities held to maturity
(estimated fair value—$5,877,814 at March 31, 2012; $6,147,579 at December 31, 2011)		5,714,661			5,964,393
Investment securities available for sale
(amortized cost— $70,501,510 at March 31, 2012; $47,639,832 at December 31, 2011)		69,551,081			46,767,668
Loans—net of allowance for loan losses of $3,894,735 at March 31, 2012 and $3,762,295 at December 31, 2011		714,993,046			727,626,278
Accrued interest receivable:
Loans		2,530,182			2,550,769
Investment securities		195,052			294,492
Federal Home Loan Bank stock—at cost		6,434,800			6,434,800
Office properties and equipment—net		13,923,589			14,054,679
Prepaid expenses and other assets		6,094,964			6,033,252
Real estate owned		243,176			97,500
Cash surrender value of life insurance		18,960,774			18,812,573
Deferred tax asset		4,516,396			4,484,212
Goodwill		5,364,991			5,279,609
Other intangible assets		680,750			677,000

TOTAL ASSETS	$	1,002,690,290		$	994,730,166

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES:
Non-interest bearing deposits	$	81,844,084		$	75,551,232
Interest bearing deposits		676,962,271			676,903,679
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		4,161,577			3,999,306
Accrued interest payable		802,618			1,146,482
Other liabilities		7,898,202			6,985,863

Total liabilities		897,132,752			890,050,562

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY:
Preferred stock, $.01 par value, 5,000,000 shares authorized, no shares issued		—			—
Common stock, $.01 par value, 25,000,000 shares authorized, 7,307,590 shares issued;
7,291,643 shares outstanding at March 31, 2012 and December 31, 2011		73,076			73,076
Additional paid-in capital		64,509,630			64,408,624
Retained earnings - partially restricted		46,064,336			45,147,396
Treasury stock – at cost: 15,947 shares at March 31, 2012 and December 31, 2011		(174,232	)		(174,232	)
Common stock acquired by employee benefits plans		(3,579,978	)		(3,665,478	)
Deferred compensation plans trust		(553,390	)		(538,982	)
Accumulated other comprehensive loss		(781,904	)		(570,800	)

Total stockholders’ equity		105,557,538			104,679,604

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,002,690,290		$	994,730,166

See notes to unaudited condensed consolidated financial statements.

OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

	Three Months Ended March 31,
	2012			2011
INTEREST AND DIVIDEND INCOME:
Taxable interest and fees on loans	$	9,000,535		$	8,554,572
Taxable interest on mortgage-backed securities		165,401			164,636
Non-taxable interest on municipal securities		54,284			10,646
Taxable interest and dividends on other investment securities		391,035			307,874

Total interest and dividend income		9,611,255			9,037,728

INTEREST EXPENSE:
Deposits		1,215,444			1,565,988
Advances from Federal Home Loan Bank
and other borrowed money		1,510,333			1,497,431

Total interest expense		2,725,777			3,063,419

NET INTEREST INCOME		6,885,478			5,974,309

PROVISION FOR LOAN LOSSES		172,900			74,800

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		6,712,578			5,899,509

OTHER INCOME:
Service charges		410,848			359,795
Cash surrender value of life insurance		148,201			128,469
Gain on call of AFS security		—			10,014
Other		345,941			303,811

Total other income		904,990			802,089

OTHER EXPENSE:
Salaries and employee benefits		3,129,921			2,612,693
Occupancy and equipment		1,235,287			984,192
Federal insurance premiums		127,692			187,080
Advertising		116,945			106,030
Professional services		252,057			294,447
Real estate owned activity		2,678			1,250
Charitable contributions		37,500			36,000
Other operating expenses		498,924			434,174

Total other expenses		5,401,004			4,655,866

INCOME BEFORE INCOME TAXES		2,216,564			2,045,732

INCOME TAX EXPENSE		862,126			841,146

NET INCOME		1,354,438			1,204,586
Other comprehensive income, net of tax:
Unrealized (loss) gain on securities		(211,104	)		251,164

COMPREHENSIVE INCOME	$	1,143,334		$	1,455,750

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

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,
	2012			2011
OPERATING ACTIVITIES:
Net income	$	1,354,438		$	1,204,586
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		272,825			222,461
Provision for loan losses		172,900			74,800
Stock based compensation expense		186,506			181,641
Gain on call of AFS securities		—			(10,014	)
Cash surrender value of life insurance		(148,201	)		(128,469	)
Changes in assets and liabilities which provided (used) cash:
Accrued interest receivable		120,027			44,392
Prepaid expenses and other assets		(226,735	)		(20,434	)
Accrued interest payable		(343,864	)		(348,804	)
Other liabilities		912,339			75,388
Net cash provided by operating activities		2,300,235			1,295,547

INVESTING ACTIVITIES:
Principal collected on:
Mortgage-backed securities available for sale		1,005,876			1,125,283
Mortgage-backed securities held to maturity		217,826			153,558
Loan repayments, net of originations		12,223,601			(111,081	)
Purchases of:
Investment securities available for sale		(13,764,580	)		(20,005,000	)
Investment securities held to maturity		(88,000	)		—
Mortgage-backed securities available for sale		(20,132,422	)		—
Office properties and equipment		(131,707	)		(177,947	)
Proceeds from maturities/ calls of:
Investment securities held to maturity		120,000			—
Mortgage-backed securities available for sale		—			124,361
Investment securities available for sale		10,000,000			600,000
Net cash used in investing activities		(10,549,406	)		(18,290,826	)

FINANCING ACTIVITIES:
Increase in deposits		6,372,694			20,350,589
Dividends paid		(437,499	)		(437,807	)
Purchase of shares by deferred compensation plans trust		(14,408	)		(2,752	)
Increase in advances from borrowers for taxes and insurance		162,271			234,185
Net cash provided by financing activities		6,083,058			20,144,215

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(2,166,113	)		3,148,936

CASH AND CASH EQUIVALENTS—Beginning of period		155,652,941			110,865,154

CASH AND CASH EQUIVALENTS—End of period	$	153,486,828		$	114,014,090

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION—Cash paid during the period for:
Interest	$	3,090,891		$	3,412,222
Income Taxes	$	222,000		$	609,574
SUPPLEMENTAL DISCLOSURES OF NON-CASH ITEMS
Transfers of loans to real-estate owned	$	145,676		$	—
Adjustments to goodwill	$	85,382		$	—

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, 2011. The results for the three months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2012 or any other period. The Company has evaluated subsequent events through the date of the issuance of its financial statements.

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 September 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-08, Testing Goodwill for Impairment. This update amends the current guidance on testing goodwill for impairment. Under the revised guidance, entities testing goodwill for impairment have the option of performing a qualitative assessment before calculating the fair value of the reporting unit. If entities determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, the two-step impairment test would be required. This update does not change how goodwill is calculated or assigned to reporting units, nor does it revise the requirement to test goodwill annually for impairment. In addition, the update does not amend the requirement to test goodwill for impairment between annual tests if events or circumstances warrant; however, it does revise the examples of events and circumstances that an entity should consider. The amendments became effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The adoption of this accounting guidance did not have a material impact on the Company’s consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income. This update to comprehensive income guidance requires all nonowner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. This update also requires additional changes to the face of the financial statements including eliminating the presentation of other comprehensive income as a part of stockholders’ equity, and the presentation of certain reclassification adjustments between net income and other comprehensive income. The new accounting guidance was effective beginning January 1, 2012, and was applied retrospectively. The adoption of this update impacted the presentation and disclosure of the Company’s financial statements but did not impact its results of operations, financial position, or cash flows.

In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards. This update to fair value measurement guidance addresses changes to concepts regarding performing fair value measurements including: (i) the application of the highest and best use and valuation premise; (ii) the valuation of an instrument classified in the reporting entity’s shareholders’ equity; (iii) the valuation of financial instruments that are managed within a portfolio; and (iv) the application of premiums and discounts. This update also enhances disclosure requirements about fair value measurements, including providing information regarding Level 3 measurements such as quantitative information about unobservable inputs, further discussion of the valuation processes used and assumption sensitivity analysis. The new accounting guidance was effective beginning January 1, 2012. The adoption of this update impacted the presentation and disclosure of the Company’s financial statements but did not impact its results of operations, financial position, or cash flows.

In December 2011, the FASB issued ASU No. 2011-12, ASU No. 2011-12, "Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.” This update defers the effective date for the part of ASU No. 2011-05 that would have required adjustments of items out of accumulated other comprehensive income to be presented on the components of both net income and other comprehensive income in the financial statements until FASB can adequately evaluate the costs and benefits of this presentation requirement. The Company has deferred this presentation, as permitted, and continues to evaluate the impact of the adoption of this accounting standards update on the Company's financial statements.

2. INVESTMENT SECURITIES

Investment securities are summarized as follows:
	March 31, 2012
				Gross		Gross			Estimated
		Amortized		Unrealized		Unrealized			Fair
		Cost		Gain		Loss			Value
Held to Maturity
Debt Securities - Municipal	$	3,988,000	$	—	$	—		$	3,988,000
U.S. Treasury and government sponsored entity mortgage-backed securities		1,726,661		163,153		—			1,889,814
Totals	$	5,714,661	$	163,153	$	—		$	5,877,814

Available for Sale
Debt securities:
Municipal securities	$	830,000	$	8,532	$	—		$	838,532
Corporate		11,473,842		66,557		(1,583,408	)		9,956,991
U.S. Treasury and federal agencies		25,659,454		224		(92,308	)		25,567,370
Equity securities		2,596		12,962		(1,737	)		13,821
U.S. Treasury and government sponsored entity mortgage-backed securities		32,535,618		690,157		(51,408	)		33,174,367
Totals	$	70,501,510	$	778,432	$	(1,728,861	)	$	69,551,081

		December 31, 2011
				Gross		Gross			Estimated
		Amortized		Unrealized		Unrealized			Fair
		Cost		Gain		Loss			Value
Held to Maturity
Debt Securities - Municipal	$	4,020,000	$	—	$	—		$	4,020,000
U.S. Treasury and government sponsored entity mortgage-backed securities		1,944,393		183,186		—			2,127,579
Totals	$	5,964,393	$	183,186	$	—		$	6,147,579

Available for Sale
Debt securities:
Municipal	$	830,000	$	2,000	$	—		$	832,000
Corporate		7,700,531		35,450		(1,625,673	)		6,110,308
U.S. Treasury and federal agencies		25,660,016		24,720		(148	)		25,684,588
Equity securities		2,596		11,980		(2,034	)		12,542
U.S. Treasury and government sponsored entity mortgage-backed securities		13,446,689		707,047		(25,506	)		14,128,230
Totals	$	47,639,832	$	781,197	$	(1,653,361	)	$	46,767,668

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, 2012 and December 31, 2011:

	March 31, 2012
	Less Than 12 Months					12 Months or Longer					Total
			Gross					Gross					Gross
	Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
	Fair Value		Loss			Fair Value		Loss			Fair Value		Loss
Debt securities -
U.S. Treasuries and agencies	$	19,977,146	$	(92,308	)	$	—	$	—		$	19,977,146	$	(92,308	)
Corporate		—		—			3,119,275		(1,583,408	)		3,119,275		(1,583,408	)
U.S. Treasury and government sponsored entity mortgage-backed securities		22,858,788		(51,408	)		—		—			22,858,788		(51,408	)
Equity securities		—		—			859		(1,737	)		859		(1,737	)
Totals	$	42,835,934	$	(143,716	)	$	3,120,134	$	(1,585,145	)	$	45,956,068	$	(1,728,861	)

	December 31, 2011
	Less Than 12 Months					12 Months or Longer					Total
			Gross					Gross					Gross
	Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
	Fair Value		Loss			Fair Value		Loss			Fair Value		Loss
Debt securities -
U.S. Treasury	$	32,797	$	(148	)	$	—	$	—		$	32,797	$	(148	)
Corporate		—		—			4,076,639		(1,625,673	)		4,076,639		(1,625,673	)
US Treasury and government sponsored entity mortgage-backed securities		2,685,526		(25,506	)		—		—			2,685,526		(25,506	)
Equity securities		—		—			562		(2,034	)		562		(2,034	)
Totals	$	2,718,323	$	(25,564	)	$	4,077,201	$	(1,627,707	)	$	6,795,524	$	(1,653,361	)

Management has reviewed its investment securities as of March 31, 2012 and has determined that all declines in fair value below amortized cost are temporary.

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. The Company determines whether the unrealized losses are temporary in accordance with FASB ASC 325-40, when applicable, and FASB ASC 320-10. The evaluation is based upon factors such as the creditworthiness of the issuers/guarantors, the underlying collateral, if applicable, and the continuing performance of the securities. Management also evaluates other facts and circumstances that may be indicative of an OTTI condition. This includes, but is not limited to, an evaluation of the type of security, length of time and extent to which the fair value has been less than cost, and near-term prospects of the issuer.

Below is a roll forward of the anticipated credit losses on securities for which the Company has recorded other than temporary impairment charges through earnings and other comprehensive income.

	2012		2011
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

Two pooled trust preferred collateralized debt obligations (“CDOs”) backed by bank trust capital securities have been determined to be other-than-temporarily impaired in 2009 and 2008, due solely to credit related factors. These securities have Fitch credit ratings below investment grade at March 31, 2012. 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, 2012 and 2011:

	March 31, 2012	March 31, 2011
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	29 years	30 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 CDOs backed by bank trust preferred capital securities.

At March 31, 2012, two single issue trust preferred securities had been in a continuous unrealized loss position for 12 months or longer. Those securities had aggregate depreciation of 41.3% 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, 2012, 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 or lack of requirement 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”). At March 31, 2012, the Company had no agency mortgage-backed securities 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 and held to maturity at March 31, 2012 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, 2012
	Held to Maturity				Available for Sale Securities
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value

Due within 1 year	$	3,988,000	$	3,988,000		$ ─		$ ─
Due after 1 year through 5 years		─		─		4,805,525		4,866,428
Due after 5 years through 10 years		─		─		36,839		36,666
Due after 10 years		─		─		33,120,932		33,459,799
Total	$	3,988,000	$	3,988,000	$	37,963,296	$	36,362,893

Equity securities had a cost of $2,596 and a fair value of $13,821 as of March 31, 2012. Mortgage-backed securities had a cost of $32,535,618 and a fair value of $33,174,367 as of March 31, 2012.

3. LOANS RECEIVABLE ─ NET

Loans receivable consist of the following:

	March 31, 2012			December 31, 2011
Real estate - mortgage:
One-to-four family residential	$	533,429,926		$	547,906,420
Commercial and multi-family		77,206,197			77,072,427
Total real estate-mortgage		610,636,123			624,978,847
Real estate - construction:
Residential		9,369,764			8,057,416
Commercial		2,930,129			3,790,673
Total real estate - construction		12,299,893			11,848,089
Commercial		26,077,057			23,937,050
Consumer:
Home equity		65,994,599			66,787,820
Other consumer loans		783,729			809,965
Total consumer loans		66,778,328			67,597,785
Total loans		715,791,401			728,361,771
Net deferred loan cost		3,096,380			3,026,802
Allowance for loan losses		(3,894,735	)		(3,762,295	)
Net total loans	$	714,993,046		$	727,626,728

Changes in the allowance for loan losses are as follows:

	Three Months Ended March 31,
	2012			2011

Balance, beginning of period	$	3,762,295		$	3,988,076
Provision for loan loss		172,900			74,800
Charge-offs		(50,408	)		—
Recoveries		9,948			—
Balance, end of period	$	3,894,735		$	4,062,876

The provision for loan losses charged to expense is based upon past loan loss experiences and an evaluation of losses in the current loan portfolio, including the evaluation of impaired loans. The Company established a provision for loan losses of $172,900 for the quarter ended March 31, 2012 as compared to $74,800 for the comparable period in 2011. The increase in the provision for loan losses was a result of required reserves for an increase in classified loans.

A loan is considered to be impaired when, based upon current information and events, it is probable that the Company 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 are considered to be insignificant. As of March 31, 2012, and December 31, 2011, the impaired loan balance was measured for impairment based on the fair value of the loans’ collateral. Loans collectively evaluated for impairment include residential real estate loans, consumer loans, and smaller balance commercial and commercial real estate loans.

Non-performing loans at March 31, 2012 and December 31, 2011 consisted of non-accrual loans that amounted to $5,659,199 and $5,676,819, respectively, and non-accrual troubled debt restructurings of $801,028 and $805,095, respectively. The reserve for delinquent interest on loans totaled $467,848 and $425,384 at March 31, 2012 and December 31, 2011, respectively.

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

	March 31, 2012		December 31, 2011
Real estate
One-to-four family residential	$	4,166,118	$	4,768,395
Commercial and multi-family		890,073		392,146
Commercial		298,885		318,230
Consumer		304,123		198,048
Non-accrual loans		5,659,199		5,676,819
Troubled debt restructuring, non-accrual		801,028		805,095
Total non-accrual loans	$	6,460,227	$	6,481,914

A rollforward of the Company’s nonaccretable and accretable yield on loans accounted for under ASU 310-30, Loans and Debts Securities Acquired with Deteriorated Credit Quailty, is shown below for the three month period ended March 31, 2012:

	Contractual Receivable Amount			Nonaccretable (Yield) / Premium			Accretable (Yield) / Premuim			Carrying Amount
Balance at January 1, 2012	$	78,039,662		$	(3,835,961	)	$	1,284,000		$	75,487,701
Principal reductions		(4,355,207	)		—			—			(4,355,207	)
Charge-offs, net		—			2,079			—			—
Amortization of loan premium		—			—			(75,250	)		(75,250	)
Settlement adjustments		—			(85,382	)		—			(85,382	)
Balance at March 31, 2012	$	73,682,376		$	(3,919,264	)	$	1,208,750		$	70,971,862

An age analysis of past due loans, segregated by class of loans, as of March 31, 2012 and December 31, 2011 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, 2012
Real Estate
1-4 Family Residential	$	381,568	$	—	$	4,166,118	$	4,547,686	$	528,882,240	$	533,429,926
Commercial and Multi-Family		476,424		—		890,073		1,366,497		75,839,700		77,206,197
Construction		—		—		—		—		12,299,893		12,299,893
Commercial		—		—		298,885		298,885		25,778,172		26,077,057
Consumer		173,014		50,188		304,123		527,325		66,251,003		66,778,328
Total	$	1,031,006	$	50,188	$	5,659,199	$	6,740,393	$	709,051,008	$	715,791,401

December 31, 2011
Real Estate
1-4 Family Residential	$	665,563	$	—	$	4,768,395	$	5,433,958	$	542,472,462	$	547,906,420
Commercial and Multi-Family		12,318		—		392,146		404,464		76,667,963		77,072,427
Construction		—		—		—		—		11,848,089		11,848,089
Commercial		—		—		318,230		318,230		23,618,820		23,937,050
Consumer		218,766		198,995		198,048		615,809		66,981,976		67,597,785
Total	$	896,647	$	198,995	$	5,676,819	$	6,772,461	$	721,589,310	$	728,361,771

Impaired loans are set forth 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, 2012
With no related allowance recorded
Real Estate
1-4 Family Residential	$	1,164,159	$	1,164,159	$	—	$	129,351
Commercial and Multi-Family		890,073		890,073		—		148,345
Commercial		98,885		98,885		—		98,885
Consumer		290,012		290,012		—		58,002
With an allowance recorded
Real Estate
1-4 Family Residential		3,802,987		4,141,416		455,529		380,299
Commercial and Multi-Family		—		—		—		—
Commercial		200,000		200,000		18,986		200,000
Consumer		14,111		14,111		14,111		14,111
Total
Real Estate
1-4 Family Residential		4,967,146		5,305,575		455,529		509,650
Commercial and Multi-Family		890,073		890,073		—		148,345
Commercial		298,885		298,885		18,986		298,885
Consumer		304,123		304,123		14,111		72,113

December 31, 2011
With no related allowance recorded
Real Estate
1-4 Family Residential	$	2,287,176	$	2,287,176	$	—	$	190,598
Commercial and Multi-Family		392,146		392,146		—		130,715
Commercial		318,230		318,230		—		106,077
Consumer		183,937		183,937		—		36,787
With an allowance recorded
Real Estate
1-4 Family Residential		3,286,313		3,764,871		371,554		328,631
Commercial and Multi-Family		—		—		—		—
Commercial		—		—		—		—
Consumer		14,111		14,111		14,286		14,111
Total
Real Estate
1-4 Family Residential		5,573,489		6,052,047		371,554		519,229
Commercial and Multi-Family		392,146		392,146		—		130,715
Commercial		318,230		318,230		—		106,077
Consumer		198,048		198,048		14,286		50,898

Included in the Company’s loan portfolio are modified commercial loans. Per FASB ASC 310-40, Troubled Debt Restructuring (“TDR”), a modification is one in which the creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider, such as providing for a below market interest rate and/or forgiving principal or previously accrued interest; this modification may stem from an agreement or be imposed by law or a court, and may involve a multiple note structure. Generally, prior to the modification, the loans which are modified as a TDR are already classified as non-performing. These loans may only be returned to performing (i.e. accrual status) after considering the borrower’s sustained repayment performance for a reasonable amount of time, generally six months; this sustained repayment performance may include the period of time just prior to the restructuring. The Company entered into two TDR agreements. As of March 31, 2012, the total carrying value of the TDRs were $912 thousand, of which $111 thousand was performing.

Included in impaired loans at March 31, 2012 was one troubled debt restructuring (“TDR”) which had a specific reserve of $157,028. The following table presents an analysis of the Company’s TDR agreements existing as of March 31, 2012 and December 31, 2011, respectively.

	As of March 31, 2012						As of December 31, 2011
			Outstanding Recorded Investment						Outstanding Recorded Investment
	Number of Contracts		Pre- Modification		Post- Modification		Number of Contracts		Pre- Modification		Post- Modification
1-4 Family Residential		2	$	912,031	$	912,031		1	$	805,095	$	805,095

Federal regulations require us to review and classify our assets on a regular basis. In addition, the Office of Comptroller of the Currency 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 required. If we classify an asset as loss, we reserve an amount equal to 100% of the portion of the asset classified loss.

The following table presents classified loans by class of loans as of March 31, 2012 and December 31, 2011.

	Real Estate
	1-4 Family Residential				Commercial and Multi-Family				Construction				Commercial				Consumer
	3/31/2012		12/31/2011		3/31/2012		12/31/2011		3/31/2012		12/31/2011		3/31/2012		12/31/2011		3/31/2012		12/30/2011
Grade:
Special Mention	$	3,147,386	$	1,779,742	$	3,493,825	$	3,518,440	$	—	$	—	$	—	$	—	$	226,020	$	229,156
Substandard		6,879,130		6,134,849		3,966,827		2,760,244		—		—		1,485,204		1,494,731		676,631		538,676
Doubtful and Loss		—		148,849		—		—		—		—		—		—		14,111		—
Total	$	10,026,516	$	8,063,440	$	7,460,652	$	6,278,684	$	—	$	—	$	1,485,204	$	1,494,731	$	916,762	$	767,832

The following table presents the credit risk profile of loans based on payment activity as of March 31, 2012 and December 31, 2011.

	Real Estate
	1-4 Family Residential				Commercial and Multi-Family				Construction				Commercial				Consumer
	3/31/2012		12/31/2011		3/31/2012		12/31/2011		3/31/2012		12/31/2011		3/31/2012		12/31/2011		3/31/2012		12/30/2011
Performing	$	529,263,808	$	542,332,930	$	76,316,124	$	76,680,281	$	12,299,893	$	11,848,089	$	25,778,172	$	23,618,820	$	66,474,205	$	67,399,737
Non-Performing		4,166,118		5,573,490		890,073		392,146		—		—		298,885		318,230		304,123		198,048
Total	$	533,429,926	$	547,906,420	$	77,206,197	$	77,072,427	$	12,299,893	$	11,848,089	$	26,077,057	$	23,937,050	$	66,778,328	$	67,597,785

The following table details activity in the allowance for possible loan losses by portfolio segment for the periods ended March 31, 2012 and December 31, 2011. Allocation of a portion of the allowance to one category does not preclude its availability to absorb losses in other categories.

	Real Estate
	1-4 Family Residential			Commercial and Multi-Family		Construction		Commercial			Consumer			Total
March 31, 2012
Allowance for credit losses:
Beginning Balance	$	2,512,970		$	459,987	$	97,825	$	229,055		$	462,458		$	3,762,295
Charge-offs		(50,408	)		—		—		—			—			(50,408	)
Recoveries		—			—		—		9,948			—			9,948
Provision for loan losses		54,410			58,061		19,219		81,557			(40,347	)		172,900
Ending balance	$	2,516,972		$	518,048	$	117,044	$	320,560		$	422,111		$	3,894,735
Ending balance: individually evaluated for impairment		455,529			—		—		18,986			14,111			488,626
Ending balance: collectively evaluated for impairment	$	2,061,443		$	518,048	$	117,044	$	301,574		$	408,000		$	3,406,109
Loan Receivables:
Ending balance	$	533,429,926		$	77,206,197	$	12,299,893	$	26,077,057		$	66,778,328		$	715,791,401
Ending balance: individually evaluated for impairment		4,967,146			890,073		—		298,885			304,123			6,460,227
Ending balance: collectively evaluated for impairment	$	528,462,780		$	76,316,124	$	12,299,893	$	25,778,172		$	66,474,205		$	709,331,174

December 31, 2011
Allowance for credit losses:
Beginning Balance	$	2,731,325		$	281,762	$	32,494	$	268,411		$	674,084		$	3,988,076
Charge-offs		(558,727	)		—		—		(90,694	)		(50,904	)		(700,325	)
Recoveries		—			—		—		—			1,309			1,309
Provision for loan losses		340,372			178,225		65,331		51,338			(162,031	)		473,235
Ending balance	$	2,512,970		$	459,987	$	97,825	$	229,055		$	462,458		$	3,762,295
Ending balance: individually evaluated for impairment		371,554			—		—		—			14,286			385,840
Ending balance: collectively evaluated for impairment	$	2,141,416		$	459,987	$	97,825	$	229,055		$	448,172		$	3,376,455
Loan Receivables:
Ending balance	$	547,906,420		$	77,072,427	$	11,848,089	$	23,937,050		$	67,597,785		$	728,361,771
Ending balance: individually evaluated for impairment		5,573,490			392,146		—		318,230			198,048			6,481,914
Ending balance: collectively evaluated for impairment	$	542,332,930		$	76,680,281	$	11,848,089	$	23,618,820		$	67,399,737		$	721,879,857

4. DEPOSITS

Deposits consist of the following major classifications:

	March 31, 2012			December 31, 2011
			Weighted			Weighted
			Average			Average
	Amount		Interest Rate	Amount		Interest Rate

NOW and other demand deposit accounts	$	380,023,435	0.23%	$	378,271,640	0.28%
Passbook savings and club accounts		137,358,453	0.29%		130,324,314	0.46%
Subtotal		517,381,888			508,595,954
Certificates with original maturities:
Within one year		80,634,614	0.55%		83,200,428	0.66%
One to three years		133,552,505	1.63%		135,954,595	1.76%
Three years and beyond		27,237,348	2.88%		23,703,934	3.10%
Total certificates		241,424,467			243,858,957
Total	$	758,806,355		$	752,454,911

The aggregate amount of certificate accounts in denominations of $100,000 or more at March 31, 2012 and December 31, 2011 amounted to $90,586,608 and $90,275,593, respectively.

Municipal demand deposit accounts in denominations of $100,000 or more at March 31, 2012 and December 31, 2011 amounted to $113,290,916 and $118,827,074, 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.

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

	Three Months Ended March 31,
	2012		2011
Numerator – Net Income	$	1,354,438	$	1,204,586
Denominators:
Basic average shares outstanding		6,778,305		6,730,331
Net effect of dilutive common stock equivalents		65,920		71,227
Dilutive average shares outstanding		6,844,225		6,801,558

Earnings per share:
Basic	$	0.20	$	0.18
Dilutive	$	0.20	$	0.18

At March 31, 2012 and 2011, there were 650,804 and 601,104 outstanding options that were anti-dilutive, respectively.

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”) authorize 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.

A summary of the status of the Company’s stock options under the Equity Plans as of March 31, 2012 and changes during the three months ended March 31, 2012 and 2011 are presented below:

	Three Months Ended March 31, 2012			Three Months Ended March 31, 2011
	Number of shares		Weighted average exercise price	Number of shares		Weighted average exercise price
Outstanding at the beginning of the period		650,804	$11.90		587,504	$11.92
Granted		—			13,600	$12.06
Exercised		—			—
Forfeited		—			—
Outstanding at the end of the period		650,804	$11.90		601,104	$11.92
Exercisable at the end of the period		389,085	$12.79		329,144	$13.16

The following table summarizes all stock options outstanding under the Equity Plans as of March 31, 2012:

	Options Outstanding
Date Issued	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
August 10, 2005		294,127	$	13.19	3.4 years
November 21, 2006		19,784	$	14.78	4.6 years
November 20, 2007		30,665	$	11.32	5.6 years
August 18, 2010		239,610	$	10.21	8.4 years
March 15, 2011		13,600	$	12.06	9.0 years
August 17, 2011		53,018	$	11.53	9.4 years
Total		650,804	$	11.90	6.0 years

The option compensation expense recognized for the three ended March 31, 2012 was $36,750 as compared to $32,484 for the three months ended March 31, 2011.

At March 31, 2012, there was $652,658 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 3.3 years.

Summary of Non-vested Stock Award Activity:

	Three Months Ended March 31, 2012
	Number of shares		Weighted average grant date fair value
Outstanding at January 1, 2012		80,190	$10.32
Issued		─
Forfeited		─
Vested		990	$12.06
Outstanding at March 31, 2012		79,200	$10.30

The non-vested stock award compensation expense recognized for the three ended March 31, 2012 was $51,000 as compared to $44,730 for the three months ended March 31, 2011.

At March 31, 2012, there was $682,397 of total unrecognized compensation cost related to non-vested stock awards. The cost is expected to be recognized over a weighted average period of 3.4 years.

INCOME TAXES

Income taxes increased $21,000 to $862,000 for an effective tax rate of 38.9% for the three months ended March 31, 2012 compared to $841,000 for an effective tax rate of 41.1% for the same period in 2011.

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

Items considered in this evaluation include historical financial performance, expectation of future earnings, the ability to carry back losses to recoup taxes previously paid, length of statutory carry forward periods, experience with operating loss and tax credit carry forwards not expiring unused, tax planning strategies and timing of reversals of temporary differences. Significant judgment is required in assessing future 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, 2012 and December 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, 2012, the tax years ended December 31, 2008 through 2011 were subject to examination by the Internal Revenue Service, while the tax years ended December 31, 2007 through 2011 were subject to state examination. As of March 31, 2012, the Internal Revenue Service is reviewing the Company’s 2009 tax return.

DECLARATION OF DIVIDEND

During first quarter of 2012, the Board of Directors of the Company declared a cash dividend of $0.06 per share, which was paid on February 24, 2012 to stockholders of record as of the close of business on February 3, 2012.

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.

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, 2012 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	$	—	$	58,741,737	$	—
State and municipal obligations		—		838,532		—
Corporate securities		—		9,956,791		200
Equity securities		13,821		—		—
Totals	$	13,821	$	69,537,060	$	200

Those assets at December 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	$	—	$	39,812,818	$	—
State and municipal obligations		—		832,000		—
Corporate securities		—		6,110,108		200
Equity securities		12,542		—		—
Totals	$	12,542	$	46,754,926	$	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 over the counter market, based upon its review of market data points, such as Moody’s or comparable credit ratings, maturity, price, and yield. The Company indexed the individual securities within the trading group to a comparable interest rate swap (to maturity) in determining the spread. The average spread on the trading group was matched with the individual trust preferred issues based on their comparable credit rating which was then used in arriving at the discount rate input to the model.

The following provides details of the fair value measurement activity for Level 3 for the quarters ended March 31, 2012 and March 31, 2011:

Fair Value Measurement Activity – Level 3 (only)

	Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
	Trust Preferred Securities		Total

Balance, January 1, 2012	$	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, 2012	$	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, 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.

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

			Category Used for Fair Value Measurement						Total
	Total		Level 1		Level 2		Level 3		(Losses)
March 31, 2012
Assets:
Impaired loans	$	1,626,037	$	-	$	1,626,037	$	-	$	(128,705	)
Real estate owned		145,676		-		145,676		-		-

March 31, 2011
Assets:
Impaired loans	$	1,411,963	$	-	$	864,541	$	547,422	$	(558,739	)

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, 2012, total loans remeasured at fair value were $1,626,037. Such loans were carried at the value of $1,754,742 immediately prior to remeasurement, resulting in the recognition of impairment through earnings for the life of the loans in the amount of $128,705. At March 31, 2011, total loans remeasured at fair value were $1,411,963. Such loans were carried at the value of $1,970,702 immediately prior to remeasurement, resulting in the recognition of impairment through earnings for the life of the loans in the amount of $558,739.

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 observable inputs, and therefore, the fair value measurement has been categorized as a Level 2 measurement. At March 31, 2012, the Company did not have any remeasurement to fair value to its foreclosed real estate and repossessed assets since the original recordings. At March 31, 2012, the Company had two properties totaling $243,176 compared to one property totaling $97,500 at December 31, 2011.

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.

Category Used For Fair Value

March 31, 2012

Carrying Amount

Level 1

Level 2

Level 3

Assets:

Cash and cash equivalents

153,486,828

$ ─

Investment securities:

Held to maturity

5,714,661

─

5,877,814

─

Available for sale

69,551,081

13,821

69,537,060

200

Loans receivable, net

714,993,046

─

729,879,089

─

Federal Home Loan Bank stock

6,434,800

─

6,434,800

─

Liabilities:

NOW and other demand deposit accounts

380,023,434

─

388,113,434

─

Passbook savings and club accounts

137,358,453

─

143,933,453

─

Certificates

241,424,467

─

244,463,339

─

Advances from Federal Home Loan Bank

110,000,000

─

124,759,778

─

Junior subordinated debenture

15,464,000

─

10,824,800

─

Category Used For Fair Value

December 31, 2011

Carrying Amount

Level 1

Level 2

Level 3

Assets:

Cash and cash equivalents

155,652,941

$ ─

Investment securities:

Held to maturity

5,964,393

─

6,147,579

─

Available for sale

46,767,668

12,542

46,754,926

200

Loans receivable, net

727,626,278

─

742,868,929

─

Federal Home Loan Bank stock

6,434,800

─

6,434,800

─

Liabilities:

NOW and other demand deposit accounts

378,271,640

─

386,987,640

─

Passbook savings and club accounts

130,324,313

─

137,074,313

─

Certificates

243,858,957

─

242,343,751

─

Advances from Federal Home Loan Bank

110,000,000

─

131,036,958

─

Junior subordinated debenture

15,464,000

─

10,824,800

─

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, 2012 and December 31, 2011. 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 March 31, 2012 and December 31, 2011. 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, 2012 and December 31, 2011, and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

10.

GOODWILL AND INTANGIBLE ASSETS

Goodwill totaled $5.4 million at March 31, 2012 as compared to $5.3 million at December 31, 2011. Goodwill was not impaired at March 31, 2012 as no impairment indicators have been noted. The Company will perform its annual goodwill impairment test at August 1, 2012.

The core deposit intangible totaled $681 thousand at March 31, 2012 as compared to $677 thousand at December 31, 2011. The core deposit intangible is being amortized over its estimated useful life of approximately 15 years from August 1, 2011.

11.

REAL ESTATE OWNED

Summary of Real Estate Owned (“REO”):

	2012				2011
	Residential				Residential
	Property		Total		Property		Total

Balance, January 1,	$	97,500	$	97,500	$	97,500	$	97,500
Transfers into Real Estate Owned		145,676		145,676		─		─
Sales of Real Estate Owned		─		─		─		─
Balance, March 31,	$	243,176	$	243,176	$	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, 2011 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.

COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2012 AND DECEMBER 31, 2011

Total assets of the Company increased $8.0 million, or 0.8%, to $1,002.7 million at March 31, 2012 from $994.7 million at December 31, 2011. Loans receivable, net, decreased $12.6 million to $715.0 million at March 31, 2012, investments and mortgage-backed securities increased $ 22.6 million and cash and cash equivalents decreased by $2.2 million. Asset growth was funded by an increase in deposits of $6.4 million.

Investments

Investments and mortgage-backed securities increased $22.6 million, or 42.7%, to $75.3 million at March 31, 2012 from $52.7 at December 31, 2011. The increase was the result of purchases of $23.9 million of GNMA mortgage-backed and corporate securities offset by normal repayment and payoffs of $1.3 million.

Loans

Loans receivable, net, decreased $12.6 million, or 1.7%, to $715.0 million at March 31, 2012 from $727.6 million at December 31, 2011. Loan originations totaled $37.2 million for the three months ended March 31, 2012 compared to $34.7 million originated in the three months ended March 31, 2011. Real estate mortgage loan originations totaled $25.2 million, real estate construction loan originations totaled $3.8 million, consumer loan originations totaled $3.6 million and commercial loan originations totaled $4.7 million for the first quarter of 2012. Origination activity was offset by $49.8 million of normal loan payments and payoffs.

The following table summarizes changes in the loan portfolio in the three months ended March 31, 2012.

	March 31, 2012			December 31, 2011			$ change			% change
	(Dollars in thousands)
Real estate – mortgage:
One-to-four-family residential	$	533,430		$	547,906		$	(14,476	)		(2.6	)%
Commercial and multi-family		77,206			77,073			133			0.2
Total real estate – mortgage		610,636			624,979			(14,343	)		(2.3	)

Real estate – construction:
Residential		9,370			8,057			1,313			16.3
Commercial		2,930			3,791			(861	)		(22.7	)
Total real estate – construction		12,300			11,848			452			3.8

Commercial		26,077			23,937			2,140			8.9

Consumer
Home equity		65,995			66,788			(793	)		(1.2	)
Other consumer loans		784			810			(26	)		(3.2	)
Total consumer loans		66,779			67,598			(819	)		(1.2	)

Total loans		715,792			728,362			(12,570	)		(1.7	)

Net deferred loan cost		3,096			3,026			70			2.3
Allowance for loan losses		(3,895	)		(3,762	)		(133	)		3.5

Net total loans	$	714,993		$	727,626		$	(12,633	)		(1.7	)%

Non-Performing Assets

Non-performing assets totaled $6.7 million or 0.67% of total assets at March 31, 2012 compared to $6.6 million or 0.66% of total assets at December 31, 2011 and $5.9 million or 0.88% of total assets at March 31, 2011. The increase at March 31, 2012 from December 31, 2011 was the result of increases in non-performing commercial mortgages of $498 thousand and consumer loans of $106 thousand offset by decreases in non-performing residential mortgages of $602 thousand and commercial loans of $19 thousand. Non-performing assets consisted of eighteen residential mortgages totaling $4.2 million, three commercial mortgages totaling $890 thousand, two commercial loans totaling $299 thousand, six consumer equity loans totaling $304 thousand and two real estate owned properties totaling $243 thousand. Specific reserves were recorded for twelve of the loans included above in the amount of $489 thousand at March 31, 2012 as compared to eleven loans with specific reserves of $386 thousand at December 31, 2011. Real estate owned increased by one property totaling $145 thousand to $243 thousand at March 31, 2012. The Company recorded $40 thousand in net charge-off activity for the quarter-ended March 31, 2012 as compared to no charge-off activity for the same period in 2011.

The allowance for loan losses increased $133 thousand to $3.9 million, or 0.54% of total net loans, from $3.8 million at December 31, 2011, 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, classified loans, growth in the loan portfolio and the current economic conditions. The loss factors used to calculate the allowance in March 2012 from December 31, 2011 were slightly higher due to increases in delinquencies and charge-offs. At March 31, 2012, the specific allowance on loans individually evaluated for impairment was $489 thousand and pooled allowance on the remainder of the loan portfolio was $3.4 million as compared to specific allowance on impaired or collateral-dependent loans of $386 thousand and a general valuation allowance on the remainder of the loan portfolio of $3.3 million at December 31, 2011.

	Three Months Ended March 31,
	2012			2011
Allowance for loan losses:	(Dollars in thousands)
Allowance at beginning of period	$	3,762		$	3,988
Provision for loan losses		173			75

Charge-offs		(50	)		-
Recoveries		10			-
Net charge-offs		(40	)		-
Allowance at end of period	$	3,895		$	4,063

Allowance for loan losses as a percent of total loans		0.54	%		0.62	%
Allowance for loan losses as a percent of non-performing loans		60.27	%		69.91	%

	March 31, 2012			December 31, 2011
Nonaccrual loans:	(Dollars in thousands)
Real estate - residential	$	4,166		$	4,768
Real estate - commercial		890			392
Commercial		299			318
Consumer		304			198
Total		5,659			5,676
Troubled debt restructurings - nonaccrual		801			805
Total nonaccrual loans		6,460			6,481
Real estate owned		243			98
Total non-performing assets	$	6,703		$	6,579

Total non-performing loans to total loans		0.90	%		0.89	%
Total non-performing loans to total assets		0.64	%		0.65	%
Total non-performing assets to total assets		0.67	%		0.66	%

Deposits

Deposits increased by $6.4 million, or 0.8%, to $758.8 million at March 31, 2012 from $752.5 million at December 31, 2011. Interest bearing demand deposits decreased $4.5 million, certificates of deposit decreased by $2.4 million, savings accounts increased by $7.0 million and non-interest bearing checking increased $6.3 million. The Company continued its focus on attracting core deposits, which increased $8.8 million.

The following table summarizes changes in deposits in the three months ended March 31, 2012.

	March 31,		December 31,
	2012		2011		$ change			% change
	(Dollars in thousands)
Non-interest-bearing demand deposits	$	81,844	$	75,551	$	6,293			8.3	%
Interest-bearing demand deposits		298,179		302,721		(4,542	)		(1.5	)
Savings accounts		137,358		130,324		7,034			5.4
Time deposits		241,425		243,859		(2,434	)		(1.0	)
Total	$	758,806	$	752,455	$	6,351			0.8	%

Borrowings

Federal Home Loan Bank advances were unchanged at $110.0 million at March 31, 2012 compared to December 31, 2011. Other borrowings were unchanged at $15.5 million at March 31, 2012 compared to December 31, 2011.

Stockholders’ Equity

Stockholders’ equity increased $878 thousand to $105.6 million at March 31, 2012, from $104.7 million at December 31, 2011, primarily as a result of net income of $1.4 million offset by cash dividends paid to shareholders of $437 thousand.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011

Net income was $1.4 million for the three months ended March 31, 2012 as compared to $1.2 million for the three months ended March 31, 2011. The $150 thousand, or 12.4%, increase in 2012 from 2011 was due primarily to increases in net interest income of $911 thousand and other income of $103 thousand offset by increases in provision for loan losses of $98 thousand, operating expenses of $745 thousand and income taxes of $21 thousand.

	Three Months Ended March 31,
	2012			2011

Net income (in thousands)	$	1,354		$	1,205
Basic and diluted earnings per share	$	0.20		$	0.18
Return on average assets (annualized)		0.54	%		0.55	%
Return on average equity (annualized)		5.12	%		4.74	%

Net Interest Income

The following table summarizes changes in interest income and interest expense for the three-month periods ended March 31, 2012 and 2011.

	Three Months Ended March 31,
	2012		2011		$ change			% change
	(Dollars in thousands)
INTEREST INCOME:
Loans	$	9,000	$	8,555	$	445			5.2	%
Investment securities		611		483		128			26.5
Total interest income		9,611		9,038		573			6.3

INTEREST EXPENSE:
Deposits		1,216		1,566		(350	)		(22.3	)
Borrowings		1,510		1,497		13			0.9
Total interest expense		2,726		3,063		(337	)		(11.1	)
Net interest income	$	6,885	$	5,975	$	910			15.2

Interest income increased by $573 thousand for the quarter ended March 31, 2012 compared to March 31, 2011. The increase resulted from an increase in the average balance of loans and investments offset by a decrease in the average rate earned on loans and investments.

Interest expense decreased by $337 thousand over the same period last year due primarily to a decrease in the rate paid on deposits offset by an increase in the average balance of interest-bearing deposits.

The increase in the average balances of loans and investments and interest-bearing deposits over 2011 reflect the acquisition of CBHC Financialcorp, Inc., which was completed in the third quarter of 2011.

The interest rate spread and net interest margin of the Company were 3.58% and 3.53%, respectively, for the three months ended March 31, 2012, compared to 3.50% and 3.47% for the same period in 2011. The increase in the interest rate spread of 8 basis points and margin of 6 basis points resulted from a decrease in the average rate paid on interest-bearing liabilities of 40 basis points offset by a decrease in the rate earned on interest-earning assets of 32 basis points. The decrease in cost of interest bearing liabilities resulted from a decrease in the average rate paid on deposits of 38 basis points offset by an increase in the average balances on deposits of $111.2 million. The decrease in rate earned on interest earnings assets resulted from a decrease in the average rate earned on loans of 19 basis points and investments of 230 basis points offset by an increase in the average balance of loans of $60.9 million and investments of $30.3 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, 2012						Three Months Ended March 31, 2011
	Average Balance			Interest and Dividends		Yield/ Cost	Average Balance			Interest and Dividends		Yield/ Cost
Assets:	(Dollars in thousands)
Interest-earning assets:
Loans	$	718,892		$	9,000	5.01%	$	657,986		$	8,555	5.20%
Investment securities		61,001			611	4.00%		30,656			483	6.30%
Total interest-earning assets		779,893			9,611	4.93%		688,642			9,038	5.25%
Noninterest-earning assets		222,903						184,217
Total assets	$	1,002,796					$	872,859

Liabilities and equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	310,856			254	0.33%	$	261,649			432	0.66%
Savings accounts		132,469			112	0.34%		104,519			207	0.79%
Certificates of deposit		242,022			850	1.41%		207,934			927	1.78%
Total interest-bearing deposits		685,347			1,216	0.71%		574,102			1,566	1.09%

FHLB advances		110,000			1,175	4.27%		110,000			1,162	4.23%
Subordinated debt		15,464			335	8.67%		15,464			335	8.67%
Total borrowings		125,464			1,510	4.82%		125,464			1,497	4.77%
Total interest-bearing liabilities		810,811			2,726	1.35%		699,566			3,063	1.75%
Noninterest-bearing deposits		75,729						62,493
Noninterest-bearing liabilities		10,426						9,196
Total liabilities		896,966						771,255
Retained earnings		105,830						101,604
Total liabilities and retained earnings	$	1,002,796					$	872,859

Net interest income				$	6,885					$	5,975
Interest rate spread						3.58%						3.50%
Net interest margin						3.53%						3.47%
Average interest-earning assets to average interest-bearing liabilities		96.19	%					98.44	%

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 $173 thousand in the three months ended March 31, 2012 compared to $75 thousand in the three months ended March 31, 2011. 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, classified 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, 2012 and 2011 and the changes between the periods.

	Three Months Ended March 31,
	2012		2011		% Change
	(Dollars in thousands)
OTHER INCOME:

Service charges	$	411	$	360		14.2%
Cash surrender value of life insurance		148		128		15.6
Gain on call of AFS securities		─		10		N/M
Other		346		304		13.8
Total other income	$	905	$	802		12.8

N/M – Not measurable

Other income increased $103 thousand to $905 thousand, or 12.8%, for the three-month period ended March 31, 2012 from $802 thousand for the same period in 2011. Increases in service charge income of $51 thousand resulted from increases in fees collected on deposit accounts. The increase in cash surrender value of life insurance resulted from new policies offset by a decrease in yield earned on existing policies. Other income increased $42 thousand primarily from higher debit card commissions received.

Other Expense

The following table summarizes other expense for the three months ended March 31, 2012 and 2011 and the changes between periods.

	Three Months Ended March 31,
	2012		2011		% Change
	(Dollars in thousands)
OTHER EXPENSE:

Salaries and employee benefits	$	3,130	$	2,613		19.8%
Occupancy and equipment		1,235		984		25.5
Federal insurance premiums		128		187		(31.6)
Advertising		117		106		10.4
Professional services		252		294		(14.3)
Other operating expense		539		472		14.2
Total other expense	$	5,401	$	4,656		16.0%

Other expenses increased $745 thousand or 16.0%, to $5.4 million for the three-month period ended March 31, 2012 from $4.7 million for the same period in 2011. Costs associated with locations added from the 2011 acquisition of Select Bank totaled $322,000. Additionally, increases in salaries and benefits, occupancy and equipment, marketing and other expenses of $524,000 were offset by a decrease in federal insurance premiums and professional services of $101,000.

Income Taxes

Income taxes increased $21 thousand to $862 thousand for an effective tax rate of 38.9% for the three months ended March 31, 2012, compared to $841 thousand for an effective tax rate of 41.1% from the same period in 2011. The increase was a result of higher taxable income offset by a lower effective tax rate.

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, 2012, cash and cash equivalents totaled $153.5 million. Securities classified as available-for-sale whose market value exceeds our cost, which provide additional sources of liquidity, totaled $22.8 million at March 31, 2012. In addition, at March 31, 2012, we had the ability to borrow a total of approximately $278.5 million from the Federal Home Loan Bank of New York, which included available overnight lines of credit of $278.5 million. On that date, we had no overnight advances outstanding.

At March 31, 2012, we had $64.7 million in loan commitments outstanding, which included $10.4 million in undisbursed loans, $26.7 million in unused home equity lines of credit and $19.0 million in commercial lines of credit. Certificates of deposit due within one year of March 31, 2012 totaled $108.8 million, or 45.1% 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, 2012, the Bank exceeded all of its regulatory capital requirements with tangible capital of $95.9 million, or 9.70% of total adjusted assets, which is above the required level of $14.8 million or 1.5%; tier 1 core capital of $95.9 million, or 9.70% of total adjusted assets which is above the required level of $39.6 million or 4.0%; and total risk-based capital of $99.3 million, or 19.75% of risk-weighted assets, which is above the required level of $40.2 million or 8.0%. The Bank is considered a “well-capitalized” institution under the applicable 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, 2011 Percentage Change in Estimated Net Interest Income Over
	12 Months	24 Months

200 basis point increase in rates	2.05%	3.97%
100 basis point decrease in rates	N/M	N/M
N/M - not measurable

The 200 and 100 basis point change in rates in the above table is assumed to occur evenly over the following 12- and 24-months 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 the Comptroller of the Currency to review our level of interest rate risk. This analysis measures interest rate risk by computing changes in net portfolio value of our cash flows from assets, liabilities and off-balance sheet items in the event of a range of assumed changes in market interest rates. Net portfolio value represents the market value of portfolio equity and is equal to the market value of assets minus the market value of liabilities, with adjustments made for off-balance sheet items. This analysis assesses the risk of loss in market risk sensitive instruments in the event of a sudden and sustained 100 to 300 basis point increase or 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 the Comptroller of the Currency, presents the change in our net portfolio value at December 31, 2011 that would occur in the event of an immediate change in interest rates based on Office of the Comptroller of the Currency assumptions, with no effect given to any steps that we might take to counteract that change.

	Net Portfolio Value (Dollars in Thousands)							Net Portfolio Value as % of Portfolio Value of Assets
Basis Point (“bp”) Change in Rates	$ Amount		$ Change			% Change		NPV Ratio		Change
300 bp	$	127,130	$	(9,577	)		(7)%		12.54%		(58)bp
200		139,519		2,811			2		13.53		41
100		143,018		6,310			5		13.74		62
50		140,161		3,453			3		13.45		33
0		136,708							13.12
(50)		130,280		(6,427	)		(5)		13.54		(58)
(100)		127,012		(9,695	)		(7)		12.23		(89)

The Office of the Comptroller of the Currency 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, 2012, 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, 2012 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, 2011.

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 January 1, 2012 through January 31, 2012	0	0	0	0

Month #2 February 1, 2012 through February 29, 2012	0	0	0	0

Month #3 March 1, 2012 through March 31, 2012	0	0	0	365,000

Total

_______________

(1)

On March 20, 2012, the Company’s Board of Directors approved the repurchase of up to 365,000 shares of the Company’s common stock.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

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.

101.0

The following materials from the Ocean Shore Holding Co. Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Financial Condition, (ii) the Condensed Consolidated Statements of Income and Comprehensive Income, (iii) the Condensed Consolidated Statements of Cash Flows and (iv) related notes.

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 10, 2012		/s/ Steven E. Brady
		Steven E. Brady
		President and Chief Executive Officer


Date: May 10, 2012		/s/ Donald F. Morgenweck
		Donald F. Morgenweck
		Chief Financial Officer and Senior Vice President

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