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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark One)

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

For the quarterly period ended September 30, 2006

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from to

Commission file number: 0-51000



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OCEAN SHORE HOLDING CO.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|United States                                                  |  | 22-3584037                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                           |  |           
|------------------------------------------ |  | ----------
|1001 Asbury Avenue, Ocean City, New Jersey |  | 08226     
|(Address of principal executive offices)   |  | (Zip Code)

(609) 399-0012

(Registrants telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)



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Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.(Check one):

Large Accelerated Filer ̈Accelerated Filer ̈Non-accelerated Filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x

Indicate the number of shares
outstanding of each of the issuers classes of common stock, as of the latest practicable date: At September 30, 2006, the registrant had 8,620,949 shares of $0.01 par value common stock outstanding.



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OCEAN SHORE HOLDING CO.

FORM 10-Q

INDEX



|           |  |                                                                                                                                      |  |     
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------ |  | ----
|           |  |                                                                                                                                      |  | Page
|PART I.    |  | FINANCIAL INFORMATION                                                                                                                |  |     
|           |  |                                                                                                                                     
|Item 1.    |  | Financial Statements                                                                                                                 |  | 1   
|           |  |                                                                                                                                     
|           |  | Unaudited Condensed Consolidated Statements of Financial Condition at September 30, 2006 and December 31, 2005                       |  | 1   
|           |  |                                                                                                                                     
|           |  | Unaudited Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2006 and 2005                |  | 2   
|           |  |                                                                                                                                     
|           |  | Unaudited Condensed Consolidated Statements of Changes in Stockholders Equity for the Nine Months Ended September 30, 2006 and 2005 |  | 3   
|           |  |                                                                                                                                     
|           |  | Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2006 and 2005                      |  | 4   
|           |  |                                                                                                                                     
|           |  | Notes to Unaudited Condensed Consolidated Financial Statements                                                                       |  | 5   
|           |  |                                                                                                                                     
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                |  | 15  
|           |  |                                                                                                                                     
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                                                                           |  | 27  
|           |  |                                                                                                                                     
|Item 4.    |  | Controls and Procedures                                                                                                              |  | 27  
|           |  |                                                                                                                                     
|PART II.   |  | OTHER INFORMATION                                                                                                                    |  |     
|           |  |                                                                                                                                     
|Item 1.    |  | Legal Proceedings                                                                                                                    |  | 27  
|           |  |                                                                                                                                     
|Item 1A.   |  | Risk Factors                                                                                                                         |  | 28  
|           |  |                                                                                                                                     
|Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                          |  | 28  
|           |  |                                                                                                                                     
|Item 3.    |  | Defaults upon Senior Securities                                                                                                      |  | 28  
|           |  |                                                                                                                                     
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                                                  |  | 28  
|           |  |                                                                                                                                     
|Item 5.    |  | Other Information                                                                                                                    |  | 29  
|           |  |                                                                                                                                     
|Item 6.    |  | Exhibits                                                                                                                             |  | 29  
|           |  |                                                                                                                                     
|SIGNATURES |  |                                                                                                                                      |  | 30  



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PART I  FINANCIAL INFORMATION

Item 1. Financial Statements

OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION



|                                                                                                                                                                                  |  |                    |             |   |                   |   |             |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ----------- | - | ----------------- | - | ----------- | -
|                                                                                                                                                                                  |  | September 30, 2006 |             |   | December 31, 2005 |  
|ASSETS                                                                                                                                                                            |  |                    |             |   |                   |   |             |  
|Cash and amounts due from depository institutions                                                                                                                                 |  | $                  | 15,938,044  |   |                   | $ | 13,400,085  |  
|Federal funds sold                                                                                                                                                                |  |                    | 15,000,000  |   |                   |   |            |  
|                                                                                                                                                                                  |  |                    |             |   |                   |   |             |  
|Cash and cash equivalents                                                                                                                                                         |  |                    | 30,938,044  |   |                   |   | 13,400,085  |  
|Investment securities held to maturity                                                                                                                                            |  |                    |             |   |                   |   |             |  
|(estimated fair value  September 2006, $0; December 2005, $4,293,635)                                                                                                            |  |                    |            |   |                   |   | 4,292,600   |  
|Investment securities available for sale                                                                                                                                          |  |                    |             |   |                   |   |             |  
|(amortized cost  September 2006, $36,594,602; December 2005, $47,368,441)                                                                                                        |  |                    | 36,663,709  |   |                   |   | 47,285,875  |  
|Mortgage-backed securities held to maturity                                                                                                                                       |  |                    |             |   |                   |   |             |  
|(estimated fair value  September 2006, $5,272,247; December 2005, $5,320,700)                                                                                                    |  |                    | 5,401,057   |   |                   |   | 5,435,913   |  
|Mortgage-backed securities available for sale                                                                                                                                     |  |                    |             |   |                   |   |             |  
|(amortized cost  September 2006, $31,451,423; December 2005, $37,710,146)                                                                                                        |  |                    | 30,919,204  |   |                   |   | 37,175,682  |  
|Loans receivable - net                                                                                                                                                            |  |                    | 433,698,425 |   |                   |   | 412,005,109 |  
|Accrued interest receivable:                                                                                                                                                      |  |                    |             |   |                   |   |             |  
|Loans                                                                                                                                                                             |  |                    | 1,760,476   |   |                   |   | 1,592,328   |  
|Mortgage-backed securities                                                                                                                                                        |  |                    | 157,209     |   |                   |   | 176,217     |  
|Investment securities                                                                                                                                                             |  |                    | 353,604     |   |                   |   | 443,789     |  
|Federal Home Loan Bank stock  at cost                                                                                                                                            |  |                    | 3,030,900   |   |                   |   | 2,622,800   |  
|Office properties and equipment  net                                                                                                                                             |  |                    | 8,320,067   |   |                   |   | 8,399,552   |  
|Prepaid expenses and other assets                                                                                                                                                 |  |                    | 2,599,710   |   |                   |   | 3,112,147   |  
|Cash surrender value of life insurance                                                                                                                                            |  |                    | 7,534,739   |   |                   |   | 7,339,094   |  
|Deferred tax asset                                                                                                                                                                |  |                    | 1,277,753   |   |                   |   | 564,683     |  
|                                                                                                                                                                                  |  |                    |             |   |                   |   |             |  
|TOTAL ASSETS                                                                                                                                                                      |  | $                  | 562,654,897 |   |                   | $ | 543,845,874 |  
|                                                                                                                                                                                  |  |                    |             |   |                   |   |             |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                              |  |                    |             |   |                   |   |             |  
|LIABILITIES:                                                                                                                                                                      |  |                    |             |   |                   |   |             |  
|Non-interest bearing deposits                                                                                                                                                     |  | $                  | 34,833,648  |   |                   | $ | 34,223,473  |  
|Interest bearing deposits                                                                                                                                                         |  |                    | 392,064,480 |   |                   |   | 382,690,429 |  
|Advances from Federal Home Loan Bank                                                                                                                                              |  |                    | 44,000,000  |   |                   |   | 27,000,000  |  
|Junior subordinated debenture                                                                                                                                                     |  |                    | 15,464,000  |   |                   |   | 15,464,000  |  
|Securities sold under agreements to repurchase                                                                                                                                    |  |                    | 8,190,000   |   |                   |   | 18,460,000  |  
|Advances from borrowers for taxes and insurance                                                                                                                                   |  |                    | 2,423,269   |   |                   |   | 2,200,325   |  
|Accrued interest payable                                                                                                                                                          |  |                    | 530,983     |   |                   |   | 835,122     |  
|Other liabilities                                                                                                                                                                 |  |                    | 3,060,992   |   |                   |   | 2,404,243   |  
|                                                                                                                                                                                  |  |                    |             |   |                   |   |             |  
|Total liabilities                                                                                                                                                                 |  |                    | 500,567,372 |   |                   |   | 483,277,592 |  
|                                                                                                                                                                                  |  |                    |             |   |                   |   |             |  
|COMMITMENTS AND CONTINGENCIES                                                                                                                                                     |  |                    |             |   |                   |   |             |  
|                                                                                                                                                                                  |  |                   
|STOCKHOLDERS EQUITY:                                                                                                                                                             |  |                    |             |   |                   |   |             |  
|Preferred stock, $.01 par value, 5,000,000 shares authorized, none issued                                                                                                         |  |                    |            |   |                   |   |            |  
|Common stock, $.01 par value, 25,000,000 shares authorized, 8,762,742 shares issued; 8,620,949 and 8,762,742 shares outstanding at September
2006 and December 2005, respectively |  |                    | 87,627      |   |                   |   | 87,627      |  
|Additional paid-in capital                                                                                                                                                        |  |                    | 37,125,700  |   |                   |   | 38,392,348  |  
|Retained earnings  partially restricted                                                                                                                                          |  |                    | 30,205,694  |   |                   |   | 27,633,345  |  
|Treasury stock  at cost: 141,793 shares at September 2006                                                                                                                        |  |                    | (1,835,613  | ) |                   |   |            |  
|Common stock acquired for employee benefit plans                                                                                                                                  |  |                    | (2,805,240  | ) |                   |   | (4,798,480  | )
|Deferred compensation plans trust                                                                                                                                                 |  |                    | (405,649    | ) |                   |   | (373,607    | )
|Accumulated other comprehensive loss                                                                                                                                              |  |                    | (284,994    | ) |                   |   | (372,951    | )
|                                                                                                                                                                                  |  |                    |             |   |                   |   |             |  
|Total stockholders equity                                                                                                                                                        |  |                    | 62,087,525  |   |                   |   | 60,568,282  |  
|                                                                                                                                                                                  |  |                    |             |   |                   |   |             |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                        |  | $                  | 562,654,897 |   |                   | $ | 543,845,874 |  
|                                                                                                                                                                                  |  |                    |             |   |                   |   |             |  

See notes to unaudited condensed consolidated financial statements.



1



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OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME



|                                                                                                              |  |                                  |           |                                 |   |           |  |      |            |  |   |           
|------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | --------- | ------------------------------- | - | --------- |  | ---- | ---------- |  | - | ----------
|                                                                                                              |  | Three Months Ended September 30, |           | Nine Months Ended September 30,
|                                                                                                              |  | 2006                             |           | 2005                            |   | 2006      |  | 2005
|INTEREST AND DIVIDEND INCOME:                                                                                 |  |                                  |           |                                 |   |           |  |      |            |  |   |           
|Taxable interest and fees on loans                                                                            |  | $                                | 6,465,687 |                                 | $ | 5,490,539 |  | $    | 18,746,528 |  | $ | 15,286,954
|Taxable interest on mortgage-backed securities                                                                |  |                                  | 438,534   |                                 |   | 515,131   |  |      | 1,354,041  |  |   | 1,669,473 
|Non-taxable interest on municipal securities                                                                  |  |                                  | 37,056    |                                 |   | 92,257    |  |      | 166,890    |  |   | 295,271   
|Taxable interest and dividends on investments                                                                 |  |                                  | 693,720   |                                 |   | 658,802   |  |      | 1,865,524  |  |   | 2,007,436 
|                                                                                                              |  |                                  |           |                                 |   |           |  |      |            |  |   |           
|Total interest and dividend income                                                                            |  |                                  | 7,634,997 |                                 |   | 6,756,729 |  |      | 22,132,983 |  |   | 19,259,134
|                                                                                                              |  |                                  |           |                                 |   |           |  |      |            |  |   |           
|INTEREST EXPENSE:                                                                                             |  |                                  |           |                                 |   |           |  |      |            |  |   |           
|Deposits                                                                                                      |  |                                  | 2,841,877 |                                 |   | 2,103,366 |  |      | 7,973,665  |  |   | 5,796,171 
|Advances from Federal Home Loan Bank, securities sold under agreements to repurchase and other borrowed money |  |                                  | 916,312   |                                 |   | 732,186   |  |      | 2,697,166  |  |   | 2,137,271 
|                                                                                                              |  |                                  |           |                                 |   |           |  |      |            |  |   |           
|Total interest expense                                                                                        |  |                                  | 3,758,189 |                                 |   | 2,835,552 |  |      | 10,670,831 |  |   | 7,933,442 
|                                                                                                              |  |                                  |           |                                 |   |           |  |      |            |  |   |           
|NET INTEREST INCOME                                                                                           |  |                                  | 3,876,808 |                                 |   | 3,921,177 |  |      | 11,462,152 |  |   | 11,325,692
|                                                                                                              |  |                                  |           |                                
|PROVISION FOR LOAN LOSSES                                                                                     |  |                                  | 75,000    |                                 |   | 75,000    |  |      | 225,000    |  |   | 225,000   
|                                                                                                              |  |                                  |           |                                 |   |           |  |      |            |  |   |           
|                                                                                                              |  |                                  |           |                                
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                                                           |  |                                  | 3,801,808 |                                 |   | 3,846,177 |  |      | 11,237,152 |  |   | 11,100,692
|                                                                                                              |  |                                  |           |                                 |   |           |  |      |            |  |   |           
|OTHER INCOME:                                                                                                 |  |                                  |           |                                 |   |           |  |      |            |  |   |           
|Service charges                                                                                               |  |                                  | 388,124   |                                 |   | 410,480   |  |      | 1,165,945  |  |   | 1,145,583 
|Cash surrender value of life insurance                                                                        |  |                                  | 65,500    |                                 |   | 63,000    |  |      | 195,645    |  |   | 199,000   
|Other                                                                                                         |  |                                  | 138,135   |                                 |   | 148,114   |  |      | 384,034    |  |   | 416,792   
|                                                                                                              |  |                                  |           |                                 |   |           |  |      |            |  |   |           
|Total other income                                                                                            |  |                                  | 591,759   |                                 |   | 621,594   |  |      | 1,745,624  |  |   | 1,761,375 
|                                                                                                              |  |                                  |           |                                 |   |           |  |      |            |  |   |           
|OTHER EXPENSES:                                                                                               |  |                                  |           |                                 |   |           |  |      |            |  |   |           
|Salaries and employee benefits                                                                                |  |                                  | 1,920,933 |                                 |   | 1,810,411 |  |      | 5,670,183  |  |   | 5,268,720 
|Occupancy and equipment                                                                                       |  |                                  | 691,896   |                                 |   | 664,255   |  |      | 2,013,448  |  |   | 1,829,658 
|Federal insurance premiums                                                                                    |  |                                  | 13,067    |                                 |   | 13,653    |  |      | 40,688     |  |   | 43,163    
|Advertising                                                                                                   |  |                                  | 93,040    |                                 |   | 114,550   |  |      | 295,764    |  |   | 315,529   
|Professional services                                                                                         |  |                                  | 167,016   |                                 |   | 227,901   |  |      | 464,506    |  |   | 590,518   
|Other operating expenses                                                                                      |  |                                  | 333,276   |                                 |   | 352,527   |  |      | 1,018,493  |  |   | 1,013,616 
|                                                                                                              |  |                                  |           |                                 |   |           |  |      |            |  |   |           
|Total other expenses                                                                                          |  |                                  | 3,219,228 |                                 |   | 3,183,297 |  |      | 9,503,082  |  |   | 9,061,204 
|                                                                                                              |  |                                  |           |                                 |   |           |  |      |            |  |   |           
|INCOME BEFORE INCOME TAXES                                                                                    |  |                                  | 1,174,339 |                                 |   | 1,284,474 |  |      | 3,479,694  |  |   | 3,800,863 
|                                                                                                              |  |                                  |           |                                
|INCOME TAX EXPENSE                                                                                            |  |                                  | 4,860     |                                 |   | 506,029   |  |      | 907,346    |  |   | 1,490,257 
|                                                                                                              |  |                                  |           |                                 |   |           |  |      |            |  |   |           
|NET INCOME                                                                                                    |  | $                                | 1,169,479 |                                 | $ | 778,445   |  | $    | 2,572,348  |  | $ | 2,310,606 
|                                                                                                              |  |                                  |           |                                 |   |           |  |      |            |  |   |           
|Basic earnings per share:                                                                                     |  | $                                | 0.14      |                                 | $ | 0.09      |  | $    | 0.31       |  | $ | 0.27      
|Diluted earnings per share:                                                                                   |  | $                                | 0.14      |                                 | $ | 0.09      |  | $    | 0.30       |  | $ | 0.27      

See notes to unaudited condensed consolidated financial statements.



2



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OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005



|                                                                                           |  |             |        |                          |   |            |                                       |  |               |            |  |                         |            |   |                                 |   |            |                                            |  |   |              |   |  |   |          |   |  |   |            |  
|------------------------------------------------------------------------------------------ |  | ----------- | ------ | ------------------------ | - | ---------- | ------------------------------------- |  | ------------- | ---------- |  | ----------------------- | ---------- | - | ------------------------------- | - | ---------- | ------------------------------------------ |  | - | ------------ | - |  | - | -------- | - |  | - | ---------- | -
|                                                                                           |  | CommonStock |        | AdditionalPaid-InCapital |   |            | RetainedEarnings -PartiallyRestricted |  | TreasuryStock |            |  | Unallocated ESOP Shares |            |   | DeferredCompensationPlans Trust |   |            | AccumulatedOtherComprehensiveIncome (Loss) |  |   | Total Equity |  
|BALANCE  January 1, 2006                                                                  |  | $           | 87,627 |                          | $ | 38,392,348 |                                       |  | $             | 27,633,346 |  | $                       |           |   |                                 | $ | (4,798,480 | )                                          |  | $ | (373,607     | ) |  | $ | (372,951 | ) |  | $ | 60,568,282 |  
|                                                                                           |  |             |        |                          |   |            |                                       | 
|Comprehensive income:                                                                      |  |             |        |                          |   |            |                                       |  |               |            |  |                         |            |   |                                 |   |            |                                            |  |   |              |   |  |   |          |   |  |   |            |  
|Net income                                                                                 |  |             |        |                          |   |            |                                       |  |               | 2,572,348  |  |                         |            |   |                                 |   |            |                                            |  |   |              |   |  |   |          |   |  |   | 2,572,348  |  
|Net change in unrealized loss on securities available for sale, net of taxes of $65,961    |  |             |        |                          |   |            |                                       |  |               |            |  |                         |            |   |                                 |   |            |                                            |  |   |              |   |  |   | 87,957   |   |  |   | 87,957     |  
|                                                                                           |  |             |        |                          |   |            |                                       |  |               |            |  |                         |            |   |                                 |   |            |                                            |  |   |              |   |  |   |          |   |  |   |            |  
|Comprehensive income                                                                       |  |             |        |                          |   |            |                                       |  |               |            |  |                         |            |   |                                 |   |            |                                            |  |   |              |   |  |   |          |   |  |   | 2,660,305  |  
|Reclassification upon adoption of SFAS 123(R)                                              |  |             |        |                          |   | (1,821,490 | )                                     |  |               |            |  |                         |            |   |                                 |   | 1,821,490  |                                            |  |   |              |   |  |   |          |   |  |   |           |  
|Excess of fair market value above cost of ESOP shares committed to be released             |  |             |        |                          |   | 39,503     |                                       |  |               |            |  |                         |            |   |                                 |   |            |                                            |  |   |              |   |  |   |          |   |  |   | 39,503     |  
|Unallocated ESOP shares committed to employees                                             |  |             |        |                          |   |            |                                       |  |               |            |  |                         |            |   |                                 |   | 171,750    |                                            |  |   |              |   |  |   |          |   |  |   | 171,750    |  
|Purchase of treasury stock                                                                 |  |             |        |                          |   |            |                                       |  |               |            |  |                         | (1,835,613 | ) |                                 |   |            |                                            |  |   |              |   |  |   |          |   |  |   | (1,835,613 | )
|Restricted stock shares                                                                    |  |             |        |                          |   | 298,069    |                                       |  |               |            |  |                         |            |   |                                 |   |            |                                            |  |   |              |   |  |   |          |   |  |   | 298,069    |  
|Stock options                                                                              |  |             |        |                          |   | 217,271    |                                       |  |               |            |  |                         |            |   |                                 |   |            |                                            |  |   |              |   |  |   |          |   |  |   | 217,271    |  
|Purchase of shares by deferred compensation plans trust                                    |  |             |        |                          |   |            |                                       |  |               |            |  |                         |            |   |                                 |   |            |                                            |  |   | (32,042      | ) |  |   |          |   |  |   | (32,042    | )
|                                                                                           |  |             |        |                          |   |            |                                       |  |               |            |  |                         |            |   |                                 |   |            |                                            |  |   |              |   |  |   |          |   |  |   |            |  
|BALANCE - September 30, 2006                                                               |  | $           | 87,627 |                          | $ | 37,125,700 |                                       |  | $             | 30,205,694 |  | $                       | (1,835,613 | ) |                                 | $ | (2,805,240 | )                                          |  | $ | (405,649     | ) |  | $ | (284,994 | ) |  | $ | 62,087,525 |  
|                                                                                           |  |             |        |                          |   |            |                                       |  |               |            |  |                         |            |   |                                 |   |            |                                            |  |   |              |   |  |   |          |   |  |   |            |  
|BALANCE - January 1, 2005                                                                  |  | $           | 87,627 |                          | $ | 38,387,523 |                                       |  | $             | 24,557,370 |  | $                       |           |   |                                 | $ | (3,205,990 | )                                          |  | $ | (321,260     | ) |  | $ | 289,966  |   |  | $ | 59,795,236 |  
|Comprehensive income:                                                                      |  |             |        |                          |   |            |                                       |  |               |            |  |                         |            |   |                                 |   |            |                                            |  |   |              |   |  |   |          |   |  |   |            |  
|Net income                                                                                 |  |             |        |                          |   |            |                                       |  |               | 2,310,606  |  |                         |            |   |                                 |   |            |                                            |  |   |              |   |  |   |          |   |  |   | 2,310,606  |  
|Net change in unrealized loss on securities available for sale, net of taxes of $(336,283) |  |             |        |                          |   |            |                                       |  |               |            |  |                         |            |   |                                 |   |            |                                            |  |   |              |   |  |   | (545,805 | ) |  |   | (545,805   | )
|                                                                                           |  |             |        |                          |   |            |                                       |  |               |            |  |                         |            |   |                                 |   |            |                                            |  |   |              |   |  |   |          |   |  |   |            |  
|Comprehensive income                                                                       |  |             |        |                          |   |            |                                       |  |               |            |  |                         |            |   |                                 |   |            |                                            |  |   |              |   |  |   |          |   |  |   | 1,764,801  |  
|Excess of fair market value above cost of ESOP shares                                      |  |             |        |                          |   | 3,222      |                                       |  |               |            |  |                         |            |   |                                 |   |            |                                            |  |   |              |   |  |   |          |   |  |   | 3,222      |  
|Purchase of shares for restricted stock plan                                               |  |             |        |                          |   |            |                                       |  |               |            |  |                         |            |   |                                 |   | (1,987,080 | )                                          |  |   |              |   |  |   |          |   |  |   | (1,987,080 | )
|Restricted stock shares                                                                    |  |             |        |                          |   |            |                                       |  |               |            |  |                         |            |   |                                 |   | 66,236     |                                            |  |   |              |   |  |   |          |   |  |   | 66,236     |  
|Unallocated ESOP shares committed to employees                                             |  |             |        |                          |   |            |                                       |  |               |            |  |                         |            |   |                                 |   | 171,750    |                                            |  |   |              |   |  |   |          |   |  |   | 171,750    |  
|Purchase of shares by deferred compensation plans trust                                    |  |             |        |                          |   |            |                                       |  |               |            |  |                         |            |   |                                 |   |            |                                            |  |   | (40,681      | ) |  |   |          |   |  |   | (40,681    | )
|                                                                                           |  |             |        |                          |   |            |                                       |  |               |            |  |                         |            |   |                                 |   |            |                                            |  |   |              |   |  |   |          |   |  |   |            |  
|BALANCE  September 30, 2005                                                               |  | $           | 87,627 |                          | $ | 38,390,745 |                                       |  | $             | 26,867,976 |  | $                       |           |   |                                 | $ | (4,955,084 | )                                          |  | $ | (361,941     | ) |  | $ | (255,839 | ) |  | $ | 59,773,484 |  
|                                                                                           |  |             |        |                          |   |            |                                       |  |               |            |  |                         |            |   |                                 |   |            |                                            |  |   |              |   |  |   |          |   |  |   |            |  

See notes to unaudited condensed consolidated financial statements.

|
|



3



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OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                  |  |                                 |             |   |      |   |             |  
|--------------------------------------------------------------------------------- |  | ------------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                                                  |  | Nine Months Ended September 30, |            
|                                                                                  |  | 2006                            |             |   | 2005 |  
|OPERATING ACTIVITIES:                                                             |  |                                 |             |   |      |   |             |  
|Net income                                                                        |  | $                               | 2,572,348   |   |      | $ | 2,310,606   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                 |             |   |      |   |             |  
|Depreciation and amortization                                                     |  |                                 | 863,711     |   |      |   | 1,020,419   |  
|Provision for loan losses                                                         |  |                                 | 225,000     |   |      |   | 225,000     |  
|Deferred income taxes                                                             |  |                                 | (779,030    | ) |      |   | 306,353     |  
|ESOP and restricted stock plans                                                   |  |                                 | 469,819     |   |      |   | 237,986     |  
|Incentive stock option plan                                                       |  |                                 | 217,271     |   |      |   |            |  
|Loss on sale of office properties and equipment                                   |  |                                 | 229         |   |      |   |            |  
|Increase in cash surrender value of life insurance                                |  |                                 | (195,645    | ) |      |   | (199,000    | )
|Excess of fair market value above cost of ESOP shares                             |  |                                 | 39,503      |   |      |   | 3,222       |  
|Changes in assets and liabilities which provided (used) cash:                     |  |                                 |             |   |      |   |             |  
|Accrued interest receivable                                                       |  |                                 | (58,955     | ) |      |   | (71,020     | )
|Prepaid expenses and other assets                                                 |  |                                 | 512,436     |   |      |   | (443,048    | )
|Accrued interest payable                                                          |  |                                 | (304,139    | ) |      |   | (332,244    | )
|Other liabilities                                                                 |  |                                 | 656,749     |   |      |   | 254,141     |  
|                                                                                  |  |                                 |             |   |      |   |             |  
|Net cash provided by operating activities                                         |  |                                 | 4,219,297   |   |      |   | 3,312,415   |  
|                                                                                  |  |                                 |             |   |      |   |             |  
|INVESTING ACTIVITIES:                                                             |  |                                 |             |   |      |   |             |  
|Principal collected on:                                                           |  |                                 |             |   |      |   |             |  
|Mortgage-backed securities held to maturity                                       |  |                                 | 552,652     |   |      |   | 456,299     |  
|Mortgage-backed securities available for sale                                     |  |                                 | 6,197,956   |   |      |   | 11,243,520  |  
|Loans originated, net of repayments                                               |  |                                 | (22,133,327 | ) |      |   | (57,082,898 | )
|Purchases of:                                                                     |  |                                 |             |   |      |   |             |  
|Mortgage-backed securities held to maturity                                       |  |                                 | (523,429    | ) |      |   | (3,993,750  | )
|Investment securities held to maturity                                            |  |                                 | (788,431    | ) |      |   | (5,742,600  | )
|Investment securities available for sale                                          |  |                                 |            |   |      |   | (5,509,375  | )
|Federal Home Loan Bank Stock                                                      |  |                                 | (1,250,800  | ) |      |   | (289,500    | )
|Office properties and equipment                                                   |  |                                 | (504,560    | ) |      |   | (1,032,555  | )
|Proceeds from redemption of:                                                      |  |                                 |             |   |      |   |             |  
|Federal Home Loan Bank stock                                                      |  |                                 | 842,700     |   |      |   |            |  
|Proceeds from maturities of:                                                      |  |                                 |             |   |      |   |             |  
|Investment securities held to maturity                                            |  |                                 | 5,081,031   |   |      |   | 8,931,851   |  
|Investment securities available for sale                                          |  |                                 | 10,775,355  |   |      |   | 9,187,979   |  
|Purchase of life insurance contracts                                              |  |                                 |            |   |      |   | (85,100     | )
|                                                                                  |  |                                 |             |   |      |   |             |  
|Net cash used in investing activities                                             |  |                                 | (1,750,853  | ) |      |   | (43,916,129 | )
|                                                                                  |  |                                 |             |   |      |   |             |  
|FINANCING ACTIVITIES:                                                             |  |                                 |             |   |      |   |             |  
|Increase in deposits                                                              |  |                                 | 9,984,226   |   |      |   | 34,429,946  |  
|Increase (decrease) in securities sold under agreements to repurchase             |  |                                 | (10,270,000 | ) |      |   | 2,240,000   |  
|Increase in advances from the Federal Home Loan Bank                              |  |                                 | 17,000,000  |   |      |   |            |  
|Purchase of treasury stock                                                        |  |                                 | (1,835,613  | ) |      |   |            |  
|Purchase of shares by deferred compensation plans trust                           |  |                                 | (32,042     | ) |      |   | (40,681     | )
|Increase in advances from borrowers for taxes and insurance                       |  |                                 | 222,944     |   |      |   | 239,078     |  
|                                                                                  |  |                                 |             |   |      |   |             |  
|Net cash provided by financing activities                                         |  |                                 | 15,069,515  |   |      |   | 34,881,263  |  
|                                                                                  |  |                                 |             |   |      |   |             |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                              |  |                                 | 17,537,959  |   |      |   | (5,722,451  | )
|                                                                                  |  |                                
|CASH AND CASH EQUIVALENTSBeginning of period                                     |  |                                 | 13,400,085  |   |      |   | 47,395,819  |  
|                                                                                  |  |                                 |             |   |      |   |             |  
|CASH AND CASH EQUIVALENTSEnd of period                                           |  | $                               | 30,938,044  |   |      | $ | 41,673,368  |  
|                                                                                  |  |                                 |             |   |      |   |             |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW                                             |  |                                 |             |   |      |   |             |  
|INFORMATION  Cash paid during the period for:                                    |  |                                 |             |   |      |   |             |  
|Interest                                                                          |  | $                               | 10,971,970  |   |      | $ | 8,265,686   |  
|                                                                                  |  |                                 |             |   |      |   |             |  
|Income taxes                                                                      |  | $                               | 1,120,140   |   |      | $ | 1,375,813   |  
|                                                                                  |  |                                 |             |   |      |   |             |  

See notes to unaudited condensed consolidated financial statements.



4



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OCEAN SHORE HOLDING CO. AND SUBSIDIARIES

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 intercompany balances and transactions have been eliminated in
consolidation. The accompanying unaudited condensed consolidated financial statements were prepared in accordance with instructions to Form 10-Q and, therefore, do not include information or footnotes necessary for a complete presentation of
financial position, results of operations, changes in stockholders equity and cash flows in conformity with accounting principles generally accepted in the United States of America. However, all normal recurring adjustments that, in the
opinion of management, are necessary for a fair presentation of the 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, 2005. The results for the three and nine months ended September 30, 2006 are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 2006 or any other period.

Use of Estimates in the Preparation of Financial
Statements - The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. The most significant estimates relate to the
allowance for loan losses and deferred income taxes. Actual results could differ from those estimates.

New Accounting Pronouncements-In May
2005, the Financial Accounting Standards Board (FASB) issued Statements of Financial Accounting Standards (SFAS) No. 154  Accounting Changes and Error Corrections. SFAS No. 154, a
replacement of Accounting Principals Board (APB) Opinion No. 20  Accounting Changes and FASB Statement No. 3  Reporting Accounting Changes in Interim Financial Statements. SFAS
No. 154 requires retrospective application for voluntary changes in accounting principles unless it is impracticable to do so. SFAS No. 154 is effective for accounting changes and corrections of errors in fiscal years beginning after
December 15, 2005. Early application is permitted for accounting changes and corrections of errors during fiscal years beginning after June 1, 2005. The adoption of SFAS No. 154 did not have a material effect on our financial
condition or results of operations.

On December 19, 2005, the FASB issued FASB Staff Position (FSP) 94-6-1, Terms of Loan
Products That May Give Rise to a Concentration of Credit Risk. FSP 94-6-1 addresses whether, under existing guidance, non-traditional loan products represent a concentration of credit risk and what disclosures are required for entities
that originate, hold, guarantee, service or invest in loan products whose terms may give rise to a concentration of credit risk. Non-traditional loan products expose the originator, holder, investor, guarantor or servicer to higher credit risk than
traditional loan products. Typical features of non-traditional loan products may include high loan-to-value ratios and interest or principal repayments that are less than the repayments for fully amortizing loans of an equivalent term. FSP 94-6-1
was effective upon its issuance and did not have a material impact on the Companys financial position or disclosures.

In February 2006, the FASB
issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments. This statement amends FASB Statements No. 133, Accounting for Derivative Instruments and Hedging Activities,and No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. This statement resolves issues addressed in Statement 133 Implementation Issue No. D1, Application of Statement 133 to
Beneficial Interest in Securitized Financial Assets. This Statement is effective for all financial instruments acquired or issued after the beginning of an entitys first fiscal year that begins after September 15, 2006. The
Company does not expect that the guidance will have a material effect on the Companys financial position or results of operations.



5



---

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets 
an amendment of FASB Statement No. 140. This statement addresses the recognition and measurement of separately recognized servicing rights. The statement clarifies when a servicing right should be separately recognized, requires servicing
rights to be initially measured at fair value, and allows an entity to choose to subsequently measure its servicing rights at fair value. The Statement is effective as of the beginning of an entitys first fiscal year that begins after
September 15, 2006. The Company is evaluating the impact of this pronouncement and does not expect that the guidance will have a material effect on the Companys financial position or results of operations.

In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement
No. 109 (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements in accordance with FASB Statement No. 109, Accounting for Income
Taxes. This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also
provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is currently
evaluating the impact of this pronouncement.

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements
(SFAS No. 157). SFAS No. 157 (i) defines fair value, (ii) establishes a framework for measuring fair value in GAAP and (iii) expands disclosure requirements about fair value measurements. SFAS No. 157 is
effective for all financial statements issued for fiscal years beginning after November 15, 2007. The Company currently is considering the impact from the adoption of SFAS No. 157.

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

In September 2006, the Securities and
Exchange Commission (SEC) released Staff Accounting Bulletin (SAB) No. 108. This release expresses the staffs views regarding the process of quantifying financial statement misstatements and addresses diversity in
practice in quantifying financial statement misstatements and the potential under current practice for the build up of improper amounts on the balance sheet. SAB No. 108 is effective for annual financial statements covering the first fiscal
year ending after November 15, 2006. The Company has reviewed SAB No. 18 in connection with our condensed consolidated financial statements for the current and prior periods, and has determined that its adoption will not have an
impact on any of these financial statements.



6



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2. INVESTMENT SECURITIES

Investment securities are summarized as follows:



|                                     |  |                    |            |                     |   |                     |  |                     |         |  |   |           
|------------------------------------ |  | ------------------ | ---------- | ------------------- | - | ------------------- |  | ------------------- | ------- |  | - | ----------
|                                     |  | September 30, 2006
|                                     |  | AmortizedCost      |            | GrossUnrealizedGain |   | GrossUnrealizedLoss |  | EstimatedFair Value
|Available for Sale                   |  |                    |            |                     |   |                     |  |                     |         |  |   |           
|Debt securities -                    |  |                    |            |                     |   |                     |  |                     |         |  |   |           
|U.S. Government and Federal Agencies |  | $                  | 13,660,798 |                     | $ |                    |  | $                   | 77,398  |  | $ | 13,583,400
|Municipal securities                 |  |                    | 2,954,544  |                     |   | 59,304              |  |                     |        |  |   | 3,013,848 
|Corporate                            |  |                    | 11,967,088 |                     |   | 248,630             |  |                     | 126,459 |  |   | 12,089,259
|Mutual funds                         |  |                    | 8,012,172  |                     |   | 187,795             |  |                     | 222,765 |  |   | 7,977,202 
|                                     |  |                    |            |                     |   |                     |  |                     |         |  |   |           
|                                     |  | $                  | 36,594,602 |                     | $ | 495,729             |  | $                   | 426,622 |  | $ | 36,663,709
|                                     |  |                    |            |                     |   |                     |  |                     |         |  |   |           



|                                     |  |                   |            |                     |   |                     |  |                      |         |  |   |           
|------------------------------------ |  | ----------------- | ---------- | ------------------- | - | ------------------- |  | -------------------- | ------- |  | - | ----------
|                                     |  | December 31, 2005
|                                     |  | Amortized Cost    |            | GrossUnrealizedGain |   | GrossUnrealizedLoss |  | Estimated Fair Value
|Held to Maturity                     |  |                   |            |                     |   |                     |  |                      |         |  |   |           
|Debt securities -                    |  |                   |            |                     |   |                     |  |                      |         |  |   |           
|Municipal securities                 |  | $                 | 4,292,600  |                     | $ | 1,035               |  | $                    |        |  | $ | 4,293,635 
|                                     |  |                   |            |                     |   |                     |  |                      |         |  |   |           
|Available for Sale                   |  |                   |            |                     |   |                     |  |                      |         |  |   |           
|Debt securities -                    |  |                   |            |                     |   |                     |  |                      |         |  |   |           
|U.S. Government and Federal Agencies |  | $                 | 22,433,195 |                     | $ | 5,230               |  | $                    | 303,427 |  | $ | 22,134,998
|Municipal securities                 |  |                   | 4,949,764  |                     |   | 79,699              |  |                      |        |  |   | 5,029,463 
|Corporate                            |  |                   | 11,973,310 |                     |   | 274,114             |  |                      | 93,018  |  |   | 12,154,406
|Mutual funds                         |  |                   | 8,012,172  |                     |   | 186,931             |  |                      | 232,095 |  |   | 7,967,008 
|                                     |  |                   |            |                     |   |                     |  |                      |         |  |   |           
|                                     |  | $                 | 47,368,441 |                     | $ | 545,974             |  | $                    | 628,540 |  | $ | 47,285,875
|                                     |  |                   |            |                     |   |                     |  |                      |         |  |   |           

The following table provides the gross unrealized losses and fair value, aggregated by investment category and
length of time the individual securities have been in a continuous unrealized loss position at September 30, 2006 and December 31, 2005:



|                    |  |                      |           |                     |   |                     |  |                       |            |                     |   |                       |  |   |            |  |   |        
|------------------- |  | -------------------- | --------- | ------------------- | - | ------------------- |  | --------------------- | ---------- | ------------------- | - | --------------------- |  | - | ---------- |  | - | -------
|                    |  | September 30, 2006  
|                    |  | Less Than 12 Months  |           | 12 Months or Longer |   | Total              
|                    |  | Estimated Fair Value |           | GrossUnrealizedLoss |   | EstimatedFair Value |  | Gross Unrealized Loss |            | EstimatedFair Value |   | Gross Unrealized Loss
|Debt securities -   |  |                      |           |                     |   |                     |  |                       |            |                     |   |                       |  |   |            |  |   |        
|U.S. Government and |  |                      |           |                     |   |                     |  |                       |            |                     |   |                       |  |   |            |  |   |        
|Federal Agencies    |  | $                    |          |                     | $ |                    |  | $                     | 13,583,400 |                     | $ | 77,398                |  | $ | 13,583,400 |  | $ | 77,398 
|Corporate           |  |                      | 2,126,668 |                     |   | 13,521              |  |                       | 3,006,046  |                     |   | 112,938               |  |   | 5,132,714  |  |   | 126,459
|Mutual funds        |  |                      |          |                     |   |                    |  |                       | 7,786,811  |                     |   | 222,765               |  |   | 7,786,811  |  |   | 222,765
|                    |  |                      |           |                     |   |                     |  |                       |            |                     |   |                       |  |   |            |  |   |        
|                    |  | $                    | 2,126,668 |                     | $ | 13,521              |  | $                     | 24,376,257 |                     | $ | 413,101               |  | $ | 26,502,925 |  | $ | 426,622
|                    |  |                      |           |                     |   |                     |  |                       |            |                     |   |                       |  |   |            |  |   |        



|                    |  |                     |           |                       |   |                     |  |                     |            |                     |   |                       |  |   |            |  |   |        
|------------------- |  | ------------------- | --------- | --------------------- | - | ------------------- |  | ------------------- | ---------- | ------------------- | - | --------------------- |  | - | ---------- |  | - | -------
|                    |  | December 31, 2005  
|                    |  | Less Than 12 Months |           | 12 Months or Longer   |   | Total              
|                    |  | EstimatedFair Value |           | Gross Unrealized Loss |   | EstimatedFair Value |  | GrossUnrealizedLoss |            | EstimatedFair Value |   | Gross Unrealized Loss
|Debt securities -   |  |                     |           |                       |   |                     |  |                     |            |                     |   |                       |  |   |            |  |   |        
|U.S. Government and |  |                     |           |                       |   |                     |  |                     |            |                     |   |                       |  |   |            |  |   |        
|Federal Agencies    |  | $                   | 3,531,734 |                       | $ | 42,653              |  | $                   | 17,982,383 |                     | $ | 260,774               |  | $ | 21,514,117 |  | $ | 303,427
|Corporate           |  |                     | 1,490,405 |                       |   | 20,648              |  |                     | 1,537,204  |                     |   | 72,370                |  |   | 3,027,609  |  |   | 93,018 
|Mutual funds        |  |                     |          |                       |   |                    |  |                     | 7,777,482  |                     |   | 232,095               |  |   | 7,777,482  |  |   | 232,095
|                    |  |                     |           |                       |   |                     |  |                     |            |                     |   |                       |  |   |            |  |   |        
|                    |  | $                   | 5,022,139 |                       | $ | 63,301              |  | $                   | 27,297,069 |                     | $ | 565,239               |  | $ | 32,319,208 |  | $ | 628,540
|                    |  |                     |           |                       |   |                     |  |                     |            |                     |   |                       |  |   |            |  |   |        



7



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Management believes that the estimated fair value of the securities is dependent upon the movement in market interest
rates and that the unrealized losses are temporary. The determination of whether a decline in market value is other than temporary is necessarily a matter of subjective judgment. The timing and amount of any realized losses reported in the
Companys financial statements could vary if conclusions other than those made by management were to determine whether an other than temporary impairment exists.

At September 30, 2006, 11 debt securities had aggregate depreciation of 1.13% from the Companys amortized cost basis for 12 months or longer. The unrealized loss on debt securities relates principally
to the changes in market interest rates. U.S. Government and federal agencies securities represent U.S. treasury and federal agency issues and are currently rated AAA by at least one bond credit rating agency. The corporate securities have
no identified credit issues and have a current average credit rating of A. As management has the ability and intent to hold these debt securities until a forecasted recovery, which may be maturity, no decline is deemed to be other than
temporary.

At September 30, 2006, 2 mutual fund holdings had aggregate depreciation of 2.78% from the Companys amortized cost basis for 12
months or longer. Although the mutual fund holdings have unrealized losses, no credit issues have been identified that cause management to believe that declines in market value are other than temporary as the securities in the portfolios of the
mutual fund holdings are AAA rated government or agencies bonds. Although the fair value of the mutual fund holdings will fluctuate as the market interest rates move, management believes that the fair value will recover as the securities held
in the mutual fund portfolios mature and are reinvested at market rate yielding investments. Management has the ability and intent to hold these mutual funds until such time that the values recover.

The amortized cost and estimated fair value of debt securities available for sale at September 30, 2006 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.



|                                   |  |                               |            |                      |   |           
|---------------------------------- |  | ----------------------------- | ---------- | -------------------- | - | ----------
|                                   |  | September 30, 2006           
|                                   |  | Available for Sale Securities
|                                   |  | AmortizedCost                 |            | Estimated Fair Value
|Due within 1 year                  |  | $                             | 12,853,022 |                      | $ | 12,814,765
|Due after 1 year through 5 years   |  |                               | 1,416,004  |                      |   | 1,374,848 
|Due after 5 years through 10 years |  |                               | 1,000,000  |                      |   | 908,620   
|Due after 10 years                 |  |                               | 13,313,404 |                      |   | 13,588,274
|                                   |  |                               |            |                      |   |           
|Total                              |  | $                             | 28,582,430 |                      | $ | 28,686,507
|                                   |  |                               |            |                      |   |           



8



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3. MORTGAGE-BACKED SECURITIES

Mortgage-backed securities are summarized as follows:



|                                           |  |                    |            |                       |   |                     |  |                     |         |  |   |           
|------------------------------------------ |  | ------------------ | ---------- | --------------------- | - | ------------------- |  | ------------------- | ------- |  | - | ----------
|                                           |  | September 30, 2006
|                                           |  | AmortizedCost      |            | Gross Unrealized Gain |   | GrossUnrealizedLoss |  | EstimatedFair Value
|Held to Maturity                           |  |                    |            |                       |   |                     |  |                     |         |  |   |           
|                                           |  |                    |            |                      
|GNMA pass-through certificates             |  | $                  | 131,785    |                       | $ | 3,195               |  | $                   |        |  | $ | 134,980   
|FHLMC pass-through certificates            |  |                    | 525,446    |                       |   | 4,709               |  |                     |        |  |   | 530,155   
|FNMA pass-through certificates             |  |                    | 4,743,826  |                       |   | 1,247               |  |                     | 137,961 |  |   | 4,607,112 
|                                           |  |                    |            |                       |   |                     |  |                     |         |  |   |           
|Total                                      |  | $                  | 5,401,057  |                       | $ | 9,151               |  | $                   | 137,961 |  | $ | 5,272,247 
|                                           |  |                    |            |                       |   |                     |  |                     |         |  |   |           
|Available for Sale                         |  |                    |            |                       |   |                     |  |                     |         |  |   |           
|                                           |  |                    |            |                      
|FHLMC pass-through certificates            |  | $                  | 10,223,113 |                       | $ | 8,438               |  | $                   | 223,538 |  | $ | 10,008,013
|GNMA pass-through certificates             |  |                    | 3,840,465  |                       |   | 30,320              |  |                     | 15,300  |  |   | 3,855,485 
|FNMA pass-through certificates             |  |                    | 17,375,637 |                       |   | 37,371              |  |                     | 369,414 |  |   | 17,043,594
|Small Business Administration certificates |  |                    | 12,208     |                       |   |                    |  |                     | 96      |  |   | 12,112    
|                                           |  |                    |            |                       |   |                     |  |                     |         |  |   |           
|Total                                      |  | $                  | 31,451,423 |                       | $ | 76,129              |  | $                   | 608,348 |  | $ | 30,919,204
|                                           |  |                    |            |                       |   |                     |  |                     |         |  |   |           



|                                           |  |                   |            |                     |   |                     |  |                     |         |  |   |           
|------------------------------------------ |  | ----------------- | ---------- | ------------------- | - | ------------------- |  | ------------------- | ------- |  | - | ----------
|                                           |  | December 31, 2005
|                                           |  | AmortizedCost     |            | GrossUnrealizedGain |   | GrossUnrealizedLoss |  | EstimatedFair Value
|Held to Maturity                           |  |                   |            |                     |   |                     |  |                     |         |  |   |           
|                                           |  |                   |            |                    
|GNMA pass-through certificates             |  | $                 | 153,602    |                     | $ | 5,225               |  | $                   |        |  | $ | 158,827   
|FHLMC pass-through certificates            |  |                   | 4,013      |                     |   | 347                 |  |                     |        |  |   | 4,360     
|FNMA pass-through certificates             |  |                   | 5,278,298  |                     |   | 2,050               |  |                     | 122,835 |  |   | 5,157,513 
|                                           |  |                   |            |                     |   |                     |  |                     |         |  |   |           
|Total                                      |  | $                 | 5,435,913  |                     | $ | 7,622               |  | $                   | 122,835 |  | $ | 5,320,700 
|                                           |  |                   |            |                     |   |                     |  |                     |         |  |   |           
|Available for Sale                         |  |                   |            |                     |   |                     |  |                     |         |  |   |           
|                                           |  |                   |            |                    
|FHLMC pass-through certificates            |  | $                 | 11,789,191 |                     | $ | 17,544              |  | $                   | 275,214 |  | $ | 11,531,521
|GNMA pass-through certificates             |  |                   | 4,602,712  |                     |   | 72,341              |  |                     | 19,678  |  |   | 4,655,375 
|FNMA pass-through certificates             |  |                   | 21,288,309 |                     |   | 55,204              |  |                     | 384,493 |  |   | 20,959,020
|Small Business Administration certificates |  |                   | 29,934     |                     |   |                    |  |                     | 168     |  |   | 29,766    
|                                           |  |                   |            |                     |   |                     |  |                     |         |  |   |           
|Total                                      |  | $                 | 37,710,146 |                     | $ | 145,089             |  | $                   | 679,553 |  | $ | 37,175,682
|                                           |  |                   |            |                     |   |                     |  |                     |         |  |   |           

The following table provides the gross unrealized losses and fair value, aggregated by investment category and
length of time the individual securities have been in a continuous unrealized loss position at September 30, 2006 and December 31, 2005:



|                                                |  |                     |           |                     |   |                     |  |                     |            |                     |   |                     |  |   |            |  |   |        
|----------------------------------------------- |  | ------------------- | --------- | ------------------- | - | ------------------- |  | ------------------- | ---------- | ------------------- | - | ------------------- |  | - | ---------- |  | - | -------
|                                                |  | September 30, 2006 
|                                                |  | Less Than 12 Months |           | 12 Months or Longer |   | Total              
|                                                |  | EstimatedFair Value |           | GrossUnrealizedLoss |   | EstimatedFair Value |  | GrossUnrealizedLoss |            | EstimatedFair Value |   | GrossUnrealizedLoss
|FNMA pass-through certificates-held-to-maturity |  | $                   |          |                     | $ |                    |  | $                   | 4,467,457  |                     | $ | 137,961             |  | $ | 4,467,457  |  | $ | 137,961
|SBA pass-through certificates                   |  |                     |          |                     |   |                    |  |                     | 12,112     |                     |   | 96                  |  |   | 12,112     |  |   | 96     
|FHLMC pass-through certificates                 |  |                     | 330,503   |                     |   | 1,005               |  |                     | 9,172,043  |                     |   | 222,533             |  |   | 9,502,546  |  |   | 223,538
|GNMA pass-through certificates                  |  |                     |          |                     |   |                    |  |                     | 1,101,712  |                     |   | 15,300              |  |   | 1,101,712  |  |   | 15,300 
|FNMA pass-through certificates                  |  |                     | 831,496   |                     |   | 1,933               |  |                     | 13,804,186 |                     |   | 367,481             |  |   | 14,635,682 |  |   | 369,414
|                                                |  |                     |           |                     |   |                     |  |                     |            |                     |   |                     |  |   |            |  |   |        
|Total                                           |  | $                   | 1,161,999 |                     | $ | 2,938               |  | $                   | 28,557,510 |                     | $ | 743,371             |  | $ | 29,719,509 |  | $ | 746,309
|                                                |  |                     |           |                     |   |                     |  |                     |            |                     |   |                     |  |   |            |  |   |        



9



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|                                                |  |                     |            |                     |   |                     |  |                     |            |                     |   |                     |  |   |            |  |   |        
|----------------------------------------------- |  | ------------------- | ---------- | ------------------- | - | ------------------- |  | ------------------- | ---------- | ------------------- | - | ------------------- |  | - | ---------- |  | - | -------
|                                                |  | December 31, 2005  
|                                                |  | Less Than 12 Months |            | 12 Months or Longer |   | Total              
|                                                |  | EstimatedFair Value |            | GrossUnrealizedLoss |   | EstimatedFair Value |  | GrossUnrealizedLoss |            | EstimatedFair Value |   | GrossUnrealizedLoss
|FNMA pass-through certificates-held-to-maturity |  | $                   | 3,651,184  |                     | $ | 77,532              |  | $                   | 1,339,509  |                     | $ | 45,303              |  | $ | 4,990,693  |  | $ | 122,835
|SBA pass-through certificates                   |  |                     |           |                     |   |                    |  |                     | 29,766     |                     |   | 168                 |  |   | 29,766     |  |   | 168    
|FHLMC pass-through certificates                 |  |                     | 4,763,766  |                     |   | 99,930              |  |                     | 5,718,543  |                     |   | 175,284             |  |   | 10,482,309 |  |   | 275,214
|GNMA pass-through certificates                  |  |                     | 206,343    |                     |   | 195                 |  |                     | 1,111,778  |                     |   | 19,483              |  |   | 1,318,121  |  |   | 19,678 
|FNMA pass-through certificates                  |  |                     | 8,492,438  |                     |   | 169,824             |  |                     | 9,938,447  |                     |   | 214,669             |  |   | 18,430,885 |  |   | 384,493
|                                                |  |                     |            |                     |   |                     |  |                     |            |                     |   |                     |  |   |            |  |   |        
|Total                                           |  | $                   | 17,113,731 |                     | $ | 347,481             |  | $                   | 18,138,043 |                     | $ | 454,907             |  | $ | 35,251,774 |  | $ | 802,388
|                                                |  |                     |            |                     |   |                     |  |                     |            |                     |   |                     |  |   |            |  |   |        

Management believes that the estimated fair value of the securities is dependent upon the movement in market
interest rates and that the unrealized losses are temporary. At September 30, 2006, 27 mortgage-backed securities had aggregate depreciation of 2.54% from the Companys amortized cost basis for 12 months or longer. The unrealized
losses relate principally to the changes in market interest rates. These securities represent asset backed federal agency issues and are currently rated AAA by at least one bond credit rating agency. As management has the ability and
intent to hold these debt securities until a forecasted recovery, which may be maturity, no declines are deemed to be other than temporary.

4. LOANS
RECEIVABLE

Loans receivable consist of the following:



|                                 |  |               |             |   |              |   |             |  
|-------------------------------- |  | ------------- | ----------- | - | ------------ | - | ----------- | -
|                                 |  | September 30, |             |   | December 31, |  
|                                 |  | 2006          |             |   | 2005         |  
|Real estate - mortgage:          |  |               |             |   |              |   |             |  
|One-to four-family residential   |  | $             | 315,502,311 |   |              | $ | 294,295,873 |  
|Commercial and multi-family      |  |               | 32,298,049  |   |              |   | 28,725,017  |  
|                                 |  |               |             |   |              |   |             |  
|Total real estate-mortgage       |  |               | 347,800,360 |   |              |   | 323,020,890 |  
|                                 |  |               |             |   |              |   |             |  
|Real estate - construction:      |  |               |             |   |              |   |             |  
|Residential                      |  |               | 8,221,574   |   |              |   | 12,230,271  |  
|Commercial                       |  |               | 7,501,910   |   |              |   | 11,018,586  |  
|                                 |  |               |             |   |              |   |             |  
|Total real estate - construction |  |               | 15,723,484  |   |              |   | 23,248,857  |  
|                                 |  |               |             |   |              |   |             |  
|Commercial                       |  |               | 15,047,546  |   |              |   | 16,582,359  |  
|                                 |  |               |             |   |              |   |             |  
|Consumer:                        |  |               |             |   |              |   |             |  
|Home equity                      |  |               | 54,953,569  |   |              |   | 48,536,606  |  
|Other consumer loans             |  |               | 730,442     |   |              |   | 1,135,459   |  
|                                 |  |               |             |   |              |   |             |  
|Total consumer loans             |  |               | 55,684,011  |   |              |   | 49,672,065  |  
|                                 |  |               |             |   |              |   |             |  
|Total loans                      |  |               | 434,255,401 |   |              |   | 412,524,170 |  
|Net deferred loan cost           |  |               | 1,416,902   |   |              |   | 1,233,606   |  
|Allowance for loan losses        |  |               | (1,973,878  | ) |              |   | (1,752,667  | )
|                                 |  |               |             |   |              |   |             |  
|Net total loans                  |  | $             | 433,698,425 |   |              | $ | 412,005,109 |  
|                                 |  |               |             |   |              |   |             |  

Changes in the allowance for loan losses are as follows:



|                        |  |                                 |           |   |      |   |           |  
|----------------------- |  | ------------------------------- | --------- | - | ---- | - | --------- | -
|                        |  | Nine Months Ended September 30, |          
|                        |  | 2006                            |           |   | 2005 |  
|Balance at January 1    |  | $                               | 1,752,667 |   |      | $ | 1,466,295 |  
|Provision for loan loss |  |                                 | 225,000   |   |      |   | 225,000   |  
|Charge-offs             |  |                                 | (8,640    | ) |      |   | (8,930    | )
|Recoveries              |  |                                 | 4,852     |   |      |   | 2,982     |  
|                        |  |                                 |           |   |      |   |           |  
|Balance at September 30 |  | $                               | 1,973,878 |   |      | $ | 1,685,347 |  
|                        |  |                                 |           |   |      |   |           |  



10



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5. DEPOSITS

Deposits
consist of the following major classifications:



|                                       |  |                    |             |                              |                   |   |        |   |                              |  |      |  
|-------------------------------------- |  | ------------------ | ----------- | ---------------------------- | ----------------- | - | ------ | - | ---------------------------- |  | ---- | -
|                                       |  | September 30, 2006 |             |                              | December 31, 2005 |  
|                                       |  | Amount             |             | WeightedAverageInterest Rate |                   |   | Amount |   | WeightedAverageInterest Rate | 
|NOW and other demand deposit accounts  |  | $                  | 213,658,561 |                              | 2.06              | % |        | $ | 207,015,598                  |  | 1.56 | %
|Passbook savings and club accounts     |  |                    | 65,644,833  |                              | 1.14              | % |        |   | 79,437,866                   |  | 1.16 | %
|                                       |  |                    |             |                              |                   |   |        |   |                              |  |      |  
|Subtotal                               |  |                    | 279,303,394 |                              |                   |   |        |   | 286,453,464                  |  |      |  
|                                       |  |                    |             |                              |                   |   |        |   |                              |  |      |  
|Certificates with original maturities: |  |                    |             |                              |                   |   |        |   |                              |  |      |  
|Within one year                        |  |                    | 70,734,513  |                              | 4.41              | % |        |   | 46,783,779                   |  | 3.32 | %
|One to three years                     |  |                    | 36,188,508  |                              | 4.03              | % |        |   | 41,164,569                   |  | 3.41 | %
|Three years and beyond                 |  |                    | 40,671,713  |                              | 4.87              | % |        |   | 42,512,090                   |  | 4.81 | %
|                                       |  |                    |             |                              |                   |   |        |   |                              |  |      |  
|Total certificates                     |  |                    | 147,594,734 |                              |                   |   |        |   | 130,460,438                  |  |      |  
|                                       |  |                    |             |                              |                   |   |        |   |                              |  |      |  
|Total                                  |  | $                  | 426,898,128 |                              |                   |   |        | $ | 416,913,902                  |  |      |  
|                                       |  |                    |             |                              |                   |   |        |   |                              |  |      |  

The aggregate amount of certificate accounts in denominations of $100,000 or more at September 30, 2006 and
December 31, 2005 amounted to $48,961,076 and $42,241,555, respectively.

Municipal demand deposit accounts in denominations of $100,000 or more at
September 30, 2006 and December 31, 2005 amounted to $73,861,761 and $60,129,245, respectively.

6. EARNINGS PER SHARE

Basic net income per share is based upon the weighted average number of common shares outstanding, while diluted net income per share is based upon the weighted average
number of common shares outstanding and common share equivalents that would arise from the exercise of dilutive securities.

The difference between the
common shares issued and the common shares outstanding, for the purposes of calculating basic earnings per share (EPS) is a result of the unallocated ESOP shares and treasury stock purchases.

The calculated basic and diluted EPS are as follows:



|                             |  |                                  |           |                                 |   |           |  |      |           |  |   |          
|---------------------------- |  | -------------------------------- | --------- | ------------------------------- | - | --------- |  | ---- | --------- |  | - | ---------
|                             |  | Three Months Ended September 30, |           | Nine Months Ended September 30,
|                             |  | 2006                             |           | 2005                            |   | 2006      |  | 2005
|Numerator                    |  | $                                | 1,169,479 |                                 | $ | 778,445   |  | $    | 2,572,348 |  | $ | 2,310,606
|Denominators:                |  |                                  |           |                                 |   |           |  |      |           |  |   |          
|Basic shares outstanding     |  |                                  | 8,255,269 |                                 |   | 8,437,655 |  |      | 8,280,798 |  |   | 8,444,395
|Effect of diluted securities |  |                                  | 138,187   |                                 |   | 18,801    |  |      | 163,824   |  |   | 6,336    
|                             |  |                                  |           |                                 |   |           |  |      |           |  |   |          
|Diluted shares outstanding   |  |                                  | 8,393,456 |                                 |   | 8,456,456 |  |      | 8,444,622 |  |   | 8,450,731
|                             |  |                                  |           |                                
|Earnings per share:          |  |                                  |           |                                 |   |           |  |      |           |  |   |          
|Basic                        |  | $                                | 0.14      |                                 | $ | 0.09      |  | $    | 0.31      |  | $ | 0.27     
|Diluted                      |  | $                                | 0.14      |                                 | $ | 0.09      |  | $    | 0.30      |  | $ | 0.27     

At September 30, 2006, there were 373,500 outstanding options that were anti-dilutive.



11



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7. STOCK-BASED COMPENSATION

In August 2005, the shareholders of the Company approved the adoption of the 2005 Equity Based Incentive Plan (the Equity Plan). The Equity Plan provides for the grant of shares of common stock of the Company to certain
officers, directors and employees of the Company. In order to fund the grant of shares under the Equity Plan, the Equity Plan Trust (the Trust) purchased 171,300 shares of the Companys common stock in the open market for
approximately $2.0 million, at an average price of $11.70 per share. The Company made sufficient contributions to the Trust to fund these purchases. No additional purchases are expected to be made by the Trust under this plan. Pursuant to the terms
of the Equity Plan, all 171,300 shares acquired by the Trust were granted to certain officers and directors of the Company in August 2005. The Equity Plan shares will generally vest at the rate of 20% per year over five years. As of
September 30, 2006, 34,260 shares were fully vested and none forfeited.

Compensation expense related to the shares granted is recognized ratably over
the five-year vesting period in an amount which totals the market price of the Companys stock at the date of grant. During the three months and nine months ended September 30, 2006, approximately $99,000 and $298,000 was recognized in
compensation expense for the Equity Plan, respectively.

The Equity Plan also authorizes the grant of stock options to officers, employees and directors of
the Company to acquire shares of common stock with an exercise price equal to the fair market value of the common stock on the grant date. Options will generally become vested and exercisable at the rate of 20% per year over five years. A total
of 429,374 shares of common stock have been reserved for future issuance pursuant to the Equity Plan, of which 396,000 were awarded on August 10, 2005. As of September 30, 2006, 373,500 options were outstanding. During the three and nine
months ended September 30, 2006, approximately $64,000 and $217,000, respectively, was recognized in compensation expense for the Equity Plan.

On
January 1, 2006, the Company adopted Statement of Financial Accounting Standards (SFAS) 123(R) using a modified prospective application. Accordingly, prior period amounts have not been restated. The adoption required a
reclassification to additional paid-in capital of $(1,821,000) from common stock acquired by employee benefit plan trusts. In the third quarter of 2006, the adoption of SFAS 123(R) resulted in incremental stock-based compensation expense of $64,000.
The incremental stock-based compensation expense caused income before taxes to decrease by $64,000, net income to decrease by $52,000 and diluted earnings per share to decrease by $0.01 per share. In the first nine months of 2006, the adoption of
SFAS 123(R) resulted in incremental stock-based compensation expense of $217,000. The incremental stock-based compensation expense caused income before taxes to decrease by $217,000, net income to decrease by $176,000 and diluted earnings per share
to decrease by $0.02 per share. As of September 30, 2006, expenses totaling $486,000 remain to be recognized over the next 3.9 years.

Share-based
compensation costs prior to January 1, 2006 were recognized using the intrinsic value method in accordance with Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. For
disclosure purposes, pro forma net income and net income per share data were provided in accordance with SFAS No. 123, Accounting for Stock-Based Compensation, as if the fair value method had been applied. Under SFAS
No. 123, compensation cost related to stock options granted to employees was computed based on the fair value of the stock option at the date of grant using the Black-Scholes option pricing model. Prior to the adoption of SFAS 123(R), had
compensation costs been determined based on the fair market value of the stock options consistent with the provisions of SFAS No. 123, the Companys net income and earnings per share would have been unchanged for the three months ended
September 30, 2005, as the Company had not entered into any share-based compensation arrangements at that time.

The estimated fair value of options
granted during 2005 was $2.31 per share. The fair value was estimated on the date of grant using the Black-Scholes Single Option Pricing Model with the following weighted average assumptions used:



12



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|                         |  |                              |  
|------------------------ |  | ---------------------------- | -
|                         |  | Year Ended December 31, 2005 |  
|Dividend yield           |  | 0.00                         | %
|Expected volatility      |  | 21.54                        | %
|Risk-free interest rate  |  | 4.07                         | %
|Expected life of options |  | 5.0                          |  

A summary of the status of the Companys stock options under the Equity Plan as of September 30, 2006
and changes during the nine months ended September 30, 2006 are presented below:



|                                           |  |                                      |  |                                |      
|------------------------------------------ |  | ------------------------------------ |  | ------------------------------ | -----
|                                           |  | Nine Months Ended September 30, 2006
|                                           |  | Number of Shares                     |  | Weighted averageExercise price
|Outstanding at the beginning of the period |  | 388,500                              |  | $                              | 11.60
|Granted                                    |  |                                     |  |                                |     
|Exercised                                  |  |                                     |  |                                |     
|Forfeited                                  |  | 15,000                               |  | $                              | 11.60
|                                           |  |                                      |  |                                |      
|Outstanding at the end of the period       |  | 373,500                              |  | $                              | 11.60
|                                           |  |                                      |  |                                |      
|Exercisable at the end of the period       |  | 74,700                               |  | $                              | 11.60

The following table summarizes all stock options outstanding under the Equity Plan as of September 30, 2006:



|               |  |                     |  |                                 |       |                                         |    
|-------------- |  | ------------------- |  | ------------------------------- | ----- | --------------------------------------- | ---
|               |  | Options Outstanding
|Exercise Price |  | Number ofShares     |  | Weighted Average Exercise Price |       | WeightedAverageRemainingContractualLife
|               |  |                     |  |                                 |       | (in Years)                             
|$11.60         |  | 373,500             |  | $                               | 11.60 |                                         | 8.9

8. STOCK REPURCHASE PLAN

On March 29, 2006, the Companys Board of Directors approved the repurchase of 200,087 shares of the Companys common stock in the open market. As of September 30, 2006, 128,800 shares had been
purchased. The Company is still purchasing shares in the open market to complete the remaining 71,287 shares approved for purchase.



13



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9. INCOME TAXES

Income taxes decreased $501,000 to $5,000 for an effective tax rate of 0.4% for the three months ended September 30, 2006 compared to $506,000 for an effective tax rate of 39.4% from the same period in 2005. Prior to September of 2003,
the Companys investment strategy for bank owned life insurance was to frequently purchase and surrender policies prior to term. The surrender of a policy prior to term triggers a taxable event and results in a tax liability. As a result, the
Company provided a deferred tax liability for the estimated amount that would be incurred upon the termination of such policies. During the third quarter of 2006, the Company changed its investment policy to purchase and hold the insurance policies
for the duration of the term. This policy does not require the build up of a deferred tax liability. As a result, the Company reversed $600,000 of previously recorded deferred tax liability. Partially offsetting the impact of the change in
investment policy was a $100,000 tax valuation allowance relating to the deferred tax asset established in connection with the Companys contribution to the charitable foundation established in connection with its public offering in December of
2004. The Company determined that, based on its assessment of future taxable income and expectations of charitable contributions, it is probable that the tax benefit of the contribution may not be fully realized.

Income taxes decreased $580,000 to $900,000 for an effective tax rate of 26.1% for the nine months ended September 30, 2006 compared to $1.5 million for an
effective tax rate of 39.2% from the same period in 2005. The decrease in income taxes for the nine months ended September 30, 2006 compared to September 30, 2005 is due to the Companys change in policy regarding the tax treatment on
bank owned life insurance and the offset of the $100,000 tax valuation allowance affecting the Companys contribution to the charitable foundation, both of which are discussed above. An additional decrease of $80,000 was a result of lower net
income before taxes.



14



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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 Co.s (Ocean Shore Holding or the Company) 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, 2005 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 is a federally chartered savings and loan holding company established in 1998 to be the holding company for Ocean City Home Bank (the Bank). Ocean Shore Holdings business activity is the ownership of
the outstanding capital stock of the Bank. Accordingly, the information set forth in this report, including the consolidated financial statements and related financial data, relates primarily to the Bank.

The Bank is a federally chartered savings bank. We operate as a community-oriented financial institution offering a wide range of financial services to consumers and
businesses in our market area. We attract deposits from the general public, small businesses and municipalities and use those funds to originate real estate loans, small commercial loans and consumer loans, which we hold primarily for investment.

On December 21, 2004, the Company completed its initial public offering, issuing a total of 8,762,742 shares of the Companys common stock, of
which 4,761,000 shares, or 54.3%, were issued to OC Financial MHC, 343,499 shares, or 3.9%, were issued to the Banks Employee Stock Ownership Plan, 166,492 shares, or 1.9%, were issued to the Ocean City Home Charitable Foundation, and
3,491,751 shares, or 39.8%, were issued to eligible depositors. Net proceeds of the offering were $36.8 million.

COMPARISON OF FINANCIAL CONDITION AT
SEPTEMBER 30, 2006 AND DECEMBER 31, 2005

Total assets of the Company increased by $18.8 million to $562.7 million at September 30, 2006 from
$543.8 million at December 31, 2005. Total loans receivable and cash and cash equivalents increased $21.7 million and $17.5 million, respectively, offset by decreases of $14.9 million in investments and $6.3 million in mortgage-backed
securities.

Investments

Investments decreased $14.9
million to $36.7 million at September 30, 2006 from $51.6 million at December 31, 2005. Maturities of agency notes and municipal securities totaling $15.1 million were partially offset by purchases of $800,000. Mortgage-backed securities
decreased by $6.3 million to $36.3 million as payments received and fluctuations in market value of investments totaling $6.8 million were partially offset by purchases of $500,000. The decrease in investments and mortgage-backed securities was
attributable to managements decision to use the proceeds from maturities and repayments to fund loan demand.



15



---

Loans

Loans
receivable increased $21.7 million to $433.7 million at September 30, 2006 from $412.0 million at December 31, 2005. Loan originations totaled $84.6 million for the nine months ended September 30, 2006 including real estate mortgage
loan originations of $44.2 million, real estate construction originations of $10.4 million, consumer loan originations of $23.5 million and commercial loan originations of $6.5 million. Originations were offset by $62.5 million in normal loan
payments and payoffs. The decrease in real estate construction was primarily the result of borrowers completing the construction phase of their project and paying off the construction loan.

The following table summarizes changes in the loan portfolio in the nine months ended September 30, 2006.



|                                 |  |                        |         |   |                  |   |         |          |  |   |          |   |  |       |  
|-------------------------------- |  | ---------------------- | ------- | - | ---------------- | - | ------- | -------- |  | - | -------- | - |  | ----- | -
|                                 |  | September 30,2006      |         |   | December 31,2005 |   |         | $ change |  |   | % change |  
|                                 |  | (Dollars in thousands) |        
|Real estate - mortgage:          |  |                        |         |   |                  |   |         |          |  |   |          |   |  |       |  
|One-to four-family residential   |  | $                      | 315,502 |   |                  | $ | 294,296 |          |  | $ | 21,206   |   |  | 7.2   | %
|Commercial and multi-family      |  |                        | 32,298  |   |                  |   | 28,725  |          |  |   | 3,573    |   |  | 12.4  |  
|                                 |  |                        |         |   |                  |   |         |          |  |   |          |   |  |       |  
|Total real estate-mortgage       |  |                        | 347,800 |   |                  |   | 323,021 |          |  |   | 24,779   |   |  | 7.7   |  
|                                 |  |                        |         |   |                  |   |         |          |  |   |          |   |  |       |  
|Real estate - construction:      |  |                        |         |   |                  |   |         |          |  |   |          |   |  |       |  
|Residential                      |  |                        | 8,221   |   |                  |   | 12,230  |          |  |   | (4,009   | ) |  | (32.8 | )
|Commercial                       |  |                        | 7,504   |   |                  |   | 11,019  |          |  |   | (3,517   | ) |  | (31.9 | )
|                                 |  |                        |         |   |                  |   |         |          |  |   |          |   |  |       |  
|Total real estate - construction |  |                        | 15,723  |   |                  |   | 23,249  |          |  |   | (7,525   | ) |  | (32.4 | )
|                                 |  |                        |         |   |                  |   |         |          |  |   |          |   |  |       |  
|Commercial                       |  |                        | 15,048  |   |                  |   | 16,582  |          |  |   | (1,535   | ) |  | (9.3  | )
|                                 |  |                        |         |   |                  |   |         |          |  |   |          |   |  |       |  
|Consumer                         |  |                        |         |   |                  |   |         |          |  |   |          |   |  |       |  
|Home equity                      |  |                        | 54,954  |   |                  |   | 48,537  |          |  |   | 6,417    |   |  | 13.2  |  
|Other consumer loans             |  |                        | 730     |   |                  |   | 1,135   |          |  |   | (405     | ) |  | (35.7 | )
|                                 |  |                        |         |   |                  |   |         |          |  |   |          |   |  |       |  
|Total consumer loans             |  |                        | 55,684  |   |                  |   | 49,672  |          |  |   | 6,012    |   |  | 12.1  |  
|                                 |  |                        |         |   |                  |   |         |          |  |   |          |   |  |       |  
|Total loans                      |  |                        | 434,255 |   |                  |   | 412,524 |          |  |   | 21,731   |   |  | 5.3   |  
|                                 |  |                        |         |   |                  |   |         |          |  |   |          |   |  |       |  
|Net deferred loan cost           |  |                        | 1,417   |   |                  |   | 1,234   |          |  |   | 183      |   |  | 14.9  |  
|Allowance for loan losses        |  |                        | (1,974  | ) |                  |   | (1,753  | )        |  |   | (221     | ) |  | 12.6  |  
|                                 |  |                        |         |   |                  |   |         |          |  |   |          |   |  |       |  
|Net total loans                  |  | $                      | 433,698 |   |                  | $ | 412,005 |          |  | $ | 21,693   |   |  | 5.3   |  
|                                 |  |                        |         |   |                  |   |         |          |  |   |          |   |  |       |  

Non-Performing Assets

Non-performing assets totaled $248,000 at September 30, 2006. Net charge-offs were $4,000 in the nine months ended September 30, 2006, compared to $6,000 in the same period last year. The allowance for loan losses was 0.46% of
total loans at September 30, 2006 compared to 0.42% of total loans at September 30, 2005.



16



---

|                                                              |  |                                |       |   |      |   |       |  
|------------------------------------------------------------- |  | ------------------------------ | ----- | - | ---- | - | ----- | -
|                                                              |  | Nine Months EndedSeptember 30, |      
|                                                              |  | 2006                           |       |   | 2005 |  
|                                                              |  | (In thousands)                 |      
|Allowance for loan losses:                                    |  |                                |       |   |      |   |       |  
|Allowance at beginning of period                              |  | $                              | 1,753 |   |      | $ | 1,466 |  
|Provision for loan losses                                     |  |                                | 225   |   |      |   | 225   |  
|                                                              |  |                               
|Recoveries                                                    |  |                                | 5     |   |      |   | 3     |  
|Charge-offs                                                   |  |                                | (9    | ) |      |   | (9    | )
|                                                              |  |                                |       |   |      |   |       |  
|Net charge-offs                                               |  |                                | (4    | ) |      |   | (6    | )
|                                                              |  |                                |       |   |      |   |       |  
|Allowance at end of period                                    |  | $                              | 1,974 |   |      | $ | 1,685 |  
|                                                              |  |                                |       |   |      |   |       |  
|Allowance for loan losses as a percent of total loans         |  |                                | 0.46  | % |      |   | 0.42  | %
|Allowance for loan losses as a percent of nonperforming loans |  |                                | N/M   |   |      |   | N/M   |  

---

N/M  Not meaningful



|                                                   |  |                   |      |   |                  |   |      |  
|-------------------------------------------------- |  | ----------------- | ---- | - | ---------------- | - | ---- | -
|                                                   |  | September 30,2006 |      |   | December 31,2005 |  
|                                                   |  | (In thousands)    |     
|Non-performing Assets                              |  |                   |      |   |                  |   |      |  
|Non-accrual loans:                                 |  |                   |      |   |                  |   |      |  
|Mortgage loans                                     |  | $                 | 248  |   |                  | $ | 91   |  
|Consumer loans                                     |  |                   | 0    |   |                  |   | 7    |  
|                                                   |  |                   |      |   |                  |   |      |  
|Total nonperforming assets                         |  | $                 | 248  |   |                  | $ | 98   |  
|                                                   |  |                   |      |   |                  |   |      |  
|Non-performing loans as a percent of total loans   |  |                   | 0.06 | % |                  |   | 0.02 | %
|Non-performing assets as a percent of total assets |  |                   | 0.01 | % |                  |   | 0.02 | %

Deposits

Deposits increased by $10.0 million, or 2.4%, to $426.9 million at September 30, 2006 from $416.9 million at December 31, 2005. An increase in demand deposits of $6.6 million and time deposits of $17.1 million were offset by a
decrease in savings accounts of $13.8 million.

The following table summarizes changes in deposits in the nine months ended September 30, 2006.



|                                       |  |                   |         |                   |   |                        |  |   |          |   |  |       |  
|-------------------------------------- |  | ----------------- | ------- | ----------------- | - | ---------------------- |  | - | -------- | - |  | ----- | -
|                                       |  | September 30,2006 |         | December 31, 2005 |   | $ Change               |  |   | % Change |  
|                                       |  |                   |         |                   |   | (Dollars in thousands) |  |   |          |   |  |       |  
|NOW and other demand deposit accounts  |  | $                 | 213,659 |                   | $ | 207,016                |  | $ | 6,643    |   |  | 3.2   | %
|Passbook savings and club accounts     |  |                   | 64,645  |                   |   | 79,438                 |  |   | (13,793  | ) |  | (17.4 | )
|                                       |  |                   |         |                   |   |                        |  |   |          |   |  |       |  
|Subtotal                               |  |                   | 279,303 |                   |   | 286,454                |  |   | (7,150   | ) |  | (2.5  | )
|                                       |  |                   |         |                   |   |                        |  |   |          |   |  |       |  
|Certificates with original maturities: |  |                   |         |                   |   |                        |  |   |          |   |  |       |  
|Within one year                        |  |                   | 70,735  |                   |   | 46,784                 |  |   | 23,951   |   |  | 51.2  |  
|One to three years                     |  |                   | 36,189  |                   |   | 41,165                 |  |   | (4,976   | ) |  | (12.1 | )
|Three years and beyond                 |  |                   | 40,672  |                   |   | 42,512                 |  |   | (1,840   | ) |  | (4.3  | )
|                                       |  |                   |         |                   |   |                        |  |   |          |   |  |       |  
|Total certificates                     |  |                   | 147,595 |                   |   | 130,461                |  |   | 17,134   |   |  | 13.1  |  
|                                       |  |                   |         |                   |   |                        |  |   |          |   |  |       |  
|Total                                  |  | $                 | 426,898 |                   | $ | 416,914                |  | $ | 9,984    |   |  | 2.4   |  
|                                       |  |                   |         |                   |   |                        |  |   |          |   |  |       |  

Borrowings

Federal Home Loan Bank advances increased $17.0 million to $44.0 million at September 30, 2006 from $27.0 million at December 31, 2005. Other borrowings decreased $10.3 million from $18.5 million at December 31, 2005 to $8.2
million at September 30, 2006. The additional net borrowings of $6.7 million were used to fund loan demand.



17



---

Stockholders Equity

Stockholders equity increased by $1.5 million to $62.1 million at September 30, 2006 from $60.6 million at December 31, 2005 primarily as a result from current period earnings of $2.6 million partially offset by an increase
of treasury stock of $1.8 million.

COMPARISON OF OPERATING RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005

Net income was $1.2 million for the three months ended September 30, 2006 as compared to $778,000 for the three months ended September 30, 2005. The $400,000,
or 50.2%, increase in 2006 from 2005 was primarily due to a change in tax policy that decreased the provision for income taxes in the September 2006 quarter.

Net income was $2.6 million for the nine months ended September 30, 2006 as compared to $2.3 million for the nine months ended September 30, 2005. The $300,000, or 11.3%, increase in 2006 from 2005 was primarily due to a change in
tax policy that decreased the provision for income taxes in the September 2006 quarter.



|                                      |  |                                                         |       |   |                                |   |      |      |  |   |       |   |  |   |       |  
|------------------------------------- |  | ------------------------------------------------------- | ----- | - | ------------------------------ | - | ---- | ---- |  | - | ----- | - |  | - | ----- | -
|                                      |  | Three Months EndedSeptember 30,                         |       |   | Nine Months EndedSeptember 30, |  
|                                      |  | 2006                                                    |       |   | 2005                           |   |      | 2006 |  |   | 2005  |  
|                                      |  | (Dollars in thousands, except share and per share data) |      
|Net income                            |  | $                                                       | 1,169 |   |                                | $ | 778  |      |  | $ | 2,572 |   |  | $ | 2,311 |  
|Basic earnings per share              |  | $                                                       | 0.14  |   |                                | $ | 0.09 |      |  | $ | 0.31  |   |  | $ | 0.27  |  
|Diluted earnings per share            |  | $                                                       | 0.14  |   |                                | $ | 0.09 |      |  | $ | 0.30  |   |  | $ | 0.27  |  
|Return on average assets (annualized) |  |                                                         | 0.84  | % |                                |   | 0.56 | %    |  |   | 0.61  | % |  |   | 0.57  | %
|Return on average equity (annualized) |  |                                                         | 7.55  | % |                                |   | 5.04 | %    |  |   | 5.56  | % |  |   | 5.06  | %

Net Interest Income

The following table summarizes changes in interest income and interest expense for the three-month periods ended September 30, 2006 and 2005.



|                              |  |                                  |       |      |   |          |  |   |          |   |  |       |  
|----------------------------- |  | -------------------------------- | ----- | ---- | - | -------- |  | - | -------- | - |  | ----- | -
|                              |  | Three Months Ended September 30, |       |      |  
|                              |  | 2006                             |       | 2005 |   | $ Change |  |   | % Change |  
|                              |  | (Dollars in
 thousands)          |       |      |  
|INTEREST INCOME:              |  |                                  |       |      |   |          |  |   |          |   |  |       |  
|Loans                         |  | $                                | 6,466 |      | $ | 5,491    |  | $ | 975      |   |  | 17.8  | %
|Investment securities         |  |                                  | 987   |      |   | 1,138    |  |   | (152     | ) |  | (13.3 | )
|Other interest-earning assets |  |                                  | 183   |      |   | 128      |  |   | 55       |   |  | (43.0 | )
|                              |  |                                  |       |      |   |          |  |   |          |   |  |       |  
|Total interest income         |  |                                  | 7,635 |      |   | 6,757    |  | $ | 878      |   |  | 13.0  |  
|                              |  |                                  |       |     
|INTEREST EXPENSE:             |  |                                  |       |      |   |          |  |   |          |   |  |       |  
|Deposits                      |  |                                  | 2,842 |      |   | 2,104    |  | $ | 738      |   |  | 35.1  |  
|Borrowings                    |  |                                  | 916   |      |   | 732      |  |   | 184      |   |  | 25.1  |  
|                              |  |                                  |       |      |   |          |  |   |          |   |  |       |  
|Total interest expense        |  |                                  | 3,758 |      |   | 2,836    |  |   | 922      |   |  | 32.5  |  
|                              |  |                                  |       |      |   |          |  |   |          |   |  |       |  
|Net interest income           |  | $                                | 3,877 |      | $ | 3,921    |  | $ | (44      | ) |  | (1.1  | )
|                              |  |                                  |       |      |   |          |  |   |          |   |  |       |  

Interest income increased by $878,000 in the three months ended September 30, 2006 compared to the same
period in 2005, reflecting increases in loan income and other interest-earning assets income offset by a decrease in investment income. The increase in loan income resulted from an increase in the average balance of loans of $45.7 million and an
increase in the average yield of 30 basis points. The increase in the average balance of loans was a direct result of new loan originations while the higher yield was the result of both new loans that were originated at higher yields and existing
loans repricing at higher rates. Investment



18



---

income decreased $152,000 as the decrease of the average balance of $30.1 million was offset by an increase in the average yield of 87 basis points. Income
in federal funds sold decreased $55,000 as the decrease in the average balance of $1.0 million was offset by an increase in the average yield of 174 basis points. The decreases in the average balances of investments and federal funds were the result
of maturities and repayments, while the higher yield was the result of higher short-term interest rates over the prior period.

Interest expense increased
by $922,000, reflecting an increase in demand deposit expense of $300,000, an increase in time deposit expense of $500,000 and an increase in interest expense on borrowings of $200,000 offset by a decrease in all other deposit expense of $100,000.
Demand deposit expense increased as a result of higher interest rates on accounts tied to market rates compared to the prior period, while time deposit expense increased as a result of deposit growth of $26.0 million and an increase in the average
rate paid of 77 basis points. Borrowing expense increased as a result of higher average balance of borrowings of $16.0 million offset by a decrease in the rate paid of 27 basis points.

The interest rate spread and net interest margin were 2.55% and 2.97%, respectively, for the three months ended September 30, 2006 compared to 2.76% and 3.09% for the same period in 2005. The yield on interest
earning assets increased 52 basis points as the yield on loans increased 30 basis points and short term investments were reinvested in higher yielding investments due to generally higher market interest rates in the short term end of the yield curve
compared to the prior period resulting in an increase in yield in investment securities of 87 basis points and other interest earning assets of 174 basis points. The rise in short-term interest rates over the prior period increased the cost of
interest expense on deposits and borrowings by 73 basis points.

The following table summarizes changes in interest income and interest expense for the
nine-month periods ended September 30, 2006 and 2005.



|                              |  |                                |        |      |   |          |  |   |          |   |  |       |  
|----------------------------- |  | ------------------------------ | ------ | ---- | - | -------- |  | - | -------- | - |  | ----- | -
|                              |  | Nine Months EndedSeptember 30, |        |      |  
|                              |  | 2006                           |        | 2005 |   | $ Change |  |   | % Change |  
|                              |  | (Dollars in
 thousands)        |        |      |   |          |  |  
|INTEREST INCOME:              |  |                                |        |      |   |          |  |   |          |   |  |       |  
|Loans                         |  | $                              | 18,747 |      | $ | 15,287   |  | $ | 3,460    |   |  | 22.6  | %
|Investment securities         |  |                                | 3,047  |      |   | 3,519    |  |   | (472     | ) |  | (13.4 | )
|Other interest-earning assets |  |                                | 340    |      |   | 453      |  |   | (114     | ) |  | (25.1 | )
|                              |  |                                |        |      |   |          |  |   |          |   |  |       |  
|Total interest income         |  |                                | 22,133 |      |   | 19,259   |  |   | 2,874    |   |  | 14.9  |  
|                              |  |                                |        |     
|INTEREST EXPENSE:             |  |                                |        |      |   |          |  |   |          |   |  |       |  
|Deposits                      |  |                                | 7,974  |      |   | 5,796    |  |   | 2,177    |   |  | 37.6  |  
|Borrowings                    |  |                                | 2,697  |      |   | 2,137    |  |   | 560      |   |  | 26.2  |  
|                              |  |                                |        |      |   |          |  |   |          |   |  |       |  
|Total interest expense        |  |                                | 10,671 |      |   | 7,933    |  |   | 2,737    |   |  | 34.5  |  
|                              |  |                                |        |      |   |          |  |   |          |   |  |       |  
|Net interest income           |  | $                              | 11,462 |      | $ | 11,326   |  | $ | 136      |   |  | 1.2   |  
|                              |  |                                |        |      |   |          |  |   |          |   |  |       |  

Interest income increased by $2.9 million in the nine months ended September 30, 2006 compared to the same
period in 2005, reflecting increases in loan income offset by decreases in other interest-earning assets income and investment income. The increase in loan income resulted from an increase in the average balance of loans of $60.1 million and an
increase in the average yield of 30 basis points. The increase in the average balance of loans was a direct result of new loan originations while the higher yield was the result of both new loans that were originated at higher yields and existing
loans repricing at higher rates. Investment income decreased $472,000 as the decrease of the average balance of $29.3 million was offset by an increase in the average yield of 72 basis points. Income in federal funds sold decreased $114,000 as the
decrease in the average balance of $12.1 million was offset by an increase in the average yield of 210 basis points. The decreases in the average balances of investments and federal funds were the result of maturities and repayments, while the
higher yield was the result of higher short-term interest rates over the prior period.



19



---

Interest expense increased by $2.7 million, primarily reflecting an increase in demand deposit expense of $957,000, an
increase in time deposit expense of $1.4 million and an increase in interest expense on borrowings of $560,000 partially offset by a decrease in savings deposit expense of $198,000. Demand deposit expense increased as a result of higher interest
rates on accounts tied to market rates compared to the prior period, while time deposit expense increased as a result of deposit growth of $23.9 million and an increase in the average rate paid of 76 basis points. Savings deposit expense decreased
as a result of lower average balances of $21.2 million. Borrowing expense increased $560,000 as a result of higher average balance of borrowings of $16.4 million offset by a decrease in the rate paid of 29 basis points.

The interest rate spread and net interest margin of the Company were 2.59% and 2.97%, respectively, for the nine months ended September 30, 2006 compared to 2.74%
and 3.04%, respectively, for the same period in 2005. The yield on interest earning assets increased as short-term investments were reinvested in higher yielding investments due to higher, short-term interest rates, loans repricing at higher
interest rates and new loans originated at higher interest rates. The rise in short-term interest rates over the prior period increased the cost of interest expense on deposits and borrowings.

The following tables present information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average
interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by
the average balances of assets or liabilities, respectively, for the periods presented. The balances of yields and costs are annualized for presentation purposes. For purposes of the tables, average balances have been calculated using the average
daily balances and nonaccrual loans are included in average balances only. Loan fees are included in interest income on loans and are insignificant. Interest income on loans and investment securities has not been calculated on a tax equivalent basis
because the impact would be insignificant.



20



---

Average Balance Tables



|                                                                        |  |                                      |         |   |                                      |   |            |  |      |                |  |   |                       |   |             |   |       |  |      |  
|----------------------------------------------------------------------- |  | ------------------------------------ | ------- | - | ------------------------------------ | - | ---------- |  | ---- | -------------- |  | - | --------------------- | - | ----------- | - | ----- |  | ---- | -
|                                                                        |  | Three Months EndedSeptember 30,
2006 |         |   | Three Months EndedSeptember 30, 2005 |  
|                                                                        |  | AverageBalance                       |         |   | Interest andDividends                |   | Yield/Cost |  |      | AverageBalance |  |   | Interest andDividends |   | Yield/ Cost |  
|                                                                        |  | (Dollars in thousands)               |        
|Assets:                                                                 |  |                                      |         |   |                                      |   |            |  |      |                |  |   |                       |   |             |   |       |  |      |  
|Interest-earning assets:                                                |  |                                      |         |   |                                      |   |            |  |      |                |  |   |                       |   |             |   |       |  |      |  
|Loans                                                                   |  | $                                    | 430,728 |   |                                      | $ | 6,466      |  | 6.00 | %              |  | $ | 385,064               |   |             | $ | 5,491 |  | 5.70 | %
|Investment securities                                                   |  |                                      | 77,097  |   |                                      |   | 987        |  | 5.12 | %              |  |   | 107,154               |   |             |   | 1,138 |  | 4.25 | %
|Other interest-earning assets                                           |  |                                      | 14,000  |   |                                      |   | 183        |  | 5.22 | %              |  |   | 14,680                |   |             |   | 128   |  | 3.48 | %
|                                                                        |  |                                      |         |   |                                      |   |            |  |      |                |  |   |                       |   |             |   |       |  |      |  
|Total interest-earning assets                                           |  |                                      | 521,825 |   |                                      |   | 7,635      |  | 5.85 | %              |  |   | 506,898               |   |             |   | 6,757 |  | 5.33 | %
|                                                                        |  |                                      |         |   |                                      |   |            |  |      |                |  |   |                       |   |             |   |       |  |      |  
|Noninterest-earning assets                                              |  |                                      | 38,213  |   |                                      |   |            |  |      |                |  |   | 45,488                |   |             |   |       |  |      |  
|                                                                        |  |                                      |         |   |                                      |   |            |  |      |                |  |   |                       |   |             |   |       |  |      |  
|Total assets                                                            |  | $                                    | 560,038 |   |                                      |   |            |  |      |                |  | $ | 552,386               |   |             |   |       |  |      |  
|                                                                        |  |                                      |         |   |                                      |   |            |  |      |                |  |   |                       |   |             |   |       |  |      |  
|Liabilities and equity:                                                 |  |                                      |         |   |                                      |   |            |  |      |                |  |   |                       |   |             |   |       |  |      |  
|Interest-bearing liabilities:                                           |  |                                      |         |   |                                      |   |            |  |      |                |  |   |                       |   |             |   |       |  |      |  
|Interest-bearing demand deposits                                        |  | $                                    | 174,131 |   |                                      | $ | 1,052      |  | 2.42 | %              |  | $ | 178,104               |   |             | $ | 757   |  | 1.70 | %
|Savings accounts                                                        |  |                                      | 66,839  |   |                                      |   | 191        |  | 1.14 | %              |  |   | 89,951                |   |             |   | 266   |  | 1.18 | %
|Certificates of deposit                                                 |  |                                      | 147,566 |   |                                      |   | 1,599      |  | 4.33 | %              |  |   | 121,550               |   |             |   | 1,081 |  | 3.56 | %
|                                                                        |  |                                      |         |   |                                      |   |            |  |      |                |  |   |                       |   |             |   |       |  |      |  
|Total interest-bearing deposits                                         |  |                                      | 388,536 |   |                                      |   | 2,842      |  | 2.93 | %              |  |   | 389,605               |   |             |   | 2,104 |  | 2.16 | %
|                                                                        |  |                                      |         |   |                                      |  
|FHLB advances                                                           |  |                                      | 44,014  |   |                                      |   | 473        |  | 4.30 | %              |  |   | 10,000                |   |             |   | 78    |  | 3.13 | %
|Securities sold under agreements to repurchase                          |  |                                      | 7,838   |   |                                      |   | 108        |  | 5.51 | %              |  |   | 25,808                |   |             |   | 319   |  | 4.94 | %
|Subordinated debt                                                       |  |                                      | 15,464  |   |                                      |   | 335        |  | 8.67 | %              |  |   | 15,464                |   |             |   | 335   |  | 8.67 | %
|Total borrowings                                                        |  |                                      | 67,316  |   |                                      |   | 916        |  | 5.44 | %              |  |   | 51,272                |   |             |   | 732   |  | 5.71 | %
|                                                                        |  |                                      |         |   |                                      |   |            |  |      |                |  |   |                       |   |             |   |       |  |      |  
|Total interest-bearing liabilities                                      |  |                                      | 455,853 |   |                                      |   | 3,758      |  | 3.30 | %              |  |   | 440,877               |   |             |   | 2,836 |  | 2.57 | %
|                                                                        |  |                                      |         |   |                                      |   |            |  |      |                |  |   |                       |   |             |   |       |  |      |  
|Noninterest-bearing liabilities                                         |  |                                      | 42,213  |   |                                      |   |            |  |      |                |  |   | 49,786                |   |             |   |       |  |      |  
|                                                                        |  |                                      |         |   |                                      |   |            |  |      |                |  |   |                       |   |             |   |       |  |      |  
|Total liabilities                                                       |  |                                      | 498,066 |   |                                      |   |            |  |      |                |  |   | 490,663               |   |             |   |       |  |      |  
|Stockholders equity                                                    |  |                                      | 61,972  |   |                                      |   |            |  |      |                |  |   | 61,723                |   |             |   |       |  |      |  
|                                                                        |  |                                      |         |   |                                      |   |            |  |      |                |  |   |                       |   |             |   |       |  |      |  
|Total liabilities and stockholders equity                              |  | $                                    | 560,038 |   |                                      |   |            |  |      |                |  | $ | 552,386               |   |             |   |       |  |      |  
|                                                                        |  |                                      |         |   |                                      |   |            |  |      |                |  |   |                       |   |             |   |       |  |      |  
|Net interest income                                                     |  |                                      |         |   |                                      | $ | 3,877      |  |      |                |  |   |                       |   |             | $ | 3,921 |  |      |  
|                                                                        |  |                                      |         |   |                                      |   |            |  |      |                |  |   |                       |   |             |   |       |  |      |  
|Interest rate spread                                                    |  |                                      |         |   |                                      |   |            |  | 2.55 | %              |  |   |                       |   |             |   |       |  | 2.76 | %
|Net interest margin                                                     |  |                                      |         |   |                                      |   |            |  | 2.97 | %              |  |   |                       |   |             |   |       |  | 3.09 | %
|Average interest-earning assets to average
interest-bearing liabilities |  |                                      | 114.47  | % |                                      |   |            |  |      |                |  |   | 114.98                | % |             |   |       |  |      |  



21



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|                                                                        |  |                                     |         |   |                                     |   |            |  |      |                |  |   |                      |   |             |   |        |  |      |  
|----------------------------------------------------------------------- |  | ----------------------------------- | ------- | - | ----------------------------------- | - | ---------- |  | ---- | -------------- |  | - | -------------------- | - | ----------- | - | ------ |  | ---- | -
|                                                                        |  | Nine Months EndedSeptember 30, 2006 |         |   | Nine Months EndedSeptember 30, 2005 |  
|                                                                        |  | AverageBalance                      |         |   | InterestandDividends                |   | Yield/Cost |  |      | AverageBalance |  |   | InterestandDividends |   | Yield/ Cost |  
|                                                                        |  | (Dollars in thousands)              |        
|Assets:                                                                 |  |                                     |         |   |                                     |   |            |  |      |                |  |   |                      |   |             |   |        |  |      |  
|Interest-earning assets:                                                |  |                                     |         |   |                                     |   |            |  |      |                |  |   |                      |   |             |   |        |  |      |  
|Loans                                                                   |  | $                                   | 422,574 |   |                                     | $ | 18,747     |  | 5.92 | %              |  | $ | 362,511              |   |             | $ | 15,287 |  | 5.62 | %
|Investment securities                                                   |  |                                     | 82,915  |   |                                     |   | 3,047      |  | 4.90 | %              |  |   | 112,240              |   |             |   | 3,519  |  | 4.18 | %
|Other interest-earning assets                                           |  |                                     | 9,155   |   |                                     |   | 340        |  | 4.95 | %              |  |   | 21,246               |   |             |   | 453    |  | 2.85 | %
|                                                                        |  |                                     |         |   |                                     |   |            |  |      |                |  |   |                      |   |             |   |        |  |      |  
|Total interest-earning assets                                           |  |                                     | 514,644 |   |                                     |   | 22,133     |  | 5.73 | %              |  |   | 495,997              |   |             |   | 19,259 |  | 5.18 | %
|                                                                        |  |                                     |         |   |                                     |   |            |  |      |                |  |   |                      |   |             |   |        |  |      |  
|Noninterest-earning assets                                              |  |                                     | 41,335  |   |                                     |   |            |  |      |                |  |   | 45,064               |   |             |   |        |  |      |  
|                                                                        |  |                                     |         |   |                                     |   |            |  |      |                |  |   |                      |   |             |   |        |  |      |  
|Total assets                                                            |  | $                                   | 555,979 |   |                                     |   |            |  |      |                |  | $ | 541,061              |   |             |   |        |  |      |  
|                                                                        |  |                                     |         |   |                                     |   |            |  |      |                |  |   |                      |   |             |   |        |  |      |  
|Liabilities and equity:                                                 |  |                                     |         |   |                                     |   |            |  |      |                |  |   |                      |   |             |   |        |  |      |  
|Interest-bearing liabilities:                                           |  |                                     |         |   |                                     |   |            |  |      |                |  |   |                      |   |             |   |        |  |      |  
|Interest-bearing demand deposits                                        |  | $                                   | 172,661 |   |                                     | $ | 2,950      |  | 2.28 | %              |  | $ | 172,970              |   |             | $ | 1,992  |  | 1.54 | %
|Savings accounts                                                        |  |                                     | 71,556  |   |                                     |   | 610        |  | 1.14 | %              |  |   | 92,784               |   |             |   | 808    |  | 1.16 | %
|Certificates of deposit                                                 |  |                                     | 142,507 |   |                                     |   | 4,414      |  | 4.13 | %              |  |   | 118,613              |   |             |   | 2,996  |  | 3.37 | %
|                                                                        |  |                                     |         |   |                                     |   |            |  |      |                |  |   |                      |   |             |   |        |  |      |  
|Total interest-bearing deposits                                         |  |                                     | 386,724 |   |                                     |   | 7,974      |  | 2.75 | %              |  |   | 384,367              |   |             |   | 5,796  |  | 2.01 | %
|                                                                        |  |                                     |         |   |                                     |  
|FHLB advances                                                           |  |                                     | 39,332  |   |                                     |   | 1,235      |  | 4.19 | %              |  |   | 10,000               |   |             |   | 233    |  | 3.10 | %
|Securities sold under agreements to repurchase                          |  |                                     | 11,665  |   |                                     |   | 457        |  | 5.22 | %              |  |   | 24,559               |   |             |   | 898    |  | 4.88 | %
|Subordinated debt                                                       |  |                                     | 15,464  |   |                                     |   | 1,006      |  | 8.67 | %              |  |   | 15,464               |   |             |   | 1,006  |  | 8.67 | %
|Total borrowings                                                        |  |                                     | 66,461  |   |                                     |   | 2,697      |  | 5.41 | %              |  |   | 50,023               |   |             |   | 2,137  |  | 5.70 | %
|                                                                        |  |                                     |         |   |                                     |   |            |  |      |                |  |   |                      |   |             |   |        |  |      |  
|Total interest-bearing liabilities                                      |  |                                     | 453,185 |   |                                     |   | 10,671     |  | 3.14 | %              |  |   | 434,390              |   |             |   | 7,933  |  | 2.44 | %
|                                                                        |  |                                     |         |   |                                     |   |            |  |      |                |  |   |                      |   |             |   |        |  |      |  
|Noninterest-bearing liabilities                                         |  |                                     | 41,082  |   |                                     |   |            |  |      |                |  |   | 45,829               |   |             |   |        |  |      |  
|                                                                        |  |                                     |         |   |                                     |   |            |  |      |                |  |   |                      |   |             |   |        |  |      |  
|Total liabilities                                                       |  |                                     | 494,267 |   |                                     |   |            |  |      |                |  |   | 480,219              |   |             |   |        |  |      |  
|                                                                        |  |                                     |         |   |                                     |  
|Stockholders equity                                                    |  |                                     | 61,712  |   |                                     |   |            |  |      |                |  |   | 60,842               |   |             |   |        |  |      |  
|                                                                        |  |                                     |         |   |                                     |   |            |  |      |                |  |   |                      |   |             |   |        |  |      |  
|Total liabilities and stockholders equity                              |  | $                                   | 555,979 |   |                                     |   |            |  |      |                |  | $ | 541,061              |   |             |   |        |  |      |  
|                                                                        |  |                                     |         |   |                                     |   |            |  |      |                |  |   |                      |   |             |   |        |  |      |  
|Net interest income                                                     |  |                                     |         |   |                                     | $ | 11,462     |  |      |                |  |   |                      |   |             | $ | 11,326 |  |      |  
|                                                                        |  |                                     |         |   |                                     |   |            |  |      |                |  |   |                      |   |             |   |        |  |      |  
|Interest rate spread                                                    |  |                                     |         |   |                                     |   |            |  | 2.59 | %              |  |   |                      |   |             |   |        |  | 2.74 | %
|Net interest margin                                                     |  |                                     |         |   |                                     |   |            |  | 2.97 | %              |  |   |                      |   |             |   |        |  | 3.04 | %
|Average interest-earning assets to average interest-bearing liabilities |  |                                     | 113.56  | % |                                     |   |            |  |      |                |  |   | 114.18               | % |             |   |        |  |      |  

Provision for Loan Losses

We review the level of the allowance for loan losses on a monthly basis and establish the provision for loan losses based on the volume and types of lending, delinquency levels, loss experience, the amount of
classified loans, economic conditions and other factors related to the collectibility of the loan portfolio. The provision for loan losses was $75,000 and $225,000 for the three and nine months ended September 30, 2006, respectively, which were
the same provision for loan losses for the corresponding periods ending September 30, 2005. The provision for loan losses was primarily to maintain an allowance level deemed appropriate by management in light of factors such as the level of
non-performing loans and the current market conditions.



22



---

Other Income

The
following table summarizes other income for the three months ended September 30, 2006 and 2005 and the changes between the periods.



|                                       |  |                                 |     |      |   |          |  |      |   
|-------------------------------------- |  | ------------------------------- | --- | ---- | - | -------- |  | ---- | --
|                                       |  | Three Months EndedSeptember 30, |     |      |  
|                                       |  | 2006                            |     | 2005 |   | % Change | 
|                                       |  | (Dollars in thousands)          |     |      |  
|OTHER INCOME:                          |  |                                 |     |      |   |          |  |      |   
|                                       |  |                                 |    
|Service charges                        |  | $                               | 388 |      | $ | 410      |  | (5.4 | )%
|Cash surrender value of life insurance |  |                                 | 66  |      |   | 63       |  | 4.0  |   
|Other                                  |  |                                 | 138 |      |   | 148      |  | (6.7 | ) 
|                                       |  |                                 |     |      |   |          |  |      |   
|Total other income                     |  | $                               | 592 |      | $ | 621      |  | (4.8 | ) 
|                                       |  |                                 |     |      |   |          |  |      |   

Other income decreased $29,000, or 4.8%, to $592,000 for the three-month period ended September 30, 2006 from
the same period in 2005. The decrease in service charges was the result of lower fees collected compared to the prior period.

The following table
summarizes other income for the nine months ended September 30, 2006 and 2005 and the changes between the periods.



|                                       |  |                                |       |      |   |          |  |      |  
|-------------------------------------- |  | ------------------------------ | ----- | ---- | - | -------- |  | ---- | -
|                                       |  | Nine Months EndedSeptember 30, |       |      |  
|                                       |  | 2006                           |       | 2005 |   | % Change | 
|                                       |  | (Dollars in thousands)         |       |      |  
|OTHER INCOME:                          |  |                                |       |      |   |          |  |      |  
|                                       |  |                                |      
|Service charges                        |  | $                              | 1,166 |      | $ | 1,145    |  | 1.8  | %
|Cash surrender value of life insurance |  |                                | 196   |      |   | 199      |  | (1.7 | )
|Other                                  |  |                                | 384   |      |   | 417      |  | (7.9 | )
|                                       |  |                                |       |      |   |          |  |      |  
|Total other income                     |  | $                              | 1,746 |      | $ | 1,761    |  | (0.9 | )
|                                       |  |                                |       |      |   |          |  |      |  

Other income decreased $15,000, or 0.9%, to $1.7 million for the nine-month period ended September 30, 2006
from the same period in 2005. The decreases occurred in service charges, fees and loan servicing fees.

Other Expense

The following table summarizes other expense for the three months ended September 30, 2006 and 2005 and the changes between the periods.



|                               |  |                                 |       |      |   |          |  |       |  
|------------------------------ |  | ------------------------------- | ----- | ---- | - | -------- |  | ----- | -
|                               |  | Three Months EndedSeptember 30, |       |      |  
|                               |  | 2006                            |       | 2005 |   | % Change | 
|                               |  | (Dollars in thousands)          |       |      |  
|OTHER EXPENSE:                 |  |                                 |       |      |   |          |  |       |  
|                               |  |                                 |      
|Salaries and employee benefits |  | $                               | 1,921 |      | $ | 1,810    |  | 6.1   | %
|Occupancy and equipment        |  |                                 | 692   |      |   | 664      |  | 4.2   |  
|Federal insurance premiums     |  |                                 | 13    |      |   | 14       |  | (4.3  | )
|Advertising                    |  |                                 | 93    |      |   | 115      |  | (18.8 | )
|Professional services          |  |                                 | 167   |      |   | 228      |  | (26.7 | )
|Other operating expense        |  |                                 | 333   |      |   | 352      |  | (5.5  | )
|                               |  |                                 |       |      |   |          |  |       |  
|Total other expense            |  | $                               | 3,219 |      | $ | 3,183    |  | 1.1   |  
|                               |  |                                 |       |      |   |          |  |       |  



23



---

Other expense increased $36,000 to $3.2 million for the three-month period ended September 30, 2006 from the same
period in 2005. Salaries and employee benefits increased $110,000 due to regular salary increases and the cost of share-based compensation.Occupancy and equipment increased $28,000 due to costs associated with the opening of a new branch
office compared to a year ago. These increases were offset by decreases in advertising, other operating expenses and professional services, including decreases in legal and accounting services.

The following table summarizes other expense for the nine months ended September 30, 2006 and 2005 and the changes between the periods.



|                               |  |                                |       |      |   |          |  |       |  
|------------------------------ |  | ------------------------------ | ----- | ---- | - | -------- |  | ----- | -
|                               |  | Nine Months EndedSeptember 30, |       |      |  
|                               |  | 2006                           |       | 2005 |   | % Change | 
|                               |  | (Dollars in thousands)         |       |      |  
|OTHER EXPENSE:                 |  |                                |       |      |   |          |  |       |  
|                               |  |                                |      
|Salaries and employee benefits |  | $                              | 5,670 |      | $ | 5,269    |  | 7.6   | %
|Occupancy and equipment        |  |                                | 2,013 |      |   | 1,830    |  | 10.0  |  
|Federal insurance premiums     |  |                                | 41    |      |   | 43       |  | (5.7  | )
|Advertising                    |  |                                | 296   |      |   | 316      |  | (6.3  | )
|Professional services          |  |                                | 465   |      |   | 591      |  | (21.3 | )
|Other operating expense        |  |                                | 1,018 |      |   | 1,013    |  | 0.5   |  
|                               |  |                                |       |      |   |          |  |       |  
|Total other expense            |  | $                              | 9,503 |      | $ | 9,061    |  | 4.9   |  
|                               |  |                                |       |      |   |          |  |       |  

Other expense increased $442,000 to $9.5 million for the nine-month period ended September 30, 2006 from the
same period in 2005. Salaries and employee benefits increased $401,000 due to regular salary increases and the cost of share-based compensation.Occupancy and equipment increased $183,000 due primarily to costs associated with the opening of
a new branch office. These increases were offset by a decrease in advertising and professional services, including legal and accounting services.

Income Taxes

Income taxes decreased $501,000 to $5,000 for an effective tax rate of 0.4% for the three months ended September 30, 2006
compared to $506,000 for an effective tax rate of 39.4% from the same period in 2005. Prior to September of 2003, the Companys investment strategy for bank owned life insurance was to frequently purchase and surrender policies prior to term.
The surrender of a policy prior to term triggers a taxable event and results in a tax liability. As a result, the Company provided a deferred tax liability for the estimated amount that would be incurred upon the termination of such policies. During
the third quarter of 2006, the Company changed its investment policy to purchase and hold the insurance policies for the duration of the term. This policy does not require the build up of a deferred tax liability. As a result, the Company reversed
$600,000 of previously recorded deferred tax liability. Partially offsetting the impact of the change in investment policy was a $100,000 tax valuation allowance relating to the deferred tax asset established in connection with the Companys
contribution to the charitable foundation established in connection with its public offering in December of 2004. The Company determined that, based on its assessment of future taxable income and expectations of charitable contributions, it is
probable that the tax benefit of the contribution may not be fully realized.

Income taxes decreased $580,000 to $900,000 for an effective tax rate of
26.1% for the nine months ended September 30, 2006 compared to $1.5 million for an effective tax rate of 39.2% from the same period in 2005. The decrease in income taxes for the nine months ended September 30, 2006 compared to
September 30, 2005 is due to the Companys change in policy regarding the tax treatment on bank owned life insurance and the offset of the $100,000 tax valuation allowance affecting the Companys contribution to the charitable
foundation, both of which are discussed above. An additional decrease of $80,000 was a result of lower net income before taxes.



24



---

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan repayments, maturities and sales of investment securities
and borrowings from the Federal Home Loan Bank of New York. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest
rates, economic conditions and competition.

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

Our most liquid assets are cash and cash equivalents and interest-bearing deposits. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At
September 30, 2006, cash and cash equivalents totaled $30.9 million. Securities classified as available-for-sale whose market value exceeds our cost, which provide additional sources of liquidity, totaled $15.8 million at September 30,
2006. In addition, at September 30, 2006, we had the ability to borrow a total of approximately $161.3 million from the Federal Home Loan Bank of New York, which included available overnight lines of credit of $107.1 million. On that date, we
had no overnight advances outstanding.

At September 30, 2006, we had $44.3 million in loan commitments outstanding, which included $12.3
million in undisbursed loans, $22.9 million in unused home equity lines of credit and $9.1 million in commercial lines of credit. Certificates of deposit due within one year of September 30, 2006 totaled $99.1 million, or 67.1%, 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 also have the ability to attract and retain deposits by adjusting the interest rates offered.

At September 30, 2006, the Bank exceeded all of its regulatory capital requirements with tangible capital of $57.5 million, or 10.59% of total adjusted assets,
which is above the required level of $8.1 million or 1.5%; core capital of $57.5 million, or 10.59% of total adjusted assets, which is above the required level of $21.7 million or 4%; and risk-based capital of $59.5 million, or 19.11% of
risk-weighted assets, which is above the required level of $24.9 million or 8%. The Bank is considered a well-capitalized institution under the Office of Thrift Supervisions prompt corrective action regulations.

On March 29, 2006, the Company announced that its board of directors approved the repurchase of up to 200,087 shares of the Companys outstanding common stock,
which is 5% of our outstanding shares (excluding those held by OC Financial MHC). The program began on May 1, 2006. Repurchases, which will be conducted through open market purchases or privately negotiated transactions, will be made from time
to time depending on market conditions and other factors. Repurchased shares will be held in treasury. As of September 30, 2006, the Company had repurchased 128,800 shares under this plan at a cost of $1.8 million.

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.



25



---

Simulation analysis is only an estimate of our interest rate risk exposure at a particular point in time. We continually review the potential effect changes
in interest rates could have on the repayment of rate sensitive assets and funding requirements of rate sensitive liabilities.

The following table
reflects changes in estimated net interest income only for Ocean Shore Holding.



|                                  |  |                                                                             |    |  |           |   
|--------------------------------- |  | --------------------------------------------------------------------------- | -- |  | --------- | --
|                                  |  | At September 30, 2006Percentage Change in EstimatedNet Interest Income
Over |   
|                                  |  | 12 Months                                                                   |    |  | 24 Months |   
|200 basis point increase in rates |  | (2.05                                                                       | )% |  | (7.38     | )%
|100 basis point decrease in rates |  | 0.20                                                                        | %  |  | (0.63     | )%

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

Net Portfolio Value Analysis

In addition to a net interest income simulation analysis, an interest rate sensitivity
analysis prepared by the Office of Thrift Supervision is used to review our level of interest rate risk. This analysis measures interest rate risk by computing changes in the net portfolio value of 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 100 to 300 basis point decrease in market interest rates with no
effect given to any steps that we might take to counter the effect of that interest rate movement. We measure interest rate risk by modeling the changes in net portfolio value over a variety of interest rate scenarios. The following table, which is
based on information that we provide to the Office of Thrift Supervision, presents the change in our net portfolio value at September 30, 2006 that would occur in the event of an immediate change in interest rates based on Office of Thrift
Supervision assumptions, with no effect given to any steps that we might take to counteract that change.



|                                   |  |                                            |        |          |                                                      |         |          |  |     |           |  |      |        |  |      |  
|---------------------------------- |  | ------------------------------------------ | ------ | -------- | ---------------------------------------------------- | ------- | -------- |  | --- | --------- |  | ---- | ------ |  | ---- | -
|                                   |  | Net Portfolio Value (Dollars in Thousands) |        |          | Net Portfolio Value as % ofPortfolio Value of Assets |        
|Basis Point (bp) Change in Rates |  | $ Amount                                   |        | $ Change |                                                      |         | % Change |  |     | NPV Ratio |  |      | Change | 
|300 bp                             |  | $                                          | 56,397 |          | $                                                    | (28,893 | )        |  | (34 | )%        |  | 10.3 | %      |  | (420 | )
|200                                |  |                                            | 66,392 |          |                                                      | (18,897 | )        |  | (22 | )         |  | 11.8 |        |  | (267 | )
|100                                |  |                                            | 77,891 |          |                                                      | (7,398  | )        |  | (9  | )         |  | 13.5 |        |  | (99  | )
|0                                  |  |                                            | 85,289 |          |                                                      |        |          |  |    |           |  | 14.5 |        |  |     |  
|(100)                              |  |                                            | 87,168 |          |                                                      | 1,879   |          |  | 2   |           |  | 14.6 |        |  | 15   |  
|(200)                              |  |                                            | 81,861 |          |                                                      | (3,429  | )        |  | (4  | )         |  | 13.7 |        |  | (77  | )
|(300)                              |  |                                            | 73,905 |          |                                                      | (11,384 | )        |  | (13 | )         |  | 12.4 |        |  | (209 | )

The Office of Thrift Supervision uses certain assumptions in assessing the interest rate risk of savings
associations. These assumptions relate to interest rates, loan prepayment rates, deposit decay rates, and the market values of certain assets under differing interest rate scenarios, among others. As with any method of measuring interest rate risk,
certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods



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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 and nine months ended September 30, 2006, 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 and principal financial offers,
as appropriate to allow timely decisions regarding required disclosure. In addition, based on that evaluation, no change in the Companys internal control over financial reporting occurred during the quarter ended September 30, 2006 that
has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.

PART II  OTHER INFORMATION

Item 1. Legal Proceedings

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



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Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the
factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2005, which could materially affect our business, financial condition or future results. The risks described in our
Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or
operating results.

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



|                                                      |  |                                              |  |                                         |       |                                                                                             |         |                                                                                                                        |        
|----------------------------------------------------- |  | -------------------------------------------- |  | --------------------------------------- | ----- | ------------------------------------------------------------------------------------------- | ------- | ---------------------------------------------------------------------------------------------------------------------- | -------
|Period                                                |  | (a) Total numberof Shares (orUnits)Purchased |  | (b)Average PricePaid per Share(or Unit) |       | (c) Total Number ofShares (or units)Purchased as Part ofPublicly AnnouncedPlans or Programs |         | (d) Maximum Number (orAppropriate DollarValue) of Shares (orunits) that May Yet BePurchased Under thePlans or Programs
|Month #1 July 1, 2006 through July 31, 2006           |  | None                                         |  |                                         | None  |                                                                                             | 28,800  |                                                                                                                        | 171,736
|Month #2 August 1, 2006 through August 31, 2006       |  | 100,000                                      |  | $                                       | 13.05 |                                                                                             | 128,800 |                                                                                                                        | 71,736 
|Month #3 September 1, 2006 through September 30, 2006 |  | None                                         |  |                                         | None  |                                                                                             | 128,800 |                                                                                                                        | 71,736 
|Total                                                 |  | 100,000                                      |  | $                                       | 13.05 |                                                                                             |         |                                                                                                                        |        

---

|(1) | On August 10, 2005, the Companys Board of Directors approved the formation and funding of a trust that will purchase 171,749 shares of the Companys common stock in
the open market with funds contributed by the Company. As of September 23, 2005, 171,300 shares were purchased. The remaining 449 shares have not been awarded and may be purchased from time to time at the discretion of the independent trustee
of the trust and the shares will be used to fund restricted stock awards under the Companys 2005 Equity Incentive Plan.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | On March 29, 2006, the Companys Board of Directors approved the repurchase of 200,087 shares of the Companys common stock in the open market. As of
September 30, 2006, 128,800 shares were purchased. The Company is still purchasing shares in the open market to complete the remaining 71,287 shares approved for purchase.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

None.



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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



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SIGNATURES

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



|                        |  |  |  |                                      
|----------------------- |  |  |  | -------------------------------------
|                        |  |  |  | OCEAN SHORE HOLDING CO.              
|                        |  |  |  | (Registrant)                         
|                        |  | 
|Date: November 13, 2006 |  |  |  | /s/ Steven E. Brady                  
|                        |  |  |  | Steven E. Brady                      
|                        |  |  |  | President and Chief Executive Officer



|                        |  |  |  |                                                  
|----------------------- |  |  |  | -------------------------------------------------
|Date: November 13, 2006 |  |  |  | /s/ Donald F. Morgenweck                         
|                        |  |  |  | Donald F. Morgenweck                             
|                        |  |  |  | Chief Financial Officer and Senior Vice President



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