**Third
                  Century Bancorp**
                
                
                
                
                
                
                
                **2006
                    Annual Report**
 
   
  
 
 **TABLE
        OF CONTENTS**




Letter
                      to Shareholders
                  1Selected
                      Consolidated Financial Data
                  2Management’s
                      Discussion and Analysis or Plan of
                      Operation
                  3Report
                      of Independent Registered Public Accounting
                      Firm
                  17Consolidated
                      Balance Sheets
                  18Consolidated
                      Statements of Income
                  19Consolidated
                      Statements of Stockholders’
                      Equity
                  20Consolidated
                      Statements of Cash Flows
                  21Notes
                      to Consolidated Financial Statements
                  22Market
                      Price of Third Century’s Common Shares and Related
                      Stockholder Matters
                  44Directors
                      and Executive Officers
                  45Directors
                      Emeritus
                  46Officers
                      of Mutual Savings Bank
                  46General
                      Information For Stockholders
                  47
 **COMPANY
        OVERVIEW**
  Third
        Century Bancorp (“**Third Century**” or “**we**”), an
        Indiana corporation, was formed in April 2004 for the primary purpose of
        purchasing all of the issued and outstanding common stock of Mutual Savings
        Bank
        (“**Mutual**” or the “**Bank**”) in its conversion
        from mutual to stock form. The conversion was completed on June 29, 2004 at
        which time Third Century became the holding company parent of
        Mutual.
  Mutual
        was founded in 1890 as a mutual building and loan association under the name
        Mutual Building and Loan Association. In 1994, Mutual converted to a
        state-chartered savings bank and changed its name to the current name of
        Mutual
        Savings Bank, which it retained after its stock conversion. Mutual conducts
        its
        business from five offices in Johnson County and one office in Marion County,
        Indiana. Mutual offers a variety of lending, deposit and other financial
        services to its retail and commercial customers.
  Third
        Century is a registered bank holding company subject to the regulations of
        the
        Federal Reserve Board under the Bank Holding Company Act of 1956, as amended.
        Mutual is organized under the laws of Indiana and as such is subject to the
        supervision of the Indiana Department of Financial Institutions
        (“**DFI**”), whose examiners conduct periodic examinations of state
        banks. Mutual’s principal federal regulator is the Federal Deposit Insurance
        Corporation (“**FDIC**”), which also conducts periodic examination
        of Mutual. Mutual’s deposits are insured by the Deposit Insurance Fund
        administered by the FDIC.
  
 *Table
              of Contents*
 
 **LETTER
        TO STOCKHOLDERS**
  Dear
        Shareholder:
 
 Please
        find enclosed the Annual Report
        for 2006.  Your Bank had another successful year in 2006, but there
        remains several challenges which impacted earnings during the past
        year.
  Net
        income for 2006 was
        $456,000.  This compares to net income of $534,000 for
        2005.  Return on average assets was 0.35% for 2006, compared to 0.42%
        for 2005; return on average equity also declined to 2.21% from 2.32% for
        the
        same time period.
  We
        realized that going into the year we
        would be taking on the added expense of a new location, our Franklin Central
        Branch, which opened in June 2006.  We also knew that it would be
        difficult to make a significant improvement in personnel expenses with the
        addition of the Franklin Central staff and the first full year of expensing
        the
        cost of our Recognition and Retention Plan.  The costs of maintaining
        the defined benefit pension plan, which was frozen in May, 2005, did not
        decline
        at the level we had desired.  Despite these additional expenses,
        overall personnel related expenses increased by a modest
        1.85%.  During the second half of the year, we reduced our staff by
        three full time positions, which we believe will provide cost savings in
        personnel expenses in 2007.
  As
        with the entire banking industry in
        2006, our earnings were impacted by a declining net interest
        margin.  Higher interest rates on deposits, along with an inverted
        interest rate yield curve were largely responsible for the decline in the
        net
        interest margin.  This is explained in more detail in the Executive
        Summary section of this report.
  Even
        with these challenges, we
        experienced successes in 2006. In this extremely competitive market total
        loans
        grew by $6.4 million, an increase of 6.05%.  Much of the growth was
        attributed to growth in commercial real estate and other commercial loans,
        with
        net growth of $5.9 million.  The bank’s adjustable rate mortgage
        portfolio grew by $4.8 million, or 32.88%.  We ended 2006 with over
        $130 million in assets for the first time in our history.
  As
        noted above, we are pleased with the
        opening of our newest location, our Franklin Central Branch, which opened
        in
        June, 2006.  Deposit growth is slightly ahead of
        projections.  We believe that growth opportunities are significant in
        this market area of southeastern Marion County, our first venture in branching
        outside of Johnson County.  This past year the Bank also purchased a
        parcel of land in the northwestern part of Johnson County, along State Road
        135
        and Whiteland Road.  While we have no plans to construct another
        branch location in 2007, we believe this parcel of land provides an excellent
        location to expand our future presence in this area of Johnson
        County.
  2006
        was a significant year for Third
        Century Bancorp shareholders.  In May, 2006 we returned $2 per share
        in the form of a return of capital to each of our shareholders.  In
        the fall we announced our intention to repurchase 5% of our outstanding
        shares.  As of the date of writing you this letter, we have
        repurchased 19,000 of the 82,656 shares which represents the 5% being
        repurchased at this time.  As of December 31, 2006, the market price
        of our stock was $11.30 per share, 96% of the book value of $11.75 for each
        Third Century Bancorp share.   We will continue to consider
        capital management options to enhance the shareholder value of our
        company.
  As
        we look ahead to 2007 and beyond, we
        realize that it is important to continue to emphasize quality growth of the
        Bank
        in order to improve its profitability and earnings performance.  We
        are looking forward to 2007 and appreciate your confidence in us.
 
 Sincerely,
  /s/
        Robert D. Heuchan
  Robert
        D.
        Heuchan
 President
        and CEO
 
 *Table
              of Contents*
 
 **SELECTED
        CONSOLIDATED FINANCIAL DATA**
  The
        following tables set forth certain information concerning the consolidated
        financial condition, earnings, and other data regarding Third Century at
        the
        dates and for the periods indicated.
  **At
                        December 31,****2006**
                    
                    
                    **2005****Selected
                        Consolidated Financial Condition Data**:
                    
                    **(In
                        Thousands)****Total
                        Amount of**:Assets
                    
                    $
                    133,503
                    
                    
                    $
                    128,147Loans
                        receivable-net
                    
                    
                    111,938
                    
                    
                    
                    105,557Cash
                        and cash
                        equivalents
                    
                    
                    9,492
                    
                    
                    
                    7,853Interest-earning
                        time
                        deposits
                    
                    
                    --
                    
                    
                    
                    200Investment
                        securities
                    
                    
                    5,209
                    
                    
                    
                    9,210Deposits
                    
                    
                    88,568
                    
                    
                    
                    88,608FHLB
                        advances
                    
                    
                    24,600
                    
                    
                    
                    16,500Stockholders’
                        equity-net
                    
                    
                    19,426
                    
                    
                    
                    22,350
 
 **For
                        the year ended December 31,****2006**
                    
                    
                    **2005****Selected
                        Consolidated Earnings Data**:
                    
                    **(In
                        Thousands, Except Share Data)**Total
                        interest
                        income
                    
                    $
                    7,840
                    
                    
                    $
                    6,893Total
                        interest expense
                    
                    
                    3,123
                    
                    
                    
                    2,180Net
                        interest income
                    
                    
                    4,717
                    
                    
                    
                    4,713Provision
                        for losses on loans
                    
                    
                    45
                    
                    
                    
                    --Net
                        interest income after provision for losses on loans
                    
                    
                    4,672
                    
                    
                    
                    4,713Other
                        income
                    
                    
                    918
                    
                    
                    
                    810General,
                        administrative and other expenses
                    
                    
                    4,829
                    
                    
                    
                    4,635Earnings
                        before income tax expense
                    
                    
                    761
                    
                    
                    
                    888Income
                        tax expense
                    
                    
                    305
                    
                    
                    
                    354Net
                        earnings
                    
                    $
                    456
                    
                    
                    $
                    534Basic
                        earnings per share
                    
                    $
                    0.31
                    
                    
                    $
                    0.35Diluted
                        earnings per share
                    
                    $
                    0.31
                    
                    
                    $
                    0.35**Selected
                        Financial Ratios and Other Data**:Interest
                        rate spread during period
                    
                    
                    3.05
                    %
                    
                    
                    3.28
                    %Net
                        yield on interest-earning assets
                    
                    
                    3.78
                    
                    
                    
                    3.85Return
                        on average assets
                    
                    
                    0.35
                    
                    
                    
                    0.42Return
                        on average equity
                    
                    
                    2.21
                    
                    
                    
                    2.32Equity
                        to assets
                    
                    
                    14.55
                    
                    
                    
                    17.44Average
                        interest-earning assets to average interest-bearing
                        liabilities
                    
                    
                    129.37
                    
                    
                    
                    132.55Non-performing
                        assets to total assets
                    
                    
                    0.08
                    
                    
                    
                    0.24Allowance
                        for loan losses to total loans outstanding
                    
                    
                    0.83
                    
                    
                    
                    0.87Allowance
                        for loan losses to non-performing loans
                    
                    
                    858.72
                    
                    
                    
                    506.01Net
                        charge-offs to average total loans outstanding
                    
                    
                    0.03
                    
                    
                    
                    0.08General,
                        administrative and other expense to average assets
                    
                    
                    3.73
                    
                    
                    
                    3.67Dividend
                        payout ratio1
                    
                    
                    51.61
                    
                    
                    
                    45.39Dividend
                        payout ratio2
                    
                    
                    696.77
                    
                    
                    
                    n/aNumber
                        of full service offices
                    
                    
                    6
                    
                    
                    
                    5
   1
        The calculation of
        this ratio does not include the return of capital dividend to
        shareholders.
 2
        The calculation of
        this ratio includes a $2.00 per share return of capital dividend paid May
        8,
        2006.
 
 *Table
              of Contents*
 
 **MANAGEMENT’S
          DISCUSSION AND ANALYSIS**
 **OF
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS**
   **GENERAL**
  As
          discussed previously, Third Century was incorporated for the primary purpose
          of
          owning all of the outstanding shares of Mutual. As a result, the discussion
          that
          follows focuses on Mutual’s financial condition and results of operations for
          the periods presented. The following discussion and analysis of the financial
          condition as of December 31, 2006 and the results of operations for periods
          prior to that date should be read in conjunction with the consolidated
          financial
          statements and the notes thereto, included elsewhere in this Annual
          Report.
  In
          addition to the historical information contained herein, the following
          discussion contains forward-looking statements that involve risks and
          uncertainties. Third Century’s operations and its actual results could differ
          significantly from those discussed in the forward-looking statements. Some
          of
          the factors that could cause or contribute to such differences are discussed
          herein but also include, but are not limited to, changes in the economy
          and
          interest rates in the nation and Third Century’s general market area. The
          forward-looking statements contained herein include those with respect
          to the
          following matters:
  1.
                Management’s
                    determination as to the amount and adequacy of the loan loss
                    allowance;
                    and
  2.
                The
                    effect of changes in interest rates on Third Century’s financial condition
                    and results of operations.
  **CRITICAL
          ACCOUNTING POLICIES**
  Generally
          accepted accounting principles are complex and require management to apply
          significant judgments to various accounting, reporting and disclosure matters.
          Management of Third Century must use assumptions and estimates to apply
          these
          principles where actual measurement is not possible or practical. For a
          complete
          discussion of Third Century’s significant accounting policies, see Note 1 to the
          Consolidated Financial Statements as of December 31, 2006. Certain policies
          are
          considered critical because they are highly dependent upon subjective or
          complex
          judgments, assumptions and estimates. Changes in such estimates may have
          a
          significant impact on the financial statements. Management has reviewed
          the
          application of these policies with the Audit Committee of Third Century’s Board
          of Directors. Those policies include the following:
  **ALLOWANCE
          FOR LOAN LOSSES**
  The
          allowance for loan losses represents management’s estimate of probable losses
          inherent in the Bank’s loan portfolio. In determining the appropriate amount of
          the allowance for loan losses, management makes numerous assumptions, estimates
          and assessments.
  The
          strategy also emphasizes diversification on an industry and customer level,
          regular credit quality reviews and quarterly management reviews of large
          credit
          exposures and loans experiencing deterioration of credit quality.
  Mutual’s
          allowance consists of three components: probable losses estimated from
          individual reviews of specific loans, probable losses estimated from historical
          loss rates, and probable losses resulting from economic or other deterioration
          above and beyond what is reflected in the first two components of the
          allowance.
  Larger
          commercial loans that exhibit probable or observed credit weaknesses are
          subject
          to individual review. Where appropriate, reserves are allocated to individual
          loans based on management’s estimate of the borrower’s ability to repay the loan
          given the availability of collateral, other sources of cash flow and legal
          options available to Mutual. Included in the review of individual
   3
 *Table
              of Contents*
  
  loans
          are
          those that are impaired as provided in SFAS No. 114, Accounting by Creditors
          for
          Impairment of a Loan. Any allowances for impaired loans are determined
          by the
          present value of expected future cash flows discounted at the loan’s effective
          interest rate or fair value of the underlying collateral. Mutual evaluates
          the
          collectibility of both principal and interest when assessing the need for
          a loss
          accrual. Historical loss rates are applied to other commercial loans not
          subject
          to specific reserve allocations.
  Homogenous
          smaller balance loans, such as consumer installment and residential mortgage
          loans are not individually risk graded. Reserves are established for each
          pool
          of loans based on estimated loss rates. Loss rates are based on the average
          net
          charge-off history by loan category.
  Historical
          loss rates for commercial and consumer loans may be adjusted for significant
          factors that, in management’s judgment, reflect the impact of any current
          conditions on loss recognition. Factors which management considers in the
          analysis include the effects of the national and local economies, trends
          in the
          nature and volume of loans (delinquencies, charge-offs and nonaccrual loans),
          changes in mix, asset quality trends, risk management and loan administration,
          changes in the internal lending policies and credit standards, collection
          practices and examination results from bank regulatory agencies and the
          Bank’s
          internal loan review.
  Mutual’s
          primary market area for lending is Johnson County, Indiana. When evaluating
          the
          adequacy of allowance, consideration is given to this regional geographic
          concentration and the closely associated effect changing economic conditions
          have on Mutual’s customers.
  **MORTGAGE
          SERVICING RIGHTS**
  Mortgage
          servicing rights (“MSRs”) associated with loans originated and sold, where
          servicing is retained, are capitalized and included in other intangible
          assets
          in the consolidated balance sheet. The value of the capitalized servicing
          rights
          represents the present value of the future servicing fees arising from
          the right
          to service loans in the portfolio. Critical accounting policies for MSRs
          relate
          to the initial valuation and subsequent impairment tests. The methodology
          used
          to determine the valuation of MSRs requires the development and use of
          a number
          of estimates, including anticipated principal amortization and prepayments
          of
          that principal balance. Events that may significantly affect the estimates
          used
          are changes in interest rates, mortgage loan prepayment speeds and the
          payment
          performance of the underlying loans. The carrying value of the MSRs is
          periodically reviewed for impairment based on a determination of fair value.
          For
          purposes of measuring impairment, the servicing rights are compared to
          a
          valuation prepared based on a discounted cash flow methodology, utilizing
          current prepayment speeds and discount rates. Impairment, if any, is recognized
          through a valuation allowance and is recorded as amortization of intangible
          assets.
    
   4
 *Table
              of Contents*
   
 **EXECUTIVE
            SUMMARY**
   The
          management of Mutual Savings Bank continues to focus on those areas which
          we
          recognize as our strengths while at the same time improve in weaker performance
          areas, mainly in operational efficiencies.
  A
          significant challenge in 2006 was in the area of net interest
          margin.  While the Bank continues to maintain this important earnings
          component above its peer levels, we did experience a reduction in the net
          interest margin.  The net interest margin declined from 3.28% as of
          December 31, 2005 to 3.05% as of December 31, 2006.  While total
          interest income increased by $947,000, an increase of 13.74%, this increase
          was
          more than offset by a correspondingly higher increase in interest expense,
          which
          increased by $943,000, or 43.26%.  Contraction in net interest margins
          was prevalent for many banks in 2006.  While our spread decline was
          not as much as many banks, it impacted our earnings, particularly since
          we rely
          more upon the spread between loan yield and deposit costs for earnings
          than
          larger banks, who typically have higher levels of fee income as a percentage
          of
          gross revenue.
 
 Operational
          efficiencies continued to trail below our peer group again this
          year.  We anticipated this decline because of the planned opening of
          our Franklin Central Branch in 2006.  This included hiring 4
          additional employees in the first half of the year as well as the expected
          occupancy expenses which go with a new branch.  Late in the year steps
          were taken to reduce overhead by trimming the staff by three full time
          employees.  Personnel-related expenses increased modestly in 2006, by
          1.85%. However, net occupancy costs increased by 14.56% largely due to
          the
          addition of the Franklin Central Branch and increased property taxes on
          all real
          estate owned by the bank.
 
 Even
          as
          we deal with these challenges, we experienced successes in 2006. In this
          very
          competitive financial market total loans grew by $6.4 million, or
          6.05%.  Much of the growth was attributed to growth in commercial real
          estate and other commercial loans, with net growth of $5.9
          million.  The bank’s adjustable rate mortgage portfolio grew by $4.8
          million, or 32.88%.  In 2006 we expanded the types of mortgage loans
          offered to customers which resulted in an increased volume of servicing
          released
          mortgage loans sold.
 
 Loan
          losses were modest in 2006, with net charge offs of $35,000.  This
          compares to $86,000 in 2005.  Charge off and delinquency numbers
          remain better than most of our peers.  As of December 31, 2006, we had
          no real estate owned or repossessed vehicles.
 
 Deposit
          growth declined during the past year.  Deposits were $40,000 lower in
          2006, compared to 2005.  The decline in deposit growth was attributed
          to the competitive market for deposits.  Despite this decline, our
          core deposit percentage remains a healthy 56.09% of total deposits.
 
 Non-interest
          income increased in 2006 to $918,000, compared to $810,000 in 2005, an
          increase
          of $108,000 or 13.33%.  A decline in mortgage servicing rights income
          of $24,000 was more than offset by an increase in Trust Department fees
          ($17,000), in service charges on deposit accounts ($66,000) and fees from
          ATM
          usage ($12,000).
 
 As
          we
          look ahead to 2007 and beyond, it is important to continue to emphasize
          quality
          growth of the Bank in order to improve its profitability and earnings
          performance.  However, we will make certain that the growth we
          experience will be the right type of growth, not growth that will imperil
          the
          Bank’s balance sheet or net interest margin.  With quality growth, we
          believe that we will improve our operational efficiencies and with it the
          financial performance of this financial institution.
  5
 *Table
              of Contents*
    **AVERAGE
          BALANCES AND INTEREST RATES AND YIELDS**
   The
          following table presents Mutual’s interest-earnings assets and interest-bearing
          liabilities and the yields and rates on such balances for 2006 and 2005
          and at
          December 31, 2006, and the average daily balances of each category of
          Mutual’s interest-earning assets and interest-bearing liabilities, the interest
          earned or paid on those balances and the average yields earned and interest
          rates paid on such balances. Such yields and costs are determined by dividing
          income or expense by the average balance of assets or liabilities, respectively,
          for the periods presented.
  **At
                                December 31,**
                            
                            
                            **Year
                                Ended December 31,****2006**
                            
                            
                            **2006**
                            
                            
                            **2005****Balance**
                            
                            
                            **Yield/**
                              **Rate**
                            
                            
                            **Average**
                              **Balance**
                            
                            
                            **Interest**
                              **Earned/**
                              **Paid**
                            
                            
                            **Average**
                              **Y****ield/**
                              **Rate**
                            
                            
                            **Average**
                              **Balance**
                            
                            
                            **Interest**
                              **Earned/**
                              **Paid**
                            
                            
                            **Average**
                              **Yield/**
                              **Rate****Assets**:
                            
                            **(Dollars
                                in Thousands)**Interest
                                Earning Assets:Interest
                                Earning
                                Deposits
                            
                            $
                            8,872
                            
                            
                            
                            5.06
                            %
                            
                            $
                            5,224
                            
                            
                            $
                            208
                            
                            
                            
                            3.98
                            %
                            
                            $
                            7,608
                            
                            
                            $
                            183
                            
                            
                            
                            2.41
                            %Interest
                                Earning Time
                                Deposits
                            
                            
                            —
                            
                            
                            
                            0.00
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            305
                            
                            
                            
                            9
                            
                            
                            
                            2.95Securities
                                Held to
                                Maturity
                            
                            
                            5,209
                            
                            
                            
                            4.73
                            
                            
                            
                            7,021
                            
                            
                            
                            291
                            
                            
                            
                            4.14
                            
                            
                            
                            10,413
                            
                            
                            
                            341
                            
                            
                            
                            3.27Loans
                                Receivable(1)
                            
                            
                            112,911
                            
                            
                            
                            6.68
                            
                            
                            
                            111,349
                            
                            
                            
                            7,287
                            
                            
                            
                            6.54
                            
                            
                            
                            102,944
                            
                            
                            
                            6,316
                            
                            
                            
                            6.14Stock
                                in FHLB of
                                Indianapolis
                            
                            
                            1,255
                            
                            
                            
                            4.75
                            
                            
                            
                            1,142
                            
                            
                            
                            54
                            
                            
                            
                            4.73
                            
                            
                            
                            1,037
                            
                            
                            
                            44
                            
                            
                            
                            4.24Total
                                Interest Earning
                                Assets
                            
                            
                            128,247
                            
                            
                            
                            6.47
                            %
                            
                            
                            124,736
                            
                            
                            
                            7,840
                            
                            
                            
                            6.29
                            %
                            
                            
                            122,307
                            
                            
                            
                            6,893
                            
                            
                            
                            5.64
                            %Non-Interest
                                Earning Assets, Net of Allowance for Loan Losses
                            
                            
                            5,256
                            
                            
                            
                            
                            
                            
                            
                            4,643
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            3,831Total
                                Assets
                            
                            $
                            133,503
                            
                            
                            
                            
                            
                            
                            $
                            129,379
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            $
                            126,138**Liabilities
                                and Retained Earnings**:Interest
                                Bearing Liabilities:Savings,
                                NOW, Money Market
                                Deposits
                            
                            $
                            40,085
                            
                            
                            
                            2.01
                            %
                            
                            $
                            40,589
                            
                            
                            $
                            830
                            
                            
                            
                            2.04
                            %
                            
                            $
                            40,740
                            
                            
                            $
                            491
                            
                            
                            
                            1.21
                            %Certificates
                                of
                                Deposit
                            
                            
                            38,893
                            
                            
                            
                            4.42
                            
                            
                            
                            35,019
                            
                            
                            
                            1,342
                            
                            
                            
                            3.83
                            
                            
                            
                            34,953
                            
                            
                            
                            1,023
                            
                            
                            
                            2.93FHLB
                                Advances
                            
                            
                            24,600
                            
                            
                            
                            4.62
                            
                            
                            
                            20,812
                            
                            
                            
                            951
                            
                            
                            
                            4.57
                            
                            
                            
                            16,581
                            
                            
                            
                            666
                            
                            
                            
                            4.02Total
                                Interest Bearing
                                Liabilities
                            
                            
                            103,578
                            
                            
                            
                            3.53
                            %
                            
                            
                            96,420
                            
                            
                            
                            3,123
                            
                            
                            
                            3.24
                            %
                            
                            
                            92,274
                            
                            
                            
                            2,180
                            
                            
                            
                            2.36
                            %Other
                                Liabilities
                            
                            
                            10,175
                            
                            
                            
                            
                            
                            
                            
                            12,369
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            10,851Total
                                Liabilities
                            
                            
                            113,753
                            
                            
                            
                            
                            
                            
                            
                            108,789
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            103,125Equity
                                Contributed by ESOP
                            
                            
                            324
                            
                            
                            
                            
                            
                            
                            
                            261
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            139Stockholders’
                                Equity
                            
                            
                            19,426
                            
                            
                            
                            
                            
                            
                            
                            20,329
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            22,874Total
                                Liabilities and Stockholders’Equity
                            
                            $
                            133,503
                            
                            
                            
                            
                            
                            
                            $
                            129,379
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            $
                            126,138Net
                                Earning Assets
                            
                            
                            24,669
                            
                            
                            
                            
                            
                            
                            
                            28,316
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            30,033Net
                                Interest Income
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            $
                            4,717
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            $
                            4,713Interest
                                Rate Spread(2)
                            
                            
                            
                            
                            
                            
                            2.93
                            %
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            3.05
                            %
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            3.28
                            %Net
                                Yield on Average Earning Assets(3)
                            
                            
                            
                            
                            
                            
                            n/a
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            3.78
                            %
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            3.85
                            %Interest
                                Earning Assets to Interest Bearing Liabilities
                            
                            
                            
                            
                            
                            
                            123.82
                            %
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            129.37
                            %
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            132.55
                            %________________________________________________________
                              (1)Nonaccruing
                                loans have been included in the average balances.
                              (2)Interest
                                rate spread is calculated by subtracting weighted
                                average interest rate
                                cost from weighted average interest rate yield for
                                the period
                                indicated.
                              (3)The
                                net
                                yield on weighted average interest earning assets
                                is calculated by
                                dividing net interest income by weighted average
                                interest earning assets
                                for the period indicated.
   6
 *Table
              of Contents*
  
 **INTEREST
            RATE SPREAD**
   Mutual’s
          results of operations have been determined primarily by net interest income
          and,
          to a lesser extent, non-interest income and non-interest expenses. Net
          interest
          income is determined by the interest rate spread between the yields earned
          on
          interest-earning assets and the rates paid on interest-bearing liabilities
          and
          by the relative amounts of interest-earning assets and interest-bearing
          liabilities.
  The
          following table sets forth the weighted average effective interest rate
          earned
          by Mutual on its loan and investment portfolios and other interest-earning
          assets, the weighted average effective cost of Mutual’s deposits and borrowings,
          the interest rate spread of Mutual, and the net yield on weighted average
          interest-earning assets for the periods and as of the date shown. Average
          balances are based on average daily balances.
  **At
                    December 31,**
                
                **Year
                    Ended December 31,****2006**
                
                **2006**
                
                **2005**Weighted
                    Average Interest Rate Earned On:Interest
                    Earning
                    Deposits
                5.06%
                
                3.98%
                
                2.41%Interest
                    Earning Time
                    Deposits
                —
                
                —
                
                2.95Securities
                    to be Held to
                    Maturity
                4.73
                
                4.14
                
                3.27Loans
                    Receivable
                6.68
                
                6.54
                
                6.14FHLB
                    Stock
                4.75
                
                4.73
                
                4.24Total
                    Interest Earning
                    Assets
                6.47
                
                6.29
                
                5.64Weighted
                    Average Interest Rate Cost of:Savings,
                    NOW and Money
                    Market
                2.01
                
                2.04
                
                1.21Certificates
                    of
                    Deposit
                4.42
                
                3.83
                
                2.93FHLB
                    Advances
                4.62
                
                4.57
                
                4.02Total
                    Interest Bearing
                    Liabilities
                3.53
                
                3.24
                
                2.36Interest
                    Rate Spread
                2.93
                
                3.05
                
                3.28Net
                    Yield on Weighted Average Interest Earning Assets
                n/a
                
                3.78
                
                3.85
 
  7
 *Table
              of Contents*
  **CHANGES
            IN RATE AND VOLUME**
  The
          following table describes the extent to which changes in interest rates
          and
          changes in volume of interest-related assets and liabilities have affected
          Mutual’s interest income and expense during the periods indicated. For each
          category of interest-earning asset and interest-bearing liability, information
          is provided on changes attributable to (1) changes in rate (changes in
          rate
          multiplied by old volume) and (2) changes in volume (changes in volume
          multiplied by old rate). Changes attributable to both rate and volume which
          cannot be segregated have been allocated proportionally to the change due
          to
          volume and the change due to rate.
 
 **Increase
                          (Decrease) in Net Interest Income****Due
                          to Rate**
                      
                      
                      **Due
                          to**
                        **Volume**
                      
                      
                      **Total
                          Net**
                        **Change****(In
                          Thousands)****Year
                          Ended December 31, 2006, Compared to Year Ended December
                          31,
                          2005**Interest
                          Earning Assets:Interest
                          Earning
                          Deposits
                      
                      $
                      95
                      
                      
                      $
                      (70
                      )
                      
                      $
                      25Interest
                          Earning Time
                          Deposits
                      
                      
                      —
                      
                      
                      
                      (9
                      )
                      
                      
                      (9
                      )Securities
                          to be Held to
                          Maturity
                      
                      
                      77
                      
                      
                      
                      (127
                      )
                      
                      
                      (50
                      )Loans
                          Receivable
                      
                      
                      436
                      
                      
                      
                      535
                      
                      
                      
                      971FHLB
                          Stock
                      
                      
                      5
                      
                      
                      
                      5
                      
                      
                      
                      10Total
                      
                      
                      613
                      
                      
                      
                      334
                      
                      
                      
                      947Interest
                          Bearing Liabilities:Savings
                          Deposits
                      
                      
                      341
                      
                      
                      
                      (2
                      )
                      
                      
                      339Certificates
                          of
                          Deposit
                      
                      
                      317
                      
                      
                      
                      2
                      
                      
                      
                      319FHLB
                          Advances
                      
                      
                      100
                      
                      
                      
                      185
                      
                      
                      
                      285Total
                      
                      
                      758
                      
                      
                      
                      185
                      
                      
                      
                      943Net
                          Change in Net Interest
                          Income
                      
                      $
                      (145
                      )
                      
                      $
                      149
                      
                      
                      $
                      4**Year
                          Ended December 31, 2005, Compared to Year Ended December
                          31,
                          2004**Interest
                          Earning Assets:Interest
                          Earning
                          Deposits
                      
                      $
                      (65
                      )
                      
                      $
                      109
                      
                      
                      $
                      44Interest
                          Earning Time
                          Deposits
                      
                      
                      6
                      
                      
                      
                      —
                      
                      
                      
                      6Securities
                          to be Held to
                          Maturity
                      
                      
                      213
                      
                      
                      
                      73
                      
                      
                      
                      286Loans
                          Receivable
                      
                      
                      365
                      
                      
                      
                      148
                      
                      
                      
                      513FHLB
                          Stock
                      
                      
                      2
                      
                      
                      
                      (6
                      )
                      
                      
                      (4
                      )Total
                      
                      
                      521
                      
                      
                      
                      324
                      
                      
                      
                      845Interest
                          Bearing Liabilities:Savings
                          Deposits
                      
                      
                      13
                      
                      
                      
                      246
                      
                      
                      
                      259Interest
                          Bearing Demand
                          Deposits
                      
                      
                      (7
                      )
                      
                      
                      —
                      
                      
                      
                      (7
                      )Certificates
                          of
                          Deposit
                      
                      
                      (25
                      )
                      
                      
                      117
                      
                      
                      
                      92FHLB
                          Advances
                      
                      
                      (33
                      )
                      
                      
                      (7
                      )
                      
                      
                      (40
                      )Total
                      
                      
                      (52
                      )
                      
                      
                      356
                      
                      
                      
                      304Net
                          Change in Net Interest Income
                      
                      $
                      573
                      
                      
                      $
                      (32
                      )
                      
                      $
                      541
 
  8
 *Table
              of Contents*
  **FINANCIAL
            CONDITION AT DECEMBER 31, 2006 COMPARED TO**
 **FINANCIAL
            CONDITION AT DECEMBER 31, 2005**
  **ASSETS**
  Total
          assets increased $5.4 million to $133.5 million at December 31, 2006 from
          $128.1 million at December 31, 2005, an increase of 4.18%.  Total
          net loans outstanding increased by $6.4 million, ending 2006 at $111.9
          million.  Commercial loans increased $5.9 million or 15.85% to $43.1
          million at December 31, 2006.  Mutual continued to sell fixed-rate
          mortgage loans without recourse in the secondary market during 2006 and
          retained
          servicing rights to those loans.  Loans sold in the secondary market
          increased by $1.8 million or 8.24% to $23.7 million at December 31,
          2006.  The Bank continued originating and holding in portfolio
          adjustable rate mortgage loans during 2006.  Adjustable rate mortgage
          loans at December 31, 2006 totaled $19.4 million, an increase of $4.8 million,
          or 32.88%, from $14.6 million at December 31, 2005.
  **AVERAGE
          BALANCES**
  The
          total
          average balance of assets increased to $129.4 million for 2006 from $126.1
          million for 2005, an increase of 2.57%.  The average balance of
          interest-earning assets represented 96.41% and 96.96% of the total average
          balance of assets for 2006 and 2005 respectively. During 2006, average
          balance
          of loans receivable increased $8.4 million to $111.3 million, the average
          balance of securities held to maturity decreased $3.4 million to $7.0 million
          and the average balance of interest earning deposits decreased by $2.4
          million
          to $5.2 million. The average balances of interest-earning assets as a percentage
          of the average balances of interest-bearing liabilities were 129.37% and
          132.55%
          for 2006 and 2005 respectively. This decrease was largely the result of
          $3.6
          million in cash dividends, including a $2.00 return of capital dividend,
          paid to
          the stockholders of Third Century.
  **INVESTMENT
          SECURITIES**
  Total
          securities decreased approximately $4.0 million, or 43.44%, to $5.2 million
          at
          December 31, 2006 from $9.2 million at December 31, 2005 due to
          scheduled maturities. In 2006, proceeds from matured investments were used
          to
          replenish cash balances depleted by the funding of loans and the payment
          of $3.6
          million in cash dividends by Third Century to stockholders, which included
          the
          $2.00 per share return of capital dividend.
  **LOANS
          AND ALLOWANCE FOR LOAN LOSSES**
  Total
          net
          loans outstanding increased $6.4 million or 6.05% to $111.9 million at
          December
          31, 2006 from $105.5 million at December 31, 2005.  As discussed
          earlier, the largest increase in the loan portfolio during 2006 as compared
          to
          2005 was in commercial loans, with an increase of $5.9 million, or an increase
          of 15.85%.  The largest segment of the commercial loan increase was in
          commercial real estate, secured by land and buildings, which saw an increase
          of
          $2.5 million or 8.87%.  Adjustable rate mortgage loans also
          contributed to the loan growth with an increase of $4.8 million or
          32.88%.  Adjustable rate mortgages with a fixed rate for the first
          five years of the loan increased $5.6 million or 352.54% to $7.1 million
          at
          December 31, 2006.
  The
          allowance for loan losses as a percentage of gross loans decreased to 0.83%
          at
          December 31, 2006 from 0.87% from a year earlier.  This decline
          reflected the proportional difference of additions to the reserves, which
          was
          $45,000, in contrast to overall growth in the loan portfolio and a decline
          in
          the charge offs against the reserve.  For the years ended December 31,
          2006 and 2005, there were $40,000 and $101,000 in loans charged off,
          respectively, and the Bank recovered $4,000 and $15,000,
          respectively.  As of December 31, 2006 the balance in Mutual’s loan
          loss reserve was $936,000, which represented 0.83% of total loans and 858.72%
          of
          non-performing loans.
  **DEPOSITS**
  Deposits
          outstanding were $88.6 million at December 31, 2006 and 2005.  The
          savings, NOW and money market account balances declined $4.2 million or
          9.44% to
          $40.1 million at December 31, 2006 and certificates increased $4.8 million
          or
          13.96% to $38.9 million at December
   9
 *Table
              of Contents*
  31,
          2006.  During 2006, two customers with aggregate deposits of
          approximately $2.0 million withdrew their funds in the normal course of
          business.  Also, the Bank offered special rates for new time deposits
          opened at Mutual and ran promotional specials for new time deposits opened
          at
          Franklin Central.  Mutual does not currently bid for public funds or
          offer brokered deposits.
  **BORROWED
          FUNDS**
  Borrowed
          funds increased $8.1 million or 49.09% to $24.6 million at December 31,
          2006
          from $16.5 million at December 31, 2005.  The borrowed funds provided
          the Bank additional cash to fund loans and replenish its cash balances
          reduced
          by Third Century’s payment of $3.6 million in cash dividends, including the
          $2.00 per share return of capital dividend, to its stockholders.  At
          December 31, 2006 the weighted average rate of all Federal Home Loan Bank
          advances was 4.62% and the weighted average maturity decreased to 2.5 months
          at
          December 31, 2006 from 2.9 months at December 31, 2005.  The advances
          mature as follows:  $4.0 million in 2007; $9.0 million in 2008; $4.6
          million in 2009; $3.0 million in 2010; $3.0 million in 2011 and $1.0 million
          in
          2012.
  Mutual
          does not have any additional long-term commitments beyond those previously
          discussed.
  **STOCKHOLDERS’
          EQUITY**
  Stockholders’
          equity decreased $2.9 million to $19.4 million at December 31, 2006
          compared to $22.4 million at December 31, 2005. The decrease in equity was
          due to $3.6 million in cash dividends paid to stockholders of Third Century
          during 2006, which included a $2.00 per share return of capital
          dividend.
  The
          Company’s book value per share as of December 2006 was $11.75 based on 1,653,125
          shares outstanding.  The book value as of December, 2005 was $13.52,
          based on the same number of shares.  The book value computation
          excludes equity contributed by Mutual’s ESOP of $324,000 at December 31, 2006
          and $203,000 at December 31, 2005.
  **COMPARISON
            OF OPERATING RESULTS**
 **FOR
              YEARS ENDED DECEMBER 31, 2006
              AND 2005**
  **GENERAL**
  Net
          income for 2006 decreased $78,000, or 14.61%, to $456,000 compared to $534,000
          for 2005. Return on average assets for 2006 and 2005 was 0.35%, and 0.42%,
          respectively. Return on average equity was 2.21% for 2006 and 2.32% for
          2005.
  During
          2006, a $947,000 increase in interest income was offset by a $943,000 increase
          in interest expense.  The decrease in net income for the year ended
          December 31, 2006 primarily resulted from an increase in non-interest expense
          of
          $194,000, or 4.19%, to $4.8 million for the year ended December 31, 2006
          from
          $4.6 million for the year ended December 31, 2005.  The increase in
          non-interest expense was partially offset by a $108,000 increase in non-interest
          income to $918,000 for the year ended December 31, 2006 from $810,000 for
          the
          year ended December 31, 2005.
  **INTEREST
          INCOME**
  Mutual’s
          total interest income was $7.8 million for 2006 which represented an increase
          of
          $947,000, or 13.74%, from 2005.  Increased volume in loans accounted
          for $535,000 of the increase, while higher interest rates on loans accounted
          for
          $436,000. The average balance of interest-earning assets increased $2.4
          million
          to $124.7 million during 2006 from $122.3 million during 2005. The increase
          in
          the average balance of interest-earning assets was accompanied by an increase
          in
          average yields to 6.29% in 2006 from 5.64% in 2005. The yield on
          interest-earning deposits increased to 3.99% for 2006 from 2.41% for 2005,
          the
          yield on investments increased to 4.14% for 2006 from 3.27% for 2005 and
          the
          yield on loans increased to 6.54% for 2006 from 6.14% for 2005.  The
          average balance of interest-earning deposits and investments decreased
          $2.4
          million and $3.4 million,
   10
 *Table
              of Contents*
  respectively
          during 2006, while the average loans outstanding increased $8.4 million
          to
          $111.3 million during 2006.
  The
          loan
          interest income growth was attributed to higher levels of interest income
          for
          2006 from residential construction loans (increased $195,000 or 81.03%),
          5-year
          adjustable rate mortgages (increased $150,000 or 182.83%), and commercial
          construction loans (increased $148,000 or 64.43%).  The 5-year
          adjustable rate mortgages and commercial construction loans are variable
          rate
          products which re-price with the constant maturity weekly rate set by the
          United
          States Treasury and the prime rate set by the Federal Reserve Board,
          respectively.
  **INTEREST
          EXPENSE**
  Interest
          expense increased $943,000 or 43.26% during 2006 as compared to 2005. The
          average balance of interest-bearing liabilities increased $4.1 million
          to $96.4
          million for 2006 from $92.3 million for 2005. The average cost of
          interest-bearing liabilities increased to 3.24% during 2006 from 2.36%
          during
          2005. The higher interest expense for 2006 on deposits reflected growth
          in the
          average balance and cost of certificate of deposit accounts and the cost
          of
          savings, checking and money market accounts.  Interest paid on Federal
          Home Loan Bank (“FHLB”) advances increased by $285,000 or 42.79% in
          2006.  During 2006, the Bank borrowed an additional $23.7 million from
          and repaid $15.6 million to FHLB.  The outstanding borrowed funds at
          December 31, 2006 were fixed-rate advances with a weighted average rate
          of 4.62%
          as compared to 3.95% at December 31, 2005.
  **NET
          INTEREST INCOME**
  Net
          interest income at December 31, 2006 and 2005 was $4.7 million.  As
          previously discussed, the increase in interest income approximated the
          increase
          in interest expense to result in no change during the reporting
          periods.  Mutual’s interest rate spread was 3.05% for 2006 compared to
          3.28% for 2005.
  **PROVISION
          FOR LOAN LOSSES**
  Mutual
          recorded a $45,000 provision for loan losses during 2006 as compared to
          no
          provision recorded in 2005. The increase in the provision for 2006 was
          based on
          management’s analysis of the adequacy of the allowance for loan losses, total
          net charge offs for 2006, which were $34,612 compared to $86,318 for 2005,
          the
          level of the allowance and other factors including the size, condition
          and
          components of the loan portfolio, economic conditions, trends in national
          and
          local bankruptcies as well as other qualitative factors.
  **NON-INTEREST
          INCOME**
  Non-interest
          income increased $108,000, or 13.33%, to $918,000 in 2006 from $810,000
          in 2005.
          The largest component making up the increase in non-interest income was
          the
          increase in service charges on deposit accounts of $66,000 as a result
          of a
          change in the Bank’s fee structure effective November 2005.  In
          addition, other income increased $44,000 primarily due to recorded gains
          on sale
          of (”REO”) property during 2006 of $30,000 as compared to the $8,000 loss on
          sale of REO property from 2005.
  **NON-INTEREST
          EXPENSE**
  Non-interest
          expense increased $194,000 to $4.8 million during 2006 from $4.6 million
          during
          2005 representing an increase of 4.19%.  Net occupancy expenses
          increased $54,000 or 14.56% due to increased property taxes on existing
          facilities and the Bank started recording depreciation expense related
          to its
          new Franklin Central branch.  Salaries and employee benefits increased
          $53,000 or 1.85%.  This component includes the categories discussed in
          the following paragraph.
  Officer
          and employee salaries increased $93,000 or 4.99% due to merit-pay increases
          and
          new staff hired for the new Franklin Central branch.   Also
          included in this component was the cost related to Mutual Savings Bank’s
          Recognition and Retention Plan (“RRP”) which was $159,000
   11
 *Table
              of Contents*
  during
          2006.  The RRP provides for the award of up to 66,125 shares of
          Company common stock to employees and directors of the Company.  The
          shares whenever awarded are released to employees and directors of the
          Company
          equally over a five-year period.  Unearned RRP shares totaled 50,877
          at December 31, 2006 and 66,125 at December 31, 2005.  Compensation
          expense is recorded as the RRP shares vest and is based on original purchase
          price.  The expense under the RRP was $159,000 and $90,000 for the
          years ended December 31, 2006 and 2005, respectively.  These increases
          were offset by the decreases in contributions to the defined benefit plan
          of
          $64,000 and 401(k) plan of $32,000 according to management’s plans from 2005 to
          reduce the costs related to salaries and employee benefits.
  **INCOME
          TAX EXPENSE**
  Income
          tax expense was $305,000 for 2006 compared to $354,000 for 2005. The level
          of
          tax expense was consistent with the level of taxable income in each year.
          The
          effective tax rates were 40.08% and 39.86% for 2006 and 2005
          respectively.
  **LIQUIDITY
          AND CAPITAL RESOURCES**
 
 Liquidity
          refers to the ability of a financial institution to generate sufficient
          cash to
          fund current loan demand, meet savings deposit withdrawals and pay operating
          expenses. Mutual’s primary sources of funds are deposits, borrowings from the
          FHLB, proceeds from principal and interest payments on loans and proceeds
          from
          maturing securities. While FHLB advances and maturities and scheduled
          amortization of loans are a predictable source of funds, deposit flows
          and
          mortgage prepayments are greatly influenced by general interest rates,
          economic
          conditions, competition and the restructuring of the thrift
          industry.
  The
          primary investing activity of the Bank is the origination of loans. During
          2006
          and 2005, the Bank originated one- to four-family mortgage loans in the
          amounts
          of $8.2 million, and $5.0 million, respectively.
  During
          2006 and 2005, the Bank also originated consumer loans of $6.0 million
          and $8.5
          million, commercial and commercial real estate loans of $14.4 million and
          $22.0
          million, land loans of $4.7 million and $723,000, and construction loans
          of $7.3
          million and $8.7 million, respectively, during these periods. Loan repayments
          and other deductions were $34.4 million and $38.3 million during the respective
          years.
  During
          2006 and 2005, the Bank purchased securities in the amounts of $3.8 million
          and
          $9.3 million, respectively. Maturities and repayments of securities were
          $7.9
          million in 2006 and $10.5 million in 2005. During 2006, deposits decreased
          approximately $40,000. Proceeds from FHLB advances were $23.7 million for
          2006
          and $2.0 million for 2005 while repayment of advances were $15.6 million
          and
          $2.0 million for 2006 and 2005, respectively.
  The
          Bank
          had outstanding loan commitments of $1.4 million and unused lines of credit
          of
          $18.2 million at December 31, 2006. We anticipate that the Bank will have
          sufficient funds from loan repayments and access to FHLB advances if needed
          to
          meet its current commitments. Time deposits scheduled to mature in one
          year or
          less at December 31, 2006 totaled $24.7 million. Management believes that a
          significant portion of such deposits will remain with Mutual based upon
          historical deposit flow data and Mutual’s competitive pricing in its market
          area, although there can be no guarantee that this will be the
          case.
  The
          Bank
          intends to continue selling new fixed-rate mortgage loans as part of its
          interest rate risk policy and will continue to sell those loans as long
          as
          necessary for interest rate risk purposes. Mutual may sell portfolio loans
          as
          management deems necessary and as opportunities arise.
  Liquidity
          management is both a daily and long-term function of the Bank’s management
          strategy. In the event that Mutual should require funds beyond its ability
          to
          generate them internally,
   12
 *Table
              of Contents*
  additional
          funds are available through the use of FHLB advances. Mutual regularly
          monitors
          its interest rate spread position to determine the appropriate mix between
          retail and wholesale funds available to fund its loan activities. From
          time to
          time, Mutual offers higher cost deposit products to generate funds for
          loans.
          Mutual also relies on advances from the FHLB to fund its lending activities
          when
          the cost of alternative sources of funds makes it prudent to do so. Mutual
          will
          continue to monitor its interest rate spread position and mix of deposits
          and
          alternative sources of funds. FHLB advances were $24.6 million at
          December 31, 2006. Mutual had approximately $51.3 million in eligible
          assets available as collateral for advances from the FHLB as of
          December 31, 2006. Based on Mutual’s blanket collateral agreements,
          advances from the FHLB must be collateralized by 145% of eligible assets.
          Therefore, Mutual’s eligible collateral would have supported approximately $36.4
          million in advances from the FHLB as of December 31, 2006. Accordingly,
          Mutual had approximately $11.8 million available to borrow from the FHLB
          at
          December 31, 2006. Mutual’s Board of Directors has by resolution limited
          the amount of authorized borrowings to $40.0 million at December 31, 2006.
          As liquidity needs present themselves, the Board of Directors may elect
          to
          increase the amount of authorized borrowings from the FHLB through a Board
          resolution.
  The
          following is a summary of cash flows for Mutual, which are of three major
          types.
          Cash flows from operating activities consist primarily of net income generated
          by cash. Investing activities generate cash flows through the origination
          and
          principal collection on loans as well as purchases and sales of securities.
          Investing activities will generally result in negative cash flows when
          Mutual is
          experiencing loan growth. Cash flows from financing activities include
          savings
          deposits, withdrawals and maturities and changes in borrowings. The following
          table summarizes cash flows for each of the years ended December 31, 2006
          and 2005.
  **Year
                        Ended December 31,****2006**
                    
                    
                    **2005****(In
                        Thousands)**Operating
                        Activities
                    
                    $
                    1,200
                    
                    
                    $
                    1,107Investing
                        Activities:Purchase
                        of Held-to-Maturity
                        Securities
                    
                    
                    (3,865
                    )
                    
                    
                    (9,256
                    )Proceeds
                        from Maturities to
                        Held-to-Maturity Securities
                    
                    
                    7,913
                    
                    
                    
                    10,525Net
                        Change in
                        Loans
                    
                    
                    (6,470
                    )
                    
                    
                    (6,735
                    )Purchases
                        of Premises and
                        Equipment
                    
                    
                    (1,631
                    )
                    
                    
                    (939
                    )Other
                    
                    
                    (14
                    )
                    
                    
                    (939
                    )Net
                        Cash Used by Investing
                        Activities
                    
                    
                    (4,067
                    )
                    
                    
                    (6,405
                    )Financing
                        ActivitiesNet
                        Change in Demand Deposits,
                        Money Market, NOW and
                      Savings
                        Accounts
                    
                    
                    (4,804
                    )
                    
                    
                    3,642Net
                        Change in Certificates of
                        Deposit
                    
                    
                    4,764
                    
                    
                    
                    (1,443
                    )Proceeds
                        from FHLB
                        Advances
                    
                    
                    23,700
                    
                    
                    
                    2,000Payments
                        on FHLB
                        Advances
                    
                    
                    (15,600
                    )
                    
                    
                    (2,000
                    )Other
                    
                    
                    (3,554
                    )
                    
                    
                    (1,106
                    )Net
                        Cash Provided by Financing
                        Activities
                    
                    
                    4,506
                    
                    
                    
                    1,093Net
                        Change in Cash and Cash Equivalents
                    
                    $
                    1,639
                    
                    
                    $
                    (4,205
                    )
  During
          2006, operating activities provided $1.2 million of cash flows with $456,000
          of
          this representing net income from operations. The majority of the remainder
          of
          the $744,000 was provided by certain “non-cash” items which in effect did not
          require a cash outlay in 2006 but reduced net income from operations such
          as
          depreciation and amortization expenses and the provision for loan losses.
          Investing activities resulted in negative cash flows of $4.1 million primarily
          due to the increase of loan balances outstanding. During 2006, financing
          activities provided $4.5 million of cash flows for Mutual. These financing
          cash
          flows were primarily generated by the net increase in FHLB advances outstanding,
          which contributed $8.1 million in 2006.
   13
 *Table
              of Contents*
   During
          2005, operating activities provided $1.1 million of cash flows with $534,000
          of
          this representing net income from operations. The majority of the remainder
          of
          the $573,000 was provided by certain “non-cash” items which in effect did not
          require a cash outlay in 2005 but reduced net income from operations such
          as
          depreciation and amortization expenses and the provision for loan losses.
          Investing activities resulted in negative cash flows of $6.4 million primarily
          due to the increase of loan balances outstanding. During 2005, financing
          activities provided $1.1 million of cash flows for Mutual. These financing
          cash
          flows were primarily generated by the net increase in deposits outstanding,
          which contributed $2.2 million in 2005.
  Mutual
          is
          subject to certain capital requirements set by regulatory agencies and
          it is
          management’s policy to maintain a “well capitalized” rating from regulatory
          authorities. Mutual was classified as “well capitalized” at December 31,
          2006, under the criteria established by the FDIC and exceeded all capital
          requirements. The following table provides the minimum regulatory capital
          requirements and Mutual’s capital ratios as of December 31,
          2006.
  **At
                          December 31, 2006****Mutual’s
                          Capital Levels****Amount
                          of Excess Over****Minimum**
                        **Requirement**
                      
                      
                      **Well
                          Capitalized**
                        **Requirement**
                      
                      
                      **Actual**
                      
                      
                      **Minimum**
                      
                      
                      **Well-**
                        **Capitalized****Ratio**
                      
                      
                      **Amount**
                      
                      
                      **Ratio**
                      
                      
                      **Amount**
                      
                      
                      **Ratio**
                      
                      
                      **Amount**
                      
                      
                      **Requirement**
                      
                      
                      **Requirement****(Dollars
                          in Thousands)**Tier
                          I Capital to Risk-Weighted Assets
                      
                      
                      4.0
                      %
                      
                      $
                      4,148
                      
                      
                      
                      6.0
                      %
                      
                      $
                      6,222
                      
                      
                      
                      15.2
                      %
                      
                      $
                      15,707
                      
                      
                      $
                      11,559
                      
                      
                      $
                      9,485Total
                          Risk Based to Risk Weighted Assets
                      
                      
                      8.0
                      
                      
                      
                      8,296
                      
                      
                      
                      10.0
                      
                      
                      
                      10,370
                      
                      
                      
                      16.1
                      
                      
                      
                      16,643
                      
                      
                      
                      8,347
                      
                      
                      
                      6,273Tier
                          I Leverage Assets
                      
                      
                      4.0
                      
                      
                      
                      5,262
                      
                      
                      
                      5.0
                      
                      
                      
                      6,578
                      
                      
                      
                      11.9
                      
                      
                      
                      15,707
                      
                      
                      
                      10,445
                      
                      
                      
                      9,129
  As
          of
          December 31, 2006, management was not aware of any current recommendations
          by regulatory authorities which, if they were to be implemented, would
          have, or
          are reasonably likely to have, a material adverse effect on Mutual’s liquidity,
          capital resources, or results of operations.
  **OFF-BALANCE
            SHEET ARRANGEMENTS**
  Third
          Century does not have any off-balance sheet arrangements that have, or
          are
          reasonably likely to have, a current or future effect on its financial
          condition, changes in financial condition, revenues or expenses, results
          of
          operations, liquidity, capital expenditures or capital resources that would
          be
          material to investors.
  Mutual
          evaluates the need for the establishment of reserves for loan commitments
          based
          on each customer’s credit worthiness on a case by case basis. If management
          determines a reserve is required based upon its evaluation, a reserve is
          established and maintained as an other liability. There were no reserves
          recorded at December 31, 2006 or 2005 for loan commitments or any other
          off-balance sheet items.
  **CURRENT
            ACCOUNTING ISSUES**
   **SERVICING
          OF FINANCIAL ASSETS**
  In
          March
          2006, the FASB issued Statement of Financial Accounting Standards No. 156
          (SFAS
          No. 156), *Accounting for Servicing of Financial Assets, an amendment of FASB
          Statement No. 140, Accounting for Transfers and Servicing of Financial
          Assets
          and Extinguishments of Liabilities,* which requires that all separately
          recognized servicing assets and servicing liabilities be initially measured
          at
          fair value, if practicable and permits the entities to elect either fair
          value
          measurement with changes in fair value reflected in earnings or the amortization
          and impairment
  14
 *Table
              of Contents*
  requirements
          of SFAS No. 140 for subsequent measurement.  The subsequent
          measurement of separately recognized servicing assets and servicing liabilities
          at fair value eliminates the necessity for entities that manage the risks
          inherent in servicing assets and servicing liabilities with derivatives
          to
          qualify for hedge accounting treatment and eliminates the characterization
          of
          declines in fair value as impairments or direct write−downs. SFAS No. 156 is
          effective for the Company beginning January 1, 2007. We have evaluated
          the
          requirements of SFAS No. 156 and determined that it will not have a material
          effect on our financial condition or results of operations.
  **FAIR
          VALUE MEASUREMENTS**
  In
          September 2006, the FASB issued SFAS No. 157, *Fair Value Measurements*.
          SFAS No. 157 defines fair value, establishes a framework for measuring
          fair
          value in generally accepted accounting standards, and expands disclosures
          about
          fair value measurements. SFAS No. 157 is effective for financial statements
          issued for fiscal years beginning after November 15, 2007, and interim
          periods
          within those fiscal years. We do not expect that the adoption of SFAS No.
          157
          will have a material impact on our financial condition or results of
          operations.
  **ACCOUNTING
          FOR UNCERTAINTY IN INCOME TAXES**
  In
          June
          2006, the FASB issued Interpretation No. 48, *Accounting for Uncertainty in
          Income Taxes*, *an interpretation of SFAS No. 109, Accounting for Income
          Taxes* (Interpretation No. 48). Interpretation No. 48 clarifies the
          accounting for uncertainty in income taxes in financial statements and
          prescribes a recognition threshold and measurement attribute for financial
          statement recognition and measurement of a tax position taken or expected
          to be
          taken. It also provides guidance on de-recognition, classification, interest
          and
          penalties, accounting in interim periods, disclosure and transition.
          Interpretation No. 48 is effective for the Company beginning January 1,
          2007. We
          have evaluated the requirements of Interpretation No. 48 and determined
          that it
          will not have a material effect on our financial condition or results of
          operations.
  **PRIOR
          YEAR MISSTATEMENTS**
  In
          September 2006, the SEC Staff issued Staff Accounting Bulletin (“SAB”) No. 108,
*Considering the Effects of Prior Year Misstatements when Quantifying
          Misstatements in Current Year Financial Statements*, which addresses how the
          effects of prior year uncorrected misstatements should be considered when
          quantifying misstatements in current year financial statements. SAB No.
          108 will
          require registrants to quantify misstatements using both the balance sheet
          and
          income−statement approaches and to evaluate whether either approach results in
          quantifying an error that is material in light of relevant quantitative
          and
          qualitative factors. When the effect of initial adoption is determined
          to be
          material, SAB No. 108 allows registrants to record that effect as a cumulative
          effect adjustment to beginning retained earnings. The requirements are
          effective
          for the Company beginning January 1, 2007. We have evaluated the requirements
          of
          SAB No. 108 and determined that it will not have a material effect on our
          financial condition or results of operations.
  **SPLIT-DOLLAR
          LIFE INSURANCE AGREEMENTS**
  In
          September 2006, the Emerging Issues Task Force Issue 06−4 (EITF 06-4),
*Accounting for Deferred Compensation and Postretirement Benefit Aspects
          of
          Endorsement Split−Dollar Life Insurance Arrangements*, was ratified. EITF
          06-4 addresses accounting for separate agreements which split life insurance
          policy benefits between an employer and employee. The Issue requires the
          employer to recognize a liability for future benefits payable to the employee
          under these agreements.  The effects of applying EITF 06-4 must be
          recognized through either a change in accounting principle through an adjustment
          to equity or through the retrospective application to all prior periods.
          For
          calendar year companies, EITF 06-4 is effective beginning January 1, 2008.
  15
 *Table
              of Contents*
  Early
          adoption is permitted as of January 1, 2007.  We do not expect the
          adoption of EITF 06-4 to have a material effect on our consolidated financial
          statements.
 
 **IMPACT
            OF INFLATION**
  The
          consolidated financial statements presented herein have been prepared in
          accordance with generally accepted accounting principles. These principles
          require the measurement of financial position and operating results in
          terms of
          historical dollars, without considering changes in the relative purchasing
          power
          of money over time due to inflation.
  Our
          primary assets and liabilities are monetary in nature. As a result, interest
          rates have a more significant impact on our performance than the effects
          of
          general levels of inflation. Interest rates, however, do not necessarily
          move in
          the same direction or with the same magnitude as the price of goods and
          services, since such prices are affected by inflation. In a period of rapidly
          rising interest rates, the liquidity and maturities structures of our assets
          and
          liabilities are critical to the maintenance of acceptable performance
          levels.
  The
          principal effect of inflation, as distinct from levels of interest rates,
          on
          earnings is in the area of noninterest expense. Such expense items as employee
          compensation, employee benefits and occupancy and equipment costs may be
          subject
          to increases as a result of inflation. An additional effect of inflation
          is the
          possible increase in the dollar value of the collateral securing loans
          that we
          have made. We are unable to determine the extent, if any, to which properties
          securing our loans have appreciated in dollar value due to
          inflation.
  
  
  
  
  
   16
 *Table
              of Contents*
  
  
 
 
 
 
 **Report
          of Independent Registered Public Accounting
          Firm**
 
 
 Audit
          Committee, Board of Directors and Stockholders
 Third
          Century Bancorp
 Franklin,
          Indiana
 
 
 We
          have
          audited the accompanying consolidated balance sheets of Third Century Bancorp
          as
          of December 31, 2006 and 2005 and the related consolidated statements of
          income,
          stockholders’ equity and cash flows for each of the two years in the period
          ended December 31, 2006.  These financial statements are the
          responsibility of the Company’s management.  Our responsibility is to
          express an opinion on these financial statements based on our
          audits.
  We
          conducted our audits in accordance with the standards of the Public Company
          Accounting Oversight Board (United States).  Those standards require
          that we plan and perform the audit to obtain reasonable assurance about
          whether
          the financial statements are free of material misstatement.  An audit
          includes examining, on a test basis, evidence supporting the amounts and
          disclosures in the financial statements.  An audit also includes
          assessing the accounting principles used and significant estimates made
          by
          management, as well as evaluating the overall financial statement
          presentation.  We believe that our audits provide a reasonable basis
          for our opinion.
  In
          our
          opinion, the consolidated financial statements referred to above present
          fairly,
          in all material respects, the financial position of Third Century Bancorp
          as of
          December 31, 2006 and 2005 and the results of its operations and its cash
          flows
          for each of the two years in the period ended December 31, 2006, in conformity
          with accounting principles generally accepted in the United States of
          America.
  
  
  /s/
          BKD,
LLP
  Indianapolis,
          Indiana
 March
          14,
          2007
  
  
   17
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Consolidated
          Balance Sheets**
 **December
          31, 2006 and 2005**
   
  **Assets**
  **2006**
                      
                      
                      **2005**Cash
                          and due from banks
                      
                      $
                      619,602
                      
                      
                      $
                      601,772Interest-earning
                          demand deposits
                      
                      
                      8,872,350
                      
                      
                      
                      7,250,781Cash
                          and cash equivalents
                      
                      
                      9,491,952
                      
                      
                      
                      7,852,553Interest-earning
                          time deposits
                      
                      
                      —
                      
                      
                      
                      200,000Held-to-maturity
                          securities
                      
                      
                      5,208,778
                      
                      
                      
                      9,210,031Loans,
                          net of allowance for loan losses of $936,312 and $925,924
                          at December 31,
                          2006 and 2005
                      
                      
                      111,937,554
                      
                      
                      
                      105,556,622Premises
                          and equipment
                      
                      
                      4,327,659
                      
                      
                      
                      2,896,817Federal
                          Home Loan Bank stock
                      
                      
                      1,255,000
                      
                      
                      
                      1,041,100Interest
                          receivable
                      
                      
                      642,593
                      
                      
                      
                      592,386Other
                      
                      
                      639,283
                      
                      
                      
                      797,384Total
                          assets
                      
                      $
                      133,502,819
                      
                      
                      $
                      128,146,893**Liabilities
                          and Stockholders’ Equity****Liabilities**DepositsDemand
                      
                      $
                      9,589,641
                      
                      
                      $
                      10,214,659Savings,
                          NOW and money market
                      
                      
                      40,084,783
                      
                      
                      
                      44,263,674Time
                      
                      
                      38,893,270
                      
                      
                      
                      34,129,185Total
                          deposits
                      
                      
                      88,567,694
                      
                      
                      
                      88,607,518Federal
                          Home Loan Bank advances
                      
                      
                      24,600,000
                      
                      
                      
                      16,500,000Interest
                          payable and other liabilities
                      
                      
                      585,618
                      
                      
                      
                      486,171Total
                          liabilities
                      
                      
                      113,753,312
                      
                      
                      
                      105,593,689**Commitments
                          and Contingencies****Equity
                          Contributed by ESOP**
                      
                      
                      323,755
                      
                      
                      
                      203,264**Stockholders’
                          Equity**Common
                          stock, authorized 20,000,000 shares, outstanding 1,653,125
                          shares
                      
                      
                      13,685,137
                      
                      
                      
                      14,289,635Unearned
                          RRP
                      
                      
                      —
                      
                      
                      
                      (778,421
                      )Retained
                          earnings
                      
                      
                      5,740,615
                      
                      
                      
                      8,838,726Total
                          stockholders’ equity
                      
                      
                      19,425,752
                      
                      
                      
                      22,349,940Total
                          liabilities and stockholders’ equity
                      
                      $
                      133,502,819
                      
                      
                      $
                      128,146,893
 *See
                  Notes to Consolidated Financial
                  Statements*
 18
 *Table
                of Contents*
 **Third
          Century Bancorp**
 **Consolidated
          Statements of Income**
 **Years
          Ended December 31, 2006 and 2005**
  
  
  **2006**
                      
                      
                      **2005****Interest
                          and Dividend Income**Loans
                      
                      $
                      7,287,407
                      
                      
                      $
                      6,315,615Securities
                      
                      
                      290,598
                      
                      
                      
                      341,215Dividends
                          on Federal Home Loan Bank stock
                      
                      
                      53,715
                      
                      
                      
                      43,723Deposits
                          with financial institutions
                      
                      
                      208,450
                      
                      
                      
                      191,981Total
                          interest and dividend income
                      
                      
                      7,840,170
                      
                      
                      
                      6,892,534**Interest
                          Expense**Deposits
                      
                      
                      2,172,173
                      
                      
                      
                      1,514,045Federal
                          Home Loan Bank advances
                      
                      
                      950,943
                      
                      
                      
                      665,908Total
                          interest expense
                      
                      
                      3,123,116
                      
                      
                      
                      2,179,953**Net
                          Interest Income**
                      
                      
                      4,717,054
                      
                      
                      
                      4,712,581**Provision
                          for Loan Losses**
                      
                      
                      45,000
                      
                      
                      
                      —**Net
                          Interest Income After Provision for Loan Losses**
                      
                      
                      4,672,054
                      
                      
                      
                      4,712,581**Noninterest
                          Income**Fiduciary
                          activities
                      
                      
                      82,388
                      
                      
                      
                      64,927Service
                          charges on deposits accounts
                      
                      
                      290,665
                      
                      
                      
                      225,177Other
                          service charges and fees
                      
                      
                      309,636
                      
                      
                      
                      305,865Net
                          gains on loan sales
                      
                      
                      78,754
                      
                      
                      
                      102,938Merchant
                          processing
                      
                      
                      76,236
                      
                      
                      
                      75,559Other
                      
                      
                      80,388
                      
                      
                      
                      35,640Total
                          noninterest income
                      
                      
                      918,067
                      
                      
                      
                      810,106**Noninterest
                          Expense**Salaries
                          and employee benefits
                      
                      
                      2,919,821
                      
                      
                      
                      2,867,377Net
                          occupancy expense
                      
                      
                      424,791
                      
                      
                      
                      370,980Equipment
                          expense
                      
                      
                      101,212
                      
                      
                      
                      79,016Data
                          processing fees
                      
                      
                      407,709
                      
                      
                      
                      379,566Professional
                          fees
                      
                      
                      111,014
                      
                      
                      
                      111,632Directors’
                          fees
                      
                      
                      155,750
                      
                      
                      
                      145,900Bank
                          charges
                      
                      
                      72,408
                      
                      
                      
                      67,406Merchant
                          processing
                      
                      
                      68,308
                      
                      
                      
                      68,577ATM
                          expense
                      
                      
                      126,769
                      
                      
                      
                      112,007Other
                      
                      
                      441,193
                      
                      
                      
                      432,664Total
                          noninterest expense
                      
                      
                      4,828,975
                      
                      
                      
                      4,635,125**Income
                          Before Income Tax**
                      
                      
                      761,146
                      
                      
                      
                      887,562**Provision
                          for Income Taxes**
                      
                      
                      304,552
                      
                      
                      
                      354,012**Net
                          Income**
                      
                      $
                      456,594
                      
                      
                      $
                      533,550**Earnings
                          per Share**Basic
                      
                      $
                      .31
                      
                      
                      $
                      .35Diluted
                      
                      
                      .31
                      
                      
                      
                      .35
  *See
                Notes to Consolidated Financial
                Statements*
 19
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Consolidated
          Statements of Stockholders’ Equity**
 **Years
          Ended December 31, 2006 and 2005**
  
  
  **Common
                              Stock**
                          
                          
                          **Unearned**
                          
                          
                          **Retained****Amount**
                          
                          
                          **RRP**
                          
                          
                          **Earnings**
                          
                          
                          **Total****Balance,
                              January 1, 2005**
                          
                          $
                          14,289,635
                          
                          
                          $
                          —
                          
                          
                          $
                          8,543,182
                          
                          
                          $
                          22,832,817Net
                              income
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          533,550
                          
                          
                          
                          533,550Dividends
                              on common stock, $.16 per share outstanding
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (238,006
                          )
                          
                          
                          (238,006
                          )Purchase
                              of unearned RRP shares
                          
                          
                          
                          
                          
                          
                          (868,421
                          )
                          
                          
                          
                          
                          
                          
                          (868,421
                          )RRP
                              shares earned
                          
                          
                          
                          
                          
                          
                          90,000
                          
                          
                          
                          
                          
                          
                          
                          90,000**Balance,
                              December 31, 2005**
                          
                          
                          14,289,635
                          
                          
                          
                          (778,421
                          )
                          
                          
                          8,838,726
                          
                          
                          
                          22,349,940Net
                              income
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          456,594
                          
                          
                          
                          456,594Reclassification
                              of unearned compensation upon adoption of SFAS 123(R)
                          
                          
                          (778,421
                          )
                          
                          
                          778,421
                          
                          
                          
                          
                          
                          
                          
                          —Stock
                              based compensation
                          
                          
                          15,240
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          15,240Dividends
                              on common stock, $2.16 per share outstanding
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (3,554,705
                          )
                          
                          
                          (3,554,705
                          )RRP
                              shares earned
                          
                          
                          158,683
                          
                          
                          
                          —
                          
                          
                          
                          
                          
                          
                          
                          158,683**Balance,
                              December 31, 2006**
                          
                          $
                          13,685,137
                          
                          
                          $
                          —
                          
                          
                          $
                          5,740,615
                          
                          
                          $
                          19,425,752
 
   *See
                Notes to Consolidated Financial
                Statements*
 20
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Consolidated
          Statements of Cash Flows**
 **Years
          Ended December 31, 2006 and 2005**
 
  **2006**
                      
                      
                      **2005****Operating
                          Activities**Net
                          income
                      
                      $
                      456,594
                      
                      
                      $
                      533,550Items
                          not requiring (providing) cashDepreciation
                          and amortization
                      
                      
                      199,900
                      
                      
                      
                      178,271Loss
                          on disposal of fixed assets
                      
                      
                      365
                      
                      
                      
                      —Provision
                          for loan losses
                      
                      
                      45,000
                      
                      
                      
                      —Stock
                          based compensation
                      
                      
                      15,240
                      
                      
                      
                      —RRP
                          shares earned
                      
                      
                      158,683
                      
                      
                      
                      90,000ESOP
                          shares earned
                      
                      
                      120,491
                      
                      
                      
                      138,859Amortization
                          of premiums and discounts on securities
                      
                      
                      (46,763
                      )
                      
                      
                      (24,079
                      )Amortization
                          of mortgage servicing rights
                      
                      
                      40,071
                      
                      
                      
                      34,378Deferred
                          income taxes
                      
                      
                      15,588
                      
                      
                      
                      (15,463
                      )FHLB
                          stock dividends
                      
                      
                      —
                      
                      
                      
                      (21,500
                      )Loans
                          originated for sale
                      
                      
                      (4,899,375
                      )
                      
                      
                      (6,792,750
                      )Sale
                          of loans
                      
                      
                      4,978,129
                      
                      
                      
                      6,895,688Gains
                          on sales of loans
                      
                      
                      (78,754
                      )
                      
                      
                      (102,938
                      )Changes
                          inInterest
                          receivable
                      
                      
                      (50,207
                      )
                      
                      
                      (109,470
                      )Other
                          assets
                      
                      
                      146,091
                      
                      
                      
                      174,622Interest
                          payable and other liabilities
                      
                      
                      99,447
                      
                      
                      
                      128,474Net
                          cash provided by operating activities
                      
                      
                      1,200,500
                      
                      
                      
                      1,107,642**Investing
                          Activities**Purchase
                          of interest-earning time deposits
                      
                      
                      —
                      
                      
                      
                      (200,000
                      )Proceeds
                          from maturities of interest- earning time deposits
                      
                      
                      200,000
                      
                      
                      
                      200,000Purchases
                          of held-to-maturity securities
                      
                      
                      (3,865,201
                      )
                      
                      
                      (9,256,458
                      )Proceeds
                          from maturities of held-to-maturity securities
                      
                      
                      7,913,217
                      
                      
                      
                      10,525,127Net
                          change in loans
                      
                      
                      (6,469,581
                      )
                      
                      
                      (6,734,764
                      )Purchase
                          of Federal Home Loan Bank stock
                      
                      
                      (213,900
                      )
                      
                      
                      —Purchase
                          of premises and equipment
                      
                      
                      (1,631,107
                      )
                      
                      
                      (939,489
                      )Proceeds
                          from sale of equipment
                      
                      
                      —
                      
                      
                      
                      440Net
                          cash used in investing activities
                      
                      
                      (4,066,572
                      )
                      
                      
                      (6,405,144
                      )**Financing
                          Activities**Net
                          change in demand deposits, money market, NOW and savings
                          accounts
                      
                      
                      (4,803,909
                      )
                      
                      
                      3,642,086Net
                          change in certificates of deposit
                      
                      
                      4,764,085
                      
                      
                      
                      (1,442,707
                      )Proceeds
                          from Federal Home Loan Bank advances
                      
                      
                      23,700,000
                      
                      
                      
                      2,000,000Repayment
                          of Federal Home Loan Bank advances
                      
                      
                      (15,600,000
                      )
                      
                      
                      (2,000,000
                      )Purchase
                          shares of stock for RRP
                      
                      
                      —
                      
                      
                      
                      (868,421
                      )Dividends
                          paid
                      
                      
                      (3,554,705
                      )
                      
                      
                      (238,006
                      )Net
                          cash provided by financing activities
                      
                      
                      4,505,471
                      
                      
                      
                      1,092,952**Change
                          in Cash and Cash Equivalents**
                      
                      
                      1,639,399
                      
                      
                      
                      (4,204,550
                      )**Cash
                          and Cash Equivalents, Beginning of Year**
                      
                      
                      7,852,553
                      
                      
                      
                      12,057,103**Cash
                          and Cash Equivalents, End of Year**
                      
                      $
                      9,491,952
                      
                      
                      $
                      7,852,553**Supplemental
                          Cash Flows Information**Interest
                          paid
                      
                      $
                      3,030,389
                      
                      
                      $
                      2,135,787Income
                          taxes paid (net of refunds)
                      
                      
                      330,783
                      
                      
                      
                      396,700
 
   *See
                Notes to Consolidated Financial
                Statements*
 21
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006 and 2005**
  
  
  **Note
                    1:**
                **Nature
                    of Operations and Summary of Significant Accounting
                    Policies**
   ***Nature
          of Operations***
  Third
          Century Bancorp (“Company”) is a bank holding company whose principal activity
          is the ownership and management of its wholly-owned subsidiary, Mutual
          Savings
          Bank.
  Mutual
          Savings Bank (“Bank”) is primarily engaged in providing a full range of banking
          and financial services to individual and corporate customers in Johnson
          County
          and surrounding counties.  The Bank is subject to competition from
          other financial institutions.  The Bank is subject to the regulation
          of certain federal and state agencies and undergoes periodic examinations
          by
          those regulatory authorities.  The Bank wholly owns Mutual Financial
          Services, Inc. (Financial), a service corporation providing insurance services
          for the customers of the Bank.
   ***Principles
          of Consolidation***
  The
          consolidated financial statements include the accounts of the Company,
          Bank and
          Financial.  All significant intercompany accounts and transactions
          have been eliminated in consolidation.
   ***Use
          of Estimates***
  The
          preparation of 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 and disclosure of contingent assets and liabilities at the
          date of
          the financial statements and the reported amounts of revenues and expenses
          during the reporting period.  Actual results could differ from those
          estimates.
  Material
          estimates that are particularly susceptible to significant change relate
          to the
          determination of the allowance for loan losses.  In connection with
          the determination of the allowance for loan losses, management obtains
          independent appraisals for significant properties.
   ***Cash
          Equivalents***
  The
          Company considers all liquid investments with original maturities of three
          months or less to be cash equivalents.
   ***Securities***
  Held-to-maturity
          securities, which include any security for which the Company has the positive
          intent and ability to hold until maturity, are carried at historical cost
          adjusted for amortization of premiums and accretion of discounts.
  Amortization
          of premiums and accretion of discounts are recorded as interest income
          from
          securities.  Realized gains and losses are recorded as net security
          gains (losses).  Gains and losses on securities are determined on the
          specific-identification method.
   22
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006 and 2005**
   ***Loans
          Held for Sale***
  Mortgage
          loans originated and intended for sale in the secondary market are carried
          at
          the lower of cost or fair value in the aggregate.  Net unrealized
          losses, if any, are recognized through a valuation allowance by charges
          to
          income.  Commitments to originate loans held for sale, if any, are
          recorded at fair value.  There were no loans held for sale at
          December 31, 2006 or 2005.
   ***Loans***
  Loans
          that management has the intent and ability to hold for the foreseeable
          future or
          until maturity or payoff are reported at their outstanding principal balances
          adjusted for any charge-offs, the allowance for loan losses, any deferred
          fees
          or costs on originated loans and unamortized premiums or discounts on purchased
          loans.  Interest income is reported on the interest method and
          includes amortization of net deferred loan fees and costs over the loan
          term.  Generally, loans are placed on non-accrual status at ninety
          days past due and interest is considered a loss, unless the loan is well-secured
          and in the process of collection.
  Discounts
          and premiums on purchased residential real estate loans are amortized to
          income
          using the interest method over the remaining period to contractual maturity,
          adjusted for anticipated prepayments.  Discounts and premiums on
          purchased consumer loans are recognized over the expected lives of the
          loans
          using methods that approximate the interest method.
   ***Allowance
          for Loan Losses***
  The
          allowance for loan losses is established as losses are estimated to have
          occurred through a provision for loan losses charged to income.  Loan
          losses are charged against the allowance when management believes the
          uncollectibility of a loan balance is confirmed.  Subsequent
          recoveries, if any, are credited to the allowance.
  The
          allowance for loan losses is evaluated on a regular basis by management
          and is
          based upon management’s periodic review of the collectibility of the loans in
          light of historical experience, the nature and volume of the loan portfolio,
          adverse situations that may affect the borrower’s ability to repay, estimated
          value of any underlying collateral and prevailing economic
          conditions.  This evaluation is inherently subjective as it requires
          estimates that are susceptible to significant revision as more information
          becomes available.
  
   23
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006 and 2005**
  A
          loan is
          considered impaired when, based on current information and events, it is
          probable that the Company will be unable to collect the scheduled payments
          of
          principal or interest when due according to the contractual terms of the
          loan
          agreement.  Factors considered by management in determining impairment
          include payment status, collateral value and the probability of collecting
          scheduled principal and interest payments when due.  Loans that
          experience insignificant payment delays and payment shortfalls generally
          are not
          classified as impaired.  Management determines the significance of
          payment delays and payment shortfalls on a case-by-case basis, taking into
          consideration all of the circumstances surrounding the loan and the borrower,
          including the length of the delay, the reasons for the delay, the borrower’s
          prior payment record and the amount of the shortfall in relation to the
          principal and interest owed.  Impairment is measured on a loan-by-loan
          basis for commercial and construction loans by either the present value
          of
          expected future cash flows discounted at the loan’s effective interest rate, the
          loan’s obtainable market price or the fair value of the collateral if the loan
          is collateral dependent.
  Large
          groups of smaller balance homogenous loans are collectively evaluated for
          impairment.  Accordingly, the Company does not separately identify
          individual consumer and residential loans for impairment
          measurements.
   ***Premises
          and Equipment***
  Depreciable
          assets are stated at cost less accumulated depreciation.  Depreciation
          is charged to expense using the straight-line and accelerated methods over
          the
          estimated useful lives of the assets.
   ***Federal
          Home Loan Bank Stock***
  Federal
          Home Loan Bank stock is a required investment for institutions that are
          members
          of the Federal Home Loan Bank system.  The required investment in the
          common stock is based on a predetermined formula.
   ***Mortgage
          Servicing Rights***
  Mortgage
          servicing rights on originated loans that have been sold are capitalized
          by
          allocating the total cost of the mortgage loans between the mortgage servicing
          rights and the loans based on their relative fair values.  Capitalized
          servicing rights are amortized in proportion to and over the period of
          estimated
          servicing revenues.  Impairment of mortgage-servicing rights is
          assessed based on the fair value of those rights.  Fair values are
          estimated using discounted cash flows based on a current market interest
          rate.  For purposes of measuring impairment, the rights are stratified
          based on the predominant risk characteristics of the underlying
          loans.  The predominant characteristic currently used for
          stratification is type of loan.  The amount of impairment recognized
          is the amount by which the capitalized mortgage servicing rights for a
          stratum
          exceed their fair value.
   24
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006 and 2005**
   ***Stock
          Options***
  At
          December 31, 2006, the Company has a stock option plan, which is described
          more
          fully in Note 12.  Prior to 2006, the Company accounted for this plan
          under the recognition and measurement principles of APB Opinion No. 25,
          *Accounting for Stock Issued to Employees*, and related
          Interpretations.  Accordingly, in 2005, no stock-based employee
          compensation cost is reflected in net income, as all options granted under
          this
          plan had an exercise price equal to the market value of the underlying
          common
          stock at the grant date.
  Effective
          January 1, 2006, the Company adopted the fair value recognition provisions
          of
          Statement of Financial Accounting Standards (SFAS) No. 123R, *Share-Based
          Payment*.  The Company selected the modified prospective
          application.  Accordingly, after January 1, 2006, the Company began
          expensing the fair value of stock options granted, modified, repurchased
          or
          cancelled.
  **Year
                        Ended**
                      **December
                        31,**
                      **2005**Net
                        income, as reported
                    
                    $
                    533,550Less:  Total
                        stock-based employee compensation cost determined under the
                        fair value
                        based method, net of income taxes
                    
                    
                    570,776Pro
                        forma net loss
                    
                    $
                    (37,226
                    )Earnings
                        per share:Basic
                        - as reported
                    
                    $
                    .35Basic
                        - pro forma
                    
                    $
                    (.03
                    )Diluted
                        - as reported
                    
                    $
                    .35Diluted
                        - pro forma
                    
                    $
                    (.03
                    )
 
   ***Income
          Taxes***
  Deferred
          tax assets and liabilities are recognized for the tax effects of differences
          between the financial statement and tax bases of assets and
          liabilities.  A valuation allowance is established to reduce deferred
          tax assets if it is more likely than not that a deferred tax asset will
          not be
          realized.
  
   25
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006 and 2005**
   ***Earnings
          Per Share***
  Earnings
          per share is computed based upon the weighted average common shares outstanding
          during the period subsequent to Mutual Savings Bank’s conversion to a stock
          savings bank on June 29, 2004.  Unearned ESOP shares and unearned
          RRP shares are not considered outstanding for the earnings per share
          calculation.  The following table presents the factors used in the
          earnings per share computation for the years ending December 31, 2006 and
          2005:
  **December
                        31,**
                      **2006**
                    
                    
                    **December
                        31,**
                      **2005**BasicNet
                        income
                    
                    $
                    456,594
                    
                    
                    $
                    533,550Weighted
                        average common shares outstanding
                    
                    
                    1,481,443
                    
                    
                    
                    1,513,622Basic
                        earnings per common share
                    
                    $
                    0.31
                    
                    
                    $
                    0.35DilutedNet
                        income
                    
                    $
                    456,594
                    
                    
                    $
                    533,550Weighted
                        average common shares outstanding
                    
                    
                    1,481,443
                    
                    
                    
                    1,513,622Add:  Dilutive
                        effects of assumed exercises of stock options
                    
                    
                    1,802
                    
                    
                    
                    253Average
                        shares and dilutive potential common shares
                    
                    
                    1,483,245
                    
                    
                    
                    1,513,875Diluted
                        earnings per common share
                    
                    $
                    0.31
                    
                    
                    $
                    0.35
 
  ***Reclassifications***
  Certain
          reclassifications have been made to the 2005 financial statements to conform
          to
          the 2006 financial statement presentation.  These reclassifications
          had no effect on net income.
  **Note
                    2:**
                **Restriction
                    on Cash and Due From Banks**
  The
          Bank
          is required to maintain reserve funds in cash and/or on deposit with the
          Federal
          Reserve Bank.  The reserve requirement at December 31, 2006 was
          $509,000.
   26
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006 and 2005**
  
  
  **Note
                    3:**
                **Securities**
  The
          amortized cost and approximate fair values of held-to-maturity securities
          are as
          follows:
  **Amortized**
                        **Cost**
                      
                      
                      **Gross**
                        **Unrealized**
                        **Gains**
                      
                      
                      **Gross**
                        **Unrealized**
                        **Losses**
                      
                      
                      **Approximate**
                        **Fair
                          Value**December
                          31, 2006:U.
                          S. Government agencies
                      
                      $
                      2,382,751
                      
                      
                      $
                      3,427
                      
                      
                      $
                      6,556
                      
                      
                      $
                      2,379,622Other
                          mortgage-backed securities
                      
                      
                      2,001,472
                      
                      
                      
                      —
                      
                      
                      
                      32,754
                      
                      
                      
                      1,968,718Securities
                          issued by state or political divisions
                      
                      
                      400,000
                      
                      
                      
                      —
                      
                      
                      
                      7,400
                      
                      
                      
                      392,600Other
                          domestic debt securities
                      
                      
                      424,555
                      
                      
                      
                      —
                      
                      
                      
                      6,149
                      
                      
                      
                      418,406$
                      5,208,778
                      
                      
                      $
                      3,427
                      
                      
                      $
                      52,859
                      
                      
                      $
                      5,159,346December
                          31, 2005:U.
                          S. Treasuries
                      
                      $
                      1,995,749
                      
                      
                      $
                      —
                      
                      
                      $
                      16,999
                      
                      
                      $
                      1,978,750U.
                          S. Government agencies
                      
                      
                      3,293,698
                      
                      
                      
                      —
                      
                      
                      
                      16,437
                      
                      
                      
                      3,277,261Other
                          mortgage-backed securities
                      
                      
                      2,580,044
                      
                      
                      
                      —
                      
                      
                      
                      41,946
                      
                      
                      
                      2,538,098Securities
                          issued by state or political divisions
                      
                      
                      400,000
                      
                      
                      
                      —
                      
                      
                      
                      5,520
                      
                      
                      
                      394,480Other
                          domestic debt securities
                      
                      
                      940,540
                      
                      
                      
                      —
                      
                      
                      
                      4,921
                      
                      
                      
                      935,619$
                      9,210,031
                      
                      
                      $
                      —
                      
                      
                      $
                      85,823
                      
                      
                      $
                      9,124,208
 
  The
          amortized cost and fair value of securities at December 31, 2006, by contractual
          maturity, are shown below.  Expected maturities will differ from
          contractual maturities because issues may have the right to call or prepay
          obligations with or without call or prepayment penalties.
  **Amortized**
                        **Cost**
                      
                      
                      **Fair**
                        **Value**Within
                          one year
                      
                      $
                      1,992,314
                      
                      
                      $
                      1,995,142One
                          to five years
                      
                      
                      1,214,992
                      
                      
                      
                      1,195,486Five
                          to ten years
                      
                      
                      —
                      
                      
                      
                      —3,207,306
                      
                      
                      
                      3,190,628Mortgage-backed
                          securities
                      
                      
                      2,001,472
                      
                      
                      
                      1,968,718Totals
                      
                      $
                      5,208,778
                      
                      
                      $
                      5,159,346
 
   27
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006 and 2005**
 
  Certain
          investments in debt securities are reported in the financial statements
          at an
          amount less than their historical cost.  Total fair value of these
          investments at December 31, 2006 and 2005 was $4,760,000 and $9,124,000,
          which is approximately 92% and 100%, respectively, of the Company’s
          held-to-maturity investment portfolio.  These declines primarily
          resulted from recent increases in market interest rates and failure of
          certain
          investments to maintain consistent credit quality ratings (or meet projected
          earnings targets).
  Based
          on
          evaluation of available evidence, including recent changes in market interest
          rates, credit rating information and information obtained from regulatory
          filings, management believes the declines in fair value for these securities
          are
          temporary.
  Should
          the impairment of any of these securities become other than temporary,
          the cost
          basis of the investment will be reduced and the resulting loss recognized
          in net
          income in the period the other-than-temporary impairment is
          identified.
  The
          following table shows the Company’s investments’ gross unrealized losses and
          fair value, aggregated by investment category and length of time that individual
          securities have been in a continuous unrealized loss position at
          December 31, 2006 and 2005:
  **December
                        31, 2006****Less
                        than 12 Months**
                    
                    
                    **12
                        Months or More**
                    
                    
                    **Total****Description
                        of**
                      **Securities**
                    
                    **Fair
                        Value**
                    
                    
                    **Unrealized**
                      **Losses**
                    
                    
                    **Fair
                        Value**
                    
                    
                    **Unrealized**
                      **Losses**
                    
                    
                    **Fair
                        Value**
                    
                    
                    **Unrealized**
                      **Losses**U.S.
                        government agencies
                    
                    $
                    1,595,421
                    
                    
                    $
                    599
                    
                    
                    $
                    384,480
                    
                    
                    $
                    5,957
                    
                    
                    $
                    1,979,901
                    
                    
                    $
                    6,556Mortgage-backed
                        securities
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    1,968,718
                    
                    
                    
                    32,754
                    
                    
                    
                    1,968,718
                    
                    
                    
                    32,754State
                        and political subdivisions
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    392,600
                    
                    
                    
                    7,400
                    
                    
                    
                    392,600
                    
                    
                    
                    7,400Other
                        securities
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    418,406
                    
                    
                    
                    6,149
                    
                    
                    
                    418,406
                    
                    
                    
                    6,149Total
                        temporarily impaired securities
                    
                    $
                    1,595,421
                    
                    
                    $
                    599
                    
                    
                    $
                    3,164,204
                    
                    
                    $
                    52,260
                    
                    
                    $
                    4,759,625
                    
                    
                    $
                    52,859
 
  **December
                              31, 2005****Less
                              than 12 Months**
                          
                          
                          **12
                              Months or More**
                          
                          
                          **Total****Description
                              of**
                            **Securities**
                          
                          **Fair
                              Value**
                          
                          
                          **Unrealized**
                            **Losses**
                          
                          
                          **Fair
                              Value**
                          
                          
                          **Unrealized**
                            **Losses**
                          
                          
                          **Fair
                              Value**
                          
                          
                          **Unrealized**
                            **Losses**U.S.
                              Treasury
                          
                          $
                          1,978,750
                          
                          
                          $
                          16,999
                          
                          
                          $
                          —
                          
                          
                          $
                          —
                          
                          
                          $
                          1,978,750
                          
                          
                          $
                          16,999U.S.
                              government agencies
                          
                          
                          3,277,261
                          
                          
                          
                          16,437
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          3,277,261
                          
                          
                          
                          16,437Mortgage-backed
                              securities
                          
                          
                          2,538,098
                          
                          
                          
                          41,946
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          2,538,098
                          
                          
                          
                          41,946State
                              and political subdivisions
                          
                          
                          394,480
                          
                          
                          
                          5,520
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          394,480
                          
                          
                          
                          5,520Other
                              securities
                          
                          
                          935,619
                          
                          
                          
                          4,921
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          935,619
                          
                          
                          
                          4,921Total
                              temporarily impaired securities
                          
                          $
                          9,124,208
                          
                          
                          $
                          85,823
                          
                          
                          $
                          —
                          
                          
                          $
                          —
                          
                          
                          $
                          9,124,208
                          
                          
                          $
                          85,823
 
   28
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006 and 2005**
  
  
  **Note
                    4:**
                **Loans
                    and Allowance for Loan
                    Losses**
  Categories
          of loans at December 31, include:
  **2006**
                      
                      
                      **2005**Residential
                          real estateOne-to-four
                          family residential
                      
                      $
                      55,040,735
                      
                      
                      $
                      54,894,462Multi-family
                          residential
                      
                      
                      1,620,469
                      
                      
                      
                      313,945Construction
                          and land development
                      
                      
                      8,876,680
                      
                      
                      
                      5,865,091Commercial
                      
                      
                      37,196,096
                      
                      
                      
                      34,682,108Consumer
                          and other
                      
                      
                      10,176,589
                      
                      
                      
                      10,764,503Total
                          loans
                      
                      
                      112,910,569
                      
                      
                      
                      106,520,109LessNet
                          deferred loan fees, premiums and discounts
                      
                      
                      36,703
                      
                      
                      
                      37,563Allowance
                          for loan losses
                      
                      
                      936,312
                      
                      
                      
                      925,924Net
                          loans
                      
                      $
                      111,937,554
                      
                      
                      $
                      105,556,622
 
  Activity
          in the allowance for loan losses was as follows:
  **2006**
                    
                    
                    **2005**Balance,
                        beginning of year
                    
                    $
                    925,924
                    
                    
                    $
                    1,012,242Provision
                        charged to expense
                    
                    
                    45,000
                    
                    
                    
                    —Losses
                        charged off, net of recoveries of $5,549 for 2006 and $15,333
                        for
                        2005
                    
                    
                    (34,612
                    )
                    
                    
                    (86,318
                    )Balance,
                        end of year
                    
                    $
                    936,312
                    
                    
                    $
                    925,924
 
  There
          were no impaired loans at December 31, 2006 or 2005.
  Non-accruing
          loans at December 31, 2006 and 2005 were $108,824 and $183,241,
          respectively.  There were no loans 90 days past due and still accruing
          at December 31, 2006 or 2005.
   29
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006 and 2005**
  
  
  **Note
                    5:**
                **Premises
                    and Equipment**
  Major
          classifications of premises and equipment, stated at cost, are as
          follows:
  **2006**
                      
                      
                      **2005**Land
                      
                      $
                      1,371,902
                      
                      
                      $
                      728,057Buildings
                          and improvements
                      
                      
                      3,457,305
                      
                      
                      
                      2,675,305Equipment
                      
                      
                      1,338,652
                      
                      
                      
                      1,137,4176,167,859
                      
                      
                      
                      4,540,779Less
                          accumulated depreciation
                      
                      
                      (1,840,200
                      )
                      
                      
                      (1,643,962
                      )Net
                          premises and equipment
                      
                      $
                      4,327,659
                      
                      
                      $
                      2,896,817
 
  **Note
                    6:**
                **Loan
                    Servicing**
  Mortgage
          loans serviced for others are not included in the accompanying consolidated
          balance sheets.  The unpaid principal balances of mortgage loans
          serviced for others was $23,717,000 and $21,912,000 at December 31, 2006
          and
          2005, respectively.
  **2006**
                      
                      
                      **2005**Mortgage
                          Servicing RightsBalances,
                          January 1
                      
                      $
                      161,126
                      
                      
                      $
                      126,090Servicing
                          rights capitalized
                      
                      
                      43,649
                      
                      
                      
                      68,180Amortization
                          of servicing rights
                      
                      
                      (40,071
                      )
                      
                      
                      (33,144
                      )Balances,
                          December 31
                      
                      $
                      164,704
                      
                      
                      $
                      161,126
 
  **Note
                    7:**
                **Interest-Bearing
                    Deposits**
  Interest-bearing
          deposits in denominations of $100,000 or more were $8,279,000 on
          December 31, 2006 and $6,442,000 on December 31, 2005.
  At
          December 31, 2006, the scheduled maturities of time deposits are as
          follows:
  2007
                    
                    $
                    24,747,3762008
                    
                    
                    10,849,2822009
                    
                    
                    1,792,5112010
                    
                    
                    899,5992011
                    
                    
                    599,502Thereafter
                    
                    
                    5,000$
                    38,893,270
 
   30
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006 and 2005**
  
  
  **Note
                    8:**
                **Federal
                    Home Loan Bank Advances**
  The
          Federal Home Loan Bank advances are secured by mortgage loans totaling
          $47,373,000 and $50,107,000 and investments totaling $4,327,000 and $0
          at
          December 31, 2006 and 2005.  Advances at December 31, 2006,
          at interest rates ranging from 3.54 to 5.55 percent are subject to restrictions
          or penalties in the event of prepayment.
  Aggregate
          annual maturities of the advances at December 31, 2006, are:
  2007
                    
                    $
                    4,000,0002008
                    
                    
                    9,000,0002009
                    
                    
                    4,600,0002010
                    
                    
                    3,000,0002011
                    
                    
                    3,000,000Thereafter
                    
                    
                    1,000,000$
                    24,600,000
 
  **Note
                    9:**
                **Income
                    Taxes**
  The
          provision for income taxes includes these components:
  **2006**
                      
                      
                      **2005**Taxes
                          currently payableFederal
                      
                      $
                      226,473
                      
                      
                      $
                      289,154State
                      
                      
                      62,491
                      
                      
                      
                      80,321Deferred
                          income taxes payableFederal
                      
                      
                      10,429
                      
                      
                      
                      (12,186
                      )State
                      
                      
                      5,159
                      
                      
                      
                      (3,277
                      )Income
                          tax expense
                      
                      $
                      304,552
                      
                      
                      $
                      354,012
 
  A
          reconciliation of income tax expense at the statutory rate to the Bank’s actual
          income tax expense is shown below:
  **2006**
                      
                      
                      **2005**Computed
                          at the statutory rate (34%)
                      
                      $
                      259,046
                      
                      
                      $
                      301,771Increase
                          resulting fromState
                          income taxes
                      
                      
                      44,649
                      
                      
                      
                      50,849Other
                      
                      
                      857
                      
                      
                      
                      1,392Actual
                          tax expense
                      
                      $
                      304,552
                      
                      
                      $
                      354,012
 
   31
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006 and 2005**
  
  
  The
          tax
          effects of temporary differences related to deferred taxes shown on the
          balance
          sheets were:
  **2006**
                      
                      
                      **2005**Deferred
                          tax assetsAccrued
                          benefits
                      
                      $
                      57,650
                      
                      
                      $
                      51,144Allowance
                          for loan losses
                      
                      
                      397,933
                      
                      
                      
                      405,145Deferred
                          compensation
                      
                      
                      539
                      
                      
                      
                      455Other
                      
                      
                      11,090
                      
                      
                      
                      14,156467,212
                      
                      
                      
                      470,900Deferred
                          tax liabilitiesDepreciation
                      
                      
                      69,180
                      
                      
                      
                      47,566FHLB
                          stock dividend
                      
                      
                      39,610
                      
                      
                      
                      39,610Prepaid
                      
                      
                      73,886
                      
                      
                      
                      78,633Mortgage
                          servicing rights
                      
                      
                      69,999
                      
                      
                      
                      68,479Other
                      
                      
                      16,642
                      
                      
                      
                      23,129269,317
                      
                      
                      
                      257,417Net
                          deferred tax asset
                      
                      $
                      197,895
                      
                      
                      $
                      213,483
 
  Retained
          earnings at December 31, 2006 and 2005, includes approximately $1,038,000
          for
          which no deferred federal income tax liability has been
          recognized.  These amounts represent an allocation of income to bad
          debt deductions for tax purposes only.  Reduction of amounts so
          allocated for purposes other than tax bad debt losses or adjustments arising
          from carryback of net operating losses would create income for tax purposes
          only, which would be subject to the then current corporate income tax
          rate.  The deferred income tax liabilities on the preceding amounts
          that would have been recorded if they were expected to reverse into taxable
          income in the foreseeable future were approximately $353,000 at
          December 31, 2006 and 2005.
  
  **Note
                    10:**
                **Stockholders’
                    Equity and Regulatory**
  The
          Bank
          is subject to various regulatory capital requirements administered by the
          federal banking agencies.  Failure to meet minimum capital
          requirements can initiate certain mandatory and possibly additional
          discretionary actions by regulators that, if undertaken, could have a direct
          material effect on the Bank’s financial statements.  Under capital
          adequacy guidelines and the regulatory framework for prompt corrective
          action,
          the Bank must meet specific capital guidelines that involve quantitative
          measures of the Bank’s assets, liabilities, and certain off-balance-sheet items
          as calculated under regulatory accounting practices.  The Bank’s
          capital amounts and classification are also subject to qualitative judgments
          by
          the regulators about components, risk weightings and other factors.
   32
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006 and 2005**
  
  
  Quantitative
          measures established by regulation to ensure capital adequacy require the
          Bank
          to maintain minimum amounts and ratios (set forth in the table
          below).  Management believes, as of December 31, 2006 and 2005,
          that the Bank meets all capital adequacy requirements to which it is
          subject.
  As
          of
          December 31, 2006, the most recent notification categorized the Bank as
          well
          capitalized under the regulatory framework for prompt corrective
          action.  To be categorized as well capitalized, the Bank must maintain
          minimum total risk-based, Tier I risk-based and Tier I leverage ratios
          as set
          forth in the table.  There are no conditions or events since that
          notification that management believes have changed the Bank’s
          category.
  The
          Bank’s actual capital amounts and ratios are also presented in the
          table.
  **Actual**
                    
                    
                    **For
                        Capital Adequacy**
                      **Purposes**
                    
                    
                    **To
                        Be Well Capitalized**
                      **Under
                        Prompt Corrective**
                      **Action
                        Provisions****Amount**
                    
                    
                    **Ratio**
                    
                    
                    **Amount**
                    
                    
                    **Ratio**
                    
                    
                    **Amount**
                    
                    
                    **Ratio**As
                        of December 31, 2006Total
                        risk-based capital
                      (to
                        risk-weighted assets)
                    
                    $
                    16,643,000
                    
                    
                    
                    16.1
                    %
                    
                    $
                    8,296,000
                    
                    
                    
                    8.0
                    %
                    
                    $
                    10,370,000
                    
                    
                    
                    10.0
                    %Tier
                        I capital
                      (to
                        risk-weighted assets)
                    
                    
                    15,707,000
                    
                    
                    
                    15.2
                    
                    
                    
                    4,148,000
                    
                    
                    
                    4.0
                    
                    
                    
                    6,222,000
                    
                    
                    
                    6.0Tier
                        I capital
                      (to
                        adjusted total assets)
                    
                    
                    15,707,000
                    
                    
                    
                    11.9
                    
                    
                    
                    5,262,000
                    
                    
                    
                    4.0
                    
                    
                    
                    6,578,000
                    
                    
                    
                    5.0As
                        of December 31, 2005Total
                        risk-based capital
                      (to
                        risk-weighted assets)
                    
                    $
                    15,924,000
                    
                    
                    
                    17.4
                    %
                    
                    $
                    7,318,000
                    
                    
                    
                    8.0
                    %
                    
                    $
                    9,148,000
                    
                    
                    
                    10.0
                    %Tier
                        I capital
                      (to
                        risk-weighted assets)
                    
                    
                    14,988,000
                    
                    
                    
                    16.4
                    
                    
                    
                    3,659,000
                    
                    
                    
                    4.0
                    
                    
                    
                    5,489,000
                    
                    
                    
                    6.0Tier
                        I capital
                      (to
                        adjusted total assets)
                    
                    
                    14,988,000
                    
                    
                    
                    12.0
                    
                    
                    
                    4,989,000
                    
                    
                    
                    4.0
                    
                    
                    
                    6,236,000
                    
                    
                    
                    5.0
 
  At
          December 31, 2006, the stockholder’s equity of the Bank was $15,707,000, of
          which approximately $1,794,000 was available for the payment of dividends
          to the
          Company.
  At
          the
          time of conversion, a liquidation account was established in an amount
          equal to
          the Bank’s net worth as reflected in the latest statements of condition used in
          its final conversion offering circular.  The liquidation account is
          maintained for the benefit of eligible deposit account holders who maintain
          their deposit account in the Bank after conversion.  In the event of a
          complete liquidation, and only in such event, each eligible deposit account
          holder will be entitled to receive a liquidation distribution from the
          liquidation account in the amount of the then current adjusted subaccount
          balance for deposit accounts then held, before any liquidation distribution
          may
          be made to shareholders.  Except for the repurchase of stock and
          payment of dividends, the existence of the liquidation account will not
          restrict
          the use or application of net worth.  The initial balance of the
          liquidation account was $8,158,000.
   33
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006 and 2005**
  
  
  **Note
                    11:**
                **Related
                    Party Transactions**
  The
          Company has entered into transactions with certain executive officers,
          directors
          and their affiliates (related parties).  In management’s opinion, such
          loans and other extensions of credit and deposits were made in the ordinary
          course of business and were made on substantially the same terms (including
          interest rates and collateral) as those prevailing at the time for comparable
          transactions with other persons.  Further, in management’s opinion,
          these loans did not involve more than normal risk of collectibility or
          present
          other unfavorable features.
  The
          aggregate amount of loans, as defined, to such related parties is as
          follows:
  Balance,
                        January 1
                    
                    $
                    2,496,145New
                        loans
                    
                    
                    148,800Repayments
                    
                    
                    (421,974
                    )Change
                        in composition
                    
                    
                    —Balance,
                        December 31
                    
                    $
                    2,222,971
 
  Deposits
          from related parties, as defined, held by the Company at December 31, 2006
          and 2005 totaled $1,587,000 and $1,139,000, respectively.
 
 **Note
                    12:**
                **Employee
                    Benefits**
  The
          Company is a participant in a pension fund known as the Financial Institutions
          Retirement Fund (FIRF).  This plan is a multi-employer plan; separate
          actuarial valuations are not made with respect to each participating
          employer.  This plan provides pension benefits for substantially all
          of the Company’s employees.  On May 1, 2005, the Company elected to
          freeze the defined benefit plan to stop accruing benefits to plan participants
          beyond what was already earned to that date and to prevent new participants
          from
          entering the plan.  The change was made in an effort to control and
          reduce pension plan expense in the future.  The Company will continue
          to meet required funding obligations.  Pension expense was $117,000
          and $181,000 for 2006 and 2005.
  The
          Company has a retirement savings plan covering substantially all
          employees.  Employees may contribute up to 50 percent of their
          compensation with the Company matching 50 percent of the employee’s contribution
          on the first 8 percent of the employee’s compensation.  Employer
          contributions charged to expense for 2006 and 2005 were $53,000 and $85,000,
          respectively.
   34
 *Table
              of Contents*
  **Third
          Century Bancorp**
  **Notes
          to Consolidated Financial Statements**
  **December
          31, 2006 and 2005**
  
  
  An
          ESOP
          covers substantially all employees of the Company.  The ESOP acquired
          132,250 shares at $11.32 per share in the conversion with funds provided
          by a
          loan from the Company.  The ESOP provides for the Company to issue a
          put option (option) to any participant who receives a distribution of Company
          stock.  The option permits the participant to sell the stock to the
          Company at any time during two option periods, as defined in the plan,
          at the
          fair market value of the stock.  In 2004, the stock acquired by the
          ESOP was reflected as a reduction to the ESOP equity accounts. The ESOP
          acquired
          no additional shares during 2006.  Unearned ESOP shares totaled
          106,065 and 116,781 at December 31, 2006 and 2005 and had a fair value of
          $1,438,000 and $1,518,000.  Shares are released to participants
          proportionately as the loan is repaid.  Dividends on allocated shares
          are recorded as dividends and charged to retained earnings.  Cash
          dividends on unallocated shares will be applied to principal and interest
          due on
          the loan.  Compensation expense is recorded equal to the fair market
          value of the stock when contributions are made to the ESOP.  The
          expense under the ESOP was $120,000 and $139,000 for the years ended
          December 31, 2006 and 2005.  At December 31, 2006 and 2005,
          the ESOP had 25,114 and 15,896 allocated shares, which are subject to the
          put
          option, and those allocated shares had a fair value of $318,000 and
          $208,000.  The ESOP has 106,065 and 116,781 unallocated shares at
          December 31, 2006 and 2005.
  Below
          are
          the transactions affecting the ESOP equity accounts:
  **Common**
                        **Stock**
                      
                      
                      **Additional**
                        **Paid-in**
                        **Capital**
                      
                      
                      **Unearned**
                        **ESOP**
                        **Shares**
                      
                      
                      **Total**Balance,
                          January 1, 2005
                      
                      $
                      1,496,816
                      
                      
                      $
                      3,869
                      
                      
                      $
                      (1,436,280
                      )
                      
                      $
                      64,405ESOP
                          shares earned
                      
                      
                      —
                      
                      
                      
                      19,376
                      
                      
                      
                      119,483
                      
                      
                      
                      138,859Balance,
                          December 31, 2005
                      
                      
                      1,496,816
                      
                      
                      
                      23,245
                      
                      
                      
                      (1,316,797
                      )
                      
                      
                      203,264ESOP
                          shares earned
                      
                      
                      —
                      
                      
                      
                      4,033
                      
                      
                      
                      116,458
                      
                      
                      
                      120,491Balance,
                          December 31, 2005
                      
                      $
                      1,496,816
                      
                      
                      $
                      27,278
                      
                      
                      $
                      (1,200,339
                      )
                      
                      $
                      323,755
 
  On
          July
          20, 2005, the stockholders of Third Century Bancorp approved the Mutual
          Savings
          Bank Recognition and Retention Plan and Trust (“RRP”).  The RRP
          provides for the awarding of up to 66,125 shares of Company common stock
          to
          employees and directors of the Company.  The shares awarded will vest
          ratably to employees and directors of the Company over a five-year
          period.  The RRP purchased 66,125 shares at $13.13 with funds provided
          by Mutual Savings Bank.  The expense under the RRP was $158,683 and
          $90,000 for the years ended December 31, 2006 and 2005,
          respectively.
   35
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006 and 2005**
  
  
  Unvested
          RRP shares at December 31, 2006:
  **Number
                          of**
                        **Shares**
                      
                      
                      **Grant
                          Date**
                        **Fair
                          Value**Beginning
                          balance
                      
                      
                      56,596
                      
                      
                      $
                      13.13Granted
                      
                      
                      562
                      
                      
                      
                      11.10Vested
                      
                      
                      12,633
                      
                      
                      
                      13.13Forfeited
                      
                      
                      —
                      
                      
                      
                      —Ending
                          balance
                      
                      
                      44,525
                      
                      
                      $
                      13.11
 
  Unearned
          compensation at December 31, 2006 related to the RRP shares is $584,000
          and will
          be recognized over a weighted-average period of four years.
  The
          Company’s Incentive Stock Option Plan (Plan), which is stockholder approved,
          permits the grant of stock options to its directors, officers and other
          key
          employees.  The Plan authorized the grant of options for up to 165,312
          shares of the Company’s common stock, and generally are vested immediately upon
          grant and have a 10-year contractual term.  The Company believes that
          such awards better align the interests of its directors and employees with
          those
          of its stockholders.  Option awards are generally granted with an
          exercise price equal to the market price of the Company’s stock at the date of
          grant.  Certain option awards provide for accelerated vesting if there
          is a change in control (as defined in the Plans).  The Company intends
          to issue shares from its authorized shares to satisfy option
          exercises.
  As
          of May
          8, 2006, the Company paid a return of capital dividend of $2.00 per share
          and
          the cost basis on the Plan shares was reduced from $13.10 to $11.10 per
          share.  During the third quarter of 2006, Third Century awarded 3,306
          options to employees and non-employee directors at an exercise price of
          $11.10.  These options were immediately vested.
  The
          fair
          value of each option award is estimated on the date of grant using a binomial
          option valuation model that uses the assumptions noted in the following
          table.  Expected volatility is based on historical volatility of the
          Company’s stock and other factors.  The Company uses historical data
          to estimate option exercise and employee termination within the valuation
          model.  The expected term of options granted is derived from the
          output of the option valuation model and represents the period of time
          that
          options granted are expected to be outstanding.  The risk-free rate
          for periods within the contractual life of the option is based on the U.S.
          Treasury yield curve in effect at the time of grant.
  **2006**
                    
                    
                    **2005**Weighted-average
                        volatility
                    
                    
                    31.84
                    %
                    
                    
                    25.10
                    %Expected
                        dividends
                    
                    
                    1.56
                    %
                    
                    
                    1.27
                    %Expected
                        term (in years)
                    
                    10
                        years
                    
                    
                    10
                        yearsRisk-free
                        rate
                    
                    
                    5.03
                    %
                    
                    
                    4.17
                    %
 
   36
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006 and 2005**
  
  
  A
          summary
          of option activity under the Plan as of December 31, 2006 and changes during
          the
          year then ended, is presented below:
  **2006****Shares**
                            
                            
                            **Weighted-**
                              **Average**
                              **Exercise
                                Price**
                            **Weighted-**
                              **Average**
                              **Contractual
                                Term**
                            
                            **Aggregate**
                              **Intrinsic**
                              **Value**Outstanding
                                at beginning of year
                            
                            
                            146,300
                            
                            
                            $
                            11.10Granted
                            
                            
                            3,306
                            
                            
                            
                            11.10Exercised
                            
                            
                            —
                            
                            
                            
                            —Forfeited
                                or expired
                            
                            
                            —
                            
                            
                            
                            —Outstanding
                                at end of period
                            
                            
                            149,606
                            
                            
                            $
                            11.10
                            
                            8.1
                                years
                            
                            $
                            29,921Options
                                exercisable at end of period
                            
                            
                            149,606
                            
                            
                            $
                            11.10
                            
                            8.1
                                years
                            
                            $
                            29,921
 
  The
          weighted-average grant-date fair value of options granted during the years
          2006
          and 2005 was $4.61 and $4.76, respectively.
  As
          of
          December 31, 2006, there was no unrecognized compensation cost related
          to stock
          options as all outstanding options are fully vested.
  During
          2006, the Company recognized $15,000 of share-based compensation expense
          related
          to stock options.
  
  **Note
                    13:**
                **Leases**
  The
          Company has several noncancellable operating leases, primarily for branch
          facilities, that expire over the next three years.   Rental
          expense for these leases was $40,800 for the years ended December 31, 2006
          and 2005, respectively.  Future lease commitments are
          immaterial.
  
   37
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006 and 2005**
 
  **Note
                    14:**
                **Disclosures
                    About Fair Value of Financial
                    Instruments**
  The
          following table presents estimated fair values of the Company’s financial
          instruments.  The fair values of certain of these instruments were
          calculated by discounting expected cash flows, which involves significant
          judgments by management and uncertainties.  Fair value is the
          estimated amount at which financial assets or liabilities could be exchanged
          in
          a current transaction between willing parties, other than in a forced or
          liquidation sale.  Because no market exists for certain of these
          financial instruments and because management does not intend to sell these
          financial instruments, the Company does not know whether the fair values
          shown
          below represent values at which the respective financial instruments could
          be
          sold individually or in the aggregate.
  **December
                        31, 2006**
                    
                    
                    **December
                        31, 2005****Carrying**
                      **Amount**
                    
                    
                    **Fair**
                      **Value**
                    
                    
                    **Carrying**
                      **Amount**
                    
                    
                    **Fair**
                      **Value**Financial
                        assetsCash
                        and cash equivalents
                    
                    $
                    9,491,952
                    
                    
                    $
                    9,491,952
                    
                    
                    $
                    7,852,553
                    
                    
                    $
                    7,852,553Interest-earning
                        time deposits
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    200,000
                    
                    
                    
                    200,000Held-to-maturity
                        securities
                    
                    
                    5,208,778
                    
                    
                    
                    5,159,345
                    
                    
                    
                    9,210,031
                    
                    
                    
                    9,124,208Loans,
                        net of allowance for loan losses
                    
                    
                    111,937,554
                    
                    
                    
                    109,573,000
                    
                    
                    
                    105,556,622
                    
                    
                    
                    103,497,000Federal
                        Home Loan Bank stock
                    
                    
                    1,255,000
                    
                    
                    
                    1,255,000
                    
                    
                    
                    1,041,000
                    
                    
                    
                    1,041,000Interest
                        receivable
                    
                    
                    642,593
                    
                    
                    
                    642,593
                    
                    
                    
                    592,386
                    
                    
                    
                    592,386Financial
                        liabilitiesDeposits
                    
                    
                    88,567,694
                    
                    
                    
                    91,815,000
                    
                    
                    
                    88,607,518
                    
                    
                    
                    88,574,000Federal
                        Home Loan Bank advances
                    
                    
                    24,600,000
                    
                    
                    
                    25,895,000
                    
                    
                    
                    16,500,000
                    
                    
                    
                    17,811,000Interest
                        payable
                    
                    
                    278,885
                    
                    
                    
                    278,885
                    
                    
                    
                    186,158
                    
                    
                    
                    186,158Off-balance
                        itemsCommitments
                        to extend credit
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —Stand-by
                        letters of credit
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —Forward
                        sales commitments
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
 
  The
          following methods and assumptions were used to estimate the fair value
          of each
          class of financial instruments.
   ***Cash
          and Cash Equivalents, Interest-Earning Deposits, Federal Home Loan Bank
          Stock,
          Interest Receivable and Interest Payable***
  The
          carrying amount approximates fair value.
   38
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006 and 2005**
   ***Securities***
  Fair
          values equal quoted market prices, if available.  If quoted market
          prices are not available, fair value is estimated based on quoted market
          prices
          of similar securities.
   ***Loans***
  The
          fair
          value of loans is estimated by discounting the future cash flows using
          the
          current rates at which similar loans would be made to borrowers with similar
          credit ratings and for the same remaining maturities.  Loans with
          similar characteristics were aggregated for purposes of the
          calculations.  The carrying amount of accrued interest approximates
          its fair value.
   ***Deposits***
  Deposits
          include demand deposits, savings accounts, NOW accounts and certain money
          market
          deposits.  The carrying amount approximates fair value.  The
          fair value of fixed-maturity time deposits is estimated using a discounted
          cash
          flow calculation that applies the rates currently offered for deposits
          of
          similar remaining maturities.
   ***Federal
          Home Loan Bank Advances***
  Rates
          currently available to the Company for debt with similar terms and remaining
          maturities are used to estimate the fair value of existing debt.
   ***Commitments
          to Originate Loans, Letters of Credit and Lines of
          Credit***
  The
          fair
          value of commitments to originate loans is estimated using the fees currently
          charged to enter into similar agreements, taking into account the remaining
          terms of the agreements and the present creditworthiness of the
          counterparties.  For fixed-rate loan commitments, fair value also
          considers the difference between current levels of interest rates and the
          committed rates.  The fair value of forward sale commitments is
          estimated based on current market prices for loans of similar terms and
          credit
          quality.  The fair values of letters of credit and lines of credit are
          based on fees currently charged for similar agreements or on the estimated
          cost
          to terminate or otherwise settle the obligations with the counterparties
          at the
          reporting date.  The carrying values of these instruments are
          immaterial at the respective balance sheet dates and are reasonable estimates
          of
          fair value.
   39
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006 and 2005**
 
  **Note
                    15:**
                **Commitments**
   ***Commitments
          to Originate Loans***
  Commitments
          to originate loans are agreements to lend to a customer as long as there
          is no
          violation of any condition established in the contract.  Commitments
          generally have fixed expiration dates or other termination clauses and
          may
          require payment of a fee.  Since a portion of the commitments may
          expire without being drawn upon, the total commitment amounts do not necessarily
          represent future cash requirements.  Each customer’s creditworthiness
          is evaluated on a case-by-case basis.  The amount of collateral
          obtained, if deemed necessary, is based on management’s credit evaluation of the
          counterparty.  Collateral held varies, but may include accounts
          receivable; inventory; property, plant and equipment; commercial real estate
          and
          residential real estate.
  At
          December 31, 2006 and 2005, the Company had outstanding commitments to
          originate
          loans aggregating approximately $1,427,000 and $1,930,000,
          respectively.  The commitments extended over varying periods of time
          with the majority being disbursed within a one-year period and were at
          fixed
          rates of interest.
   ***Letters
          of Credit***
  Letters
          of credit are conditional commitments issued by the Company to guarantee
          the
          performance of a customer to a third party.  These guarantees are
          primarily issued to support public and private borrowing arrangements,
          including
          commercial paper, bond financing and similar transactions.  The credit
          risk involved in issuing letters of credit is essentially the same as that
          involved in extending loans to customers.
  The
          Company had total outstanding performance letters of credit amounting to
          $587,000 at December 31, 2006 and $103,000 at December 31, 2005 and were
          with terms of less than two years.
   ***Lines
          of Credit***
  Lines
          of
          credit are agreements to lend to a customer as long as there is no violation
          of
          any condition established in the contract.  Lines of credit generally
          have fixed expiration dates.  Since a portion of the line may expire
          without being drawn upon, the total unused lines do not necessarily represent
          future cash requirements.  Each customer’s creditworthiness is
          evaluated on a case-by-case basis.  The amount of collateral obtained,
          if deemed necessary, is based on management’s credit evaluation of the
          counterparty.  Collateral held varies but may include accounts
          receivable, inventory, property, plant and equipment, commercial real estate
          and
          residential real estate.  Management uses the same credit policies in
          granting lines of credit as it does for on-balance-sheet
          instruments.
  At
          December 31, 2006 and 2005, the Bank had granted unused lines of credit
          to
          borrowers aggregating approximately $18,232,000 and $15,323,000 for commercial
          lines and open-end consumer lines.
   40
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006 and 2005**
 
  **Note
                    16:**
                **Condensed
                    Financial Information (Parent Company
                    Only)**
  Presented
          below is condensed financial information as to financial position, results
          of
          operations and cash flows of the Company:
  **Condensed
                          Balance Sheet**
                        **(Amounts
                          in thousands)****December
                          31,****2006**
                      
                      
                      **2005****Assets**Cash
                          and cash equivalents
                      
                      $
                      2,979
                      
                      
                      $
                      4,147Interest-earning
                          time deposit
                      
                      
                      —
                      
                      
                      
                      100Securities
                          held-to-maturity
                      
                      
                      —
                      
                      
                      
                      1,996ESOP
                          note receivable
                      
                      
                      1,247
                      
                      
                      
                      1,347Investment
                          in common stock of subsidiaries
                      
                      
                      15,707
                      
                      
                      
                      14,998Other
                          assets
                      
                      
                      13
                      
                      
                      
                      34Total
                          assets
                      
                      $
                      19,946
                      
                      
                      $
                      22,622**Liabilities**
                          - other
                      
                      $
                      196
                      
                      
                      $
                      69**Equity
                          Contributed by ESOP**
                      
                      
                      324
                      
                      
                      
                      203**Stockholders'
                          Equity**
                      
                      
                      19,426
                      
                      
                      
                      22,350Total
                          liabilities and stockholders' equity
                      
                      $
                      19,946
                      
                      
                      $
                      22,622
 
   41
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006 and 2005**
 
  **Condensed
                          Statement of Income**
                        **(Amounts
                          in thousands)****Year
                          Ending December 31****2006**
                      
                      
                      **2005****Income**Interest
                          income
                      
                      $
                      45
                      
                      
                      $
                      99Other
                          income
                      
                      
                      134
                      
                      
                      
                      114Total
                          income
                      
                      
                      179
                      
                      
                      
                      213**Expenses**Directors
                          fees
                      
                      
                      32
                      
                      
                      
                      34Professional
                          Services
                      
                      
                      51
                      
                      
                      
                      85Other
                          expenses
                      
                      
                      23
                      
                      
                      
                      26Total
                          expenses
                      
                      
                      106
                      
                      
                      
                      145**Income
                          Before Income Tax and Equity in Undistributed Income of
                          Subsidiaries**
                      
                      
                      73
                      
                      
                      
                      68**Income
                          Tax Expense**
                      
                      
                      28
                      
                      
                      
                      27**Income
                          Before Equity in Undistributed Income of
                          Subsidiaries**
                      
                      
                      45
                      
                      
                      
                      41**Equity
                          in Undistributed Income of Subsidiaries**
                      
                      
                      412
                      
                      
                      
                      493**Net
                          Income**
                      
                      $
                      457
                      
                      
                      $
                      534
  42
 *Table
              of Contents*
  **Third
          Century Bancorp**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006 and 2005**
 
  **Condensed
                          Statement of Cash Flows**
                        **(Amounts
                          in thousands)****Year
                          Ending December 31****2006**
                      
                      
                      **2005****Operating
                          Activities**Net
                          income
                      
                      $
                      457
                      
                      
                      $
                      534Items
                          not providing cash
                      
                      
                      (270
                      )
                      
                      
                      (529
                      )Net
                          cash provided by operating activities
                      
                      
                      187
                      
                      
                      
                      5**Investing
                          Activities**Proceeds
                          from maturities of interest-earning time deposit
                      
                      
                      100
                      
                      
                      
                      —Proceeds
                          from maturities of investments held to maturity
                      
                      
                      2,000
                      
                      
                      
                      2,000Payment
                          received on ESOP loan
                      
                      
                      100
                      
                      
                      
                      100Net
                          cash provided by  investing activities
                      
                      
                      2,200
                      
                      
                      
                      2,100**Financing
                          Activity** - dividends paid
                      
                      
                      (3,555
                      )
                      
                      
                      (238
                      )**Net
                          Change in Cash and Cash Equivalents**
                      
                      
                      (1,168
                      )
                      
                      
                      1,867**Cash
                          and Cash Equivalents at Beginning of Year**
                      
                      
                      4,147
                      
                      
                      
                      2,280**Cash
                          and Cash Equivalents at End of Year**
                      
                      $
                      2,979
                      
                      
                      $
                      4,147
 
  
 
 
  
   43
 *Table
              of Contents*
  **MARKET
          PRICE OF THIRD CENTURY’S COMMON SHARES**
 **AND
          RELATED STOCKHOLDER MATTERS**
  
  There
          were 1,632,843 common shares of Third Century outstanding at March 20,
          2007,
          held of record by approximately 315 stockholders. The number of stockholders
          does not reflect the number of persons or entities who may hold stock in
          nominee
          or “street name.” Since June 30, 2004, Third Century’s common shares have been
          quoted on the OTC Bulletin Board under the symbol of
“**TDCB.OB**.”
  Presented
          below are the high and low bid prices for Third Century’s common shares, as well
          as cash distributions paid thereon, since the shares began trading on
          June 30, 2004. Such quotations reflect inter-dealer prices, without retail
          financial markups, markdowns or commissions and may not represent actual
          transactions.
  **Quarter
                          Ended**
                      
                      **High**
                      
                      
                      **Low**
                      
                      **Cash
                          Distributions**December
                          31,
                          2006
                      
                      $
                      11.30
                      
                      
                      $
                      11.25
                      
                      $
                          .04/shareSeptember
                          30,
                          2006
                      
                      
                      10.70
                      
                      
                      
                      10.70
                      
                      $
                          .04/shareJune
                          30,
                          2006
                      
                      
                      11.31
                      
                      
                      
                      11.31
                      
                      $
                          2.04/shareMarch
                          31,
                          2006
                      
                      
                      13.65
                      
                      
                      
                      13.65
                      
                      $
                          .04/shareDecember
                          31,
                          2005
                      
                      $
                      13.50
                      
                      
                      $
                      12.90
                      
                      $
                          .04/shareSeptember
                          30,
                          2005
                      
                      
                      13.40
                      
                      
                      
                      12.65
                      
                      $
                          .04/shareJune
                          30,
                          2005
                      
                      
                      13.75
                      
                      
                      
                      12.20
                      
                      $
                          .04/shareMarch
                          31,
                          2005
                      
                      
                      13.95
                      
                      
                      
                      13.00
                      
                      $
                          .04/share
  Under
          Federal Reserve Board supervisory policy, a bank holding company generally
          should not maintain its existing rate of cash dividends on common shares
          unless
          (i) the organization’s net income available to common stockholders over the past
          year has been sufficient to fully fund the dividends and (ii) the prospective
          rate of earnings retention appears consistent with the organization’s capital
          needs, asset quality, and overall financial condition. The FDIC also has
          authority under the Financial Institutions Supervisory Act to prohibit
          a bank
          from paying dividends if, in its opinion, the payment of dividends would
          constitute an unsafe or unsound practice in light of the financial condition
          of
          the bank. Under Indiana law, Third Century is precluded from paying cash
          dividends if, after giving effect to such dividends, Third Century would
          be
          unable to pay its debts as they become due or Third Century’s total assets would
          be less than its liabilities and obligations to preferential
          stockholders.
  Pursuant
          to the plan of conversion, Mutual established a liquidation account for
          the
          benefit of Eligible Account Holders and Supplemental Eligible Account Holders.
          Mutual is not permitted to pay dividends to Third Century if its net worth
          would
          be reduced below the amount required for the liquidation account.
  Under
          Indiana law, Mutual may pay dividends without the approval of the DFI so
          long as
          its capital is unimpaired and those dividends in any calendar year do not
          exceed
          its net profits for that year plus its retained net profits for the previous
          two
          years. Dividends may not exceed undivided profits on hand (less losses,
          bad
          debts and expenses). Additional stringent regulatory requirements affecting
          dividend payments by Mutual, however, are established by the Federal Deposit
          Insurance Corporation Improvement Act, to which Mutual is subject. Mutual’s
          capital levels at December 31, 2006 exceeded the criteria established to be
          designated as a “well capitalized” institution. Such institutions are required
          to have a total risk-based capital ratio of 10% or greater, a Tier I risk-based
          capital ratio of 6% or greater and a leverage ratio of 5% or
          greater.
   44
 *Table
              of Contents*
  **DIRECTORS
          AND EXECUTIVE OFFICERS**
  **DIRECTORS**
                **EXECUTIVE
                    OFFICERS**David
                    A. Coffey
                  Robert
                    L. Ellett
                  Robert
                    D. Heuchan
                  Jerry
                    D. Petro
                  Robert
                    D. Schafstall
                Robert
                    D. Heuchan
                  *President
                    and Chief Executive Officer*
                  David
                    A. Coffey
                  *Executive
                    Vice President and Chief*
                  *Operating
                    Officer*
                  Debra
                    K. Harlow
                  *Chief
                    Financial Officer*
 
   **David
          A. Coffey**(age 44) has served as Executive Vice President, Chief
          Operating Officer and a director of Third Century since its formation in
          March
          2004 and of Mutual since 1999. He began serving Mutual as the Chief Operating
          Officer in 1998, and was a Senior Vice President prior to being named Executive
          Vice President. Mr. Coffey is a graduate of Franklin College.
  **Robert
          L. Ellett** (age 69) has served as Chairman of the Board of Directors of
          Third Century since its formation in March 2004 and of Mutual since
          1999.  He has served as a Director of Mutual since
          1987.  Mr. Ellett also serves as Chairman of Mutual Financial
          Services, Inc., a subsidiary of Mutual engaged in mortgage life insurance
          sales
          and servicing.  He was the General Manager of Rytex Company, a
          stationery products company, until his retirement in December 2001.
  **Debra
          K. Harlow** (age 55) has served as Chief Financial Officer of Third
          Century since its formation in March 2004 and of Mutual since January 2004.
          Prior to that time she served Mutual as the EDP Coordinator.
  **Robert
          D. Heuchan** (age 53) has served as the President, Chief Executive
          Officer and director of Third Century since its formation in March 2004
          and of
          Mutual since 1991. He has served as Vice Chairman of the Mutual Board of
          Directors since 1999. He also has been President of Mutual Financial Services,
          Inc. since its formation in 1991. Mr. Heuchan is a graduate of Franklin
          College
          and has an MBA from the University of Indianapolis.
  **Jerry
          D. Petro** (age 61) has served as a member of the Board of Directors of
          Third Century since its formation in March 2004 and of Mutual since
          1997.  Mr. Petro is the owner and President of J.D. Petro &
Associates, Inc., which sells protective coatings in Indiana, and R.T.I.L.L.C.,
          which sells protective coatings in Kentucky.  He also is the owner and
          President of R.T.I, which sells chemical and architectural coatings; Petro’s
          Water Conditioning of Johnson County; Petro Group, Inc., a manufacturer
          of
          buildings for light industrial use; and Petro Group, L.L.C., which leases
          office
          space.
  **Robert
          D. Schafstall** (age 63) has served as a member of the Board of Directors
          of Third Century since its formation in March 2004 and of Mutual since
          1999.  Mr. Schafstall has been the Franklin City Judge and an attorney
          in the law firm of Cutsinger and Schafstall since 1972.
   45
 *Table
              of Contents*
  **DIRECTORS
          EMERITUS**
  David
          B.
          Ditmars
  Sterling
          M. Haltom
  Robert
          G.
          Smith
  **OFFICERS
          OF MUTUALSAVINGS BANK**
  
  Robert
                        D. Heuchan
                    
                    *President
                        and Chief Executive Officer*David
                        A. Coffey
                    
                    *Executive
                        Vice President and Chief Operating Officer*Debra
                        K. Harlow
                    
                    *Vice
                        President and Chief Financial Officer*Glenda
                        Aulbach
                    
                    *Vice
                        President and Franklin Central Branch Manager*Lynne
                        L. Haste
                    
                    *Vice
                        President and Construction Loan Officer*Melissa
                        L. Jones
                    
                    *Vice
                        President and Mortgage Loan Manager*Debra
                        L. Morrison
                    
                    *Vice
                        President and Mortgage Loan Officer*Nell
                        R. Pettit
                    
                    *Methodist
                        Community Branch Co-Branch Manager*Linda
                        L. Prouty
                    
                    *Vice
                        President and Loan Operations Manager*Jennifer
                        D. Rector
                    
                    *Nineveh
                        and Trafalgar Branch Manager*Jacob
                        W. Sappenfield
                    
                    *Commercial
                        Loan Manager*Chris
                        A. Schaefer
                    
                    *Security
                        and Compliance Officer/ Internal Auditor*Pamela
                        J. Spencer
                    
                    *Vice
                        President and Trust Officer, Trust Department
                        Manager**and
                        Board Secretary*Elaine
                        R. Stewart
                    
                    *Methodist
                        Community Branch Co-Branch Manager*Jill
                        M. Sweeney
                    
                    *Main
                        Street Branch Manager*Melissa
                        D. Esteb
                    
                    *Main
                        Office Branch Manager*
 
  
   46
 *Table
              of Contents*
  **GENERAL
          INFORMATION FOR STOCKHOLDERS**
  **ANNUAL
            AND OTHER REPORTS**
   **Additional
          copies of this Annual Report to Stockholders and copies of the most recent
          Form
          10-KSB may be obtained without charge by contacting Debra K. Harlow, at
          the
          Corporation, 80 East Jefferson Street, Franklin, Indiana
          46131.**
  **BRANCHES
            OF MUTUAL SAVINGS BANK**
   **OFFICE**
                    **ADDRESS**Main
                        Office
                    80
                        East Jefferson Street
                      Franklin,
                        Indiana 46131Trafalgar
                    2
                        Trafalgar Square
                      Trafalgar,
                        Indiana 46181Main
                        Street
                    1124
                        North Main Street
                      Franklin,
                        Indiana 46131Methodist
                        Community
                    1070
                        West Jefferson Street
                      Franklin,
                        Indiana 46131Nineveh
                    7459
                        South Nineveh Road
                      Nineveh,
                        Indiana 46164Franklin
                        Central
                    5630
                        South Franklin Road
                      Indianapolis,
                        Indiana 46239
   **INTERNET
            AND
            E-MAIL
            ADDRESS**:   http://www.mutualsavingsbank.net
 
  **TRANSFER
            AGENT AND REGISTRAR**
 
  *Registrar
            and Transfer Company*
 10
            Commerce Drive
 Cranford,
            New Jersey  07016
 
 **CORPORATE
            COUNSEL**
 
  *Luse
            Gorman Pomerenk & Schick, P.C.*
 5335
            Wisconsin Avenue, NW
 Suite
            400
 Washington,
            DC 20015-2035
 
 **ANNUAL
            MEETING**
 
  **THE
            ANNUAL MEETING OF STOCKHOLDERS OF THIRD CENTURY BANCORP WILL BE HELD
            ON**
 **MAY
            16, 2007, AT 9:00 A.M., AT MUTUAL SAVINGS BANK, 80 EAST JEFFERSON STREET,**
 **FRANKLIN,
            INDIANA.**
 47